The American Prospect has a new story up about Xybernaut, a former Fairfax County technology company that imploded in a blaze of scandals in 2005 +óGé¼GÇ£ five years after George Allen left its Board of Directors. Yes, this is one of those slimy Abramoff-Enron-MZM kinds of stories. A previous New Republic article on the company was mentioned a few times on RK and NLS but so far has not received adequate attention. So here, again, are a few of the basics:- George Allen has had a long standing +óGé¼+ôyou scratch my back, I+óGé¼Gäóll scratch your back+óGé¼-¥ relationship with Xybernaut The company was part of a business promotion trip to Europe sponsored by then-Governor George Allen in June 1997. By August 1998, Allen had left the Governor+óGé¼Gäós office +óGé¼GÇ£ and joined Xybernaut+óGé¼Gäós Board of Directors, where he would serve until December 2000.
- At the same time, Allen was working at the law firm McGuire Woods LLP, which was billing Xybernaut for hundreds of thousands of dollars in legal fees at about the same time it was paying Allen hundred of thousands of dollars for his work. In 1999 and 2000, officers of Xybernaut donated a total of $10,750 to +óGé¼+ôFriends of George Allen.+óGé¼-¥ (Enough back scratching yet?)
- Xybernaut and numerous companies related to it have been mired in shady dealings since the company was first formed in 1990. For example, the top executives of the brokerage company that underwrote the firm+óGé¼Gäós IPO were eventually sent to prison for schemes involving other, unrelated IPOs. The head of the underwriting partner of this brokerage company is currently under indictment for money laundering in a scheme involving Xybernaut stock.
- Xybernaut filed for bankruptcy in 2005 after an audit committee of its board found that the firm+óGé¼Gäós CEO/Board Chairman and its President/COO had engaged in numerous improper activities. The company has since been under investigation by the SEC and reportedly by the U.S. Attorney+óGé¼Gäós Office, while it faces multiple class-action lawsuits from its former shareholders.
- The company was much more successful at selling stocks than products: "Between 1990 and 2005, the company sold only 10,000 mobile computers, according to The Washington Post, while racking up losses of $162 million, and issuing 200 million shares of stock."
- During George Allen+óGé¼Gäós tenure, the Board of Directors apparently either didn+óGé¼Gäót know or didn+óGé¼Gäót care about the serious scandals and other problems in which the company was mired. The article quotes David Skeel, a corporate law specialist at the University of Pennsylvania: +óGé¼+ôIt+óGé¼Gäós possible that those sorts of things could have gone on without a board of directors knowing about it, but it+óGé¼Gäós unlikely that a properly functioning board of directors would miss all of that.+óGé¼-¥
I+óGé¼Gäóve only mentioned the tip of the iceberg here; please read the American Prospect article for more. The bottom line is that George Allen has a lot of questions to answer with regard to Xybernaut.
What did George Allen know about the scandals taking place at the company that he was supposed to be monitoring as a director? And when did he know it? Has there been any "back-scratching" that we haven+óGé¼Gäót yet heard about? And what does all of this say about George Allen's leadership and management skills, as a U.S. Senator who aspires to run for the most powerful leadership position in the world?