Yes, It Could Get Worse

Is the noose tightening around officials at Spectrum Information Technologies Inc.? On Mar. 22, federal authorities brought fraud charges against five executives of Paradigm Group Inc., a consulting firm once owned by Spectrum President Peter T. Caserta. And a source close to the probe says the government is studying links between several Spectrum officials, including Caserta, and the consulting firm. While Sean O'Shea, a senior prosecutor in the Brooklyn U.S. Attorney's Office, says its policy bars discussion of the targets of probes, he acknowledges that "the investigation is active and continuing."

Things just aren't getting any better for Spectrum. The Manhasset (N.Y.) wireless-technology concern had hoped to weather a bitter feud with former Apple Computer Inc. Chairman John Sculley, who came aboard last year as chairman and chief executive only to resign abruptly, saying he had been misled about the company. His lawsuit and a Spectrum countersuit for breach of contract were dropped on Mar. 10.

That public squabble and the arrests were just the latest news to tarnish the company's image--and its stock price, down 70%, to 21 2, so far this year. Spectrum is being investigated by the Securities & Exchange Commission for allegedly misleading investors by overselling its prospects. Shareholder lawsuits claim that the company overstated the value of licensing arrangements for its technology and used questionable accounting to inflate earnings. The company has denied any wrongdoing.

ON LEAVE. Now come the charges at Paradigm, whose office is in the same building as Spectrum's headquarters. Among those arrested at the consulting firm, formerly known as Caserta Group Inc., were a Spectrum vice-president, Howard Schor, and Caserta's son-in-law, John P. Bohrman, who bought the firm from Caserta late last year. Schor and Bohrman were charged with fleecing small and medium-size high-tech companies that paid Paradigm fees for investment services they never received. Through an attorney, three of the defendants, including Bohrman and Schor, have denied any wrongdoing.

Court papers in the case suggest that other Spectrum executives are under scrutiny. Although Caserta was not indicted, he was mentioned several times in the court documents. Caserta, who had been acting CEO since Sculley's departure, took a leave of absence after the recent arrests. New Chief Executive Edward N. Maskaly, who had served on Caserta Group's board of advisers before joining Spectrum's board in 1992, also was mentioned in the court papers for his role at the consulting firm. A Spectrum spokesman says the case doesn't affect Maskaly's appointment and adds that Spectrum is cooperating with the probe. However, executives there likely are focusing now on just one question: Who's next?