From Hero To Zero In Nine Weeks
For Viasoft Inc., Alvin E. Holland was more than just a new chief financial officer--he was heaven-sent. Or so it seemed when he came on board last January. Viasoft, a Phoenix-based pioneer in the hot field of computer software, had seen its share price double since it went public in March, 1995, and the dapper 50-year-old Texan appeared to have all the right credentials and the polish to build on the company's growing reputation on Wall Street.
Just nine weeks later, Holland was out, and the charges--and lawsuits--were flying. In a suit filed on May 23, Holland claims the company fired him for his "reporting of...violations of securities laws" and his "refusal to participate in a fraud...through misleading and unlawful financial disclosures." Viasoft CEO Steven D. Whiteman says the accusations are "nonsense" and insists Holland tried unsuccessfully to take over the company. The market seems to agree with Whiteman--the company's stock is up more than 400% so far this year, and has doubled since Holland's departure. Investors are betting on growing revenues for software aimed at stemming system crashes that experts fear will take place when computer clocks reach "00" at the beginning of the year 2000.
Going public has been a thrilling ride for Whiteman and his team. The company's shares have soared to 65 1/2 from 8 1/2, boosting its total market value to $500 million. Analysts project net income will rise 52%, to $7.3 million, on $40 million in sales, an increase of 32%, for the year ended on June 30. But Holland's charges call into question the validity of those numbers. Says Whiteman: "This whole experience has been a nightmare."
It didn't start out that way. Their first meeting, scheduled to last 90 minutes, went on for six hours, as Whiteman and Holland discussed everything from future ventures to overseas expansion. "I was very impressed," recalls Whiteman. "Al struck me as very aggressive, very strong....We hit it off instantly."
Whiteman also warmed to Holland's lengthy resume: a former CFO of Sterling Software Inc. in Dallas, a Big Eight accounting consultant to Ross Perot's Electronic Data Systems Corp.--the list went on and on. For Holland, the opportunity meant getting back on the fast track after a decade of on-again, off-again consulting deals.
HIGH POINT. At their next meeting, Whiteman even drove Holland around several tony Phoenix neighborhoods, urging him to move from Dallas and join the company. Then he offered a sweet deal, according to court papers filed by Holland: 70,000 shares of restricted Viasoft stock at $6.08 per share, about half its market price at the time. The two men shook on it, according to Holland. Only later, he says, did he ask that the stock price be put in writing.
That, as it turned out, was the high point of Holland's brief career at Viasoft. Almost immediately, according to Whiteman, Holland made serious missteps. He boasted to staff members that he was going to be the next chairman of the board, say company insiders. And at meetings with investors he often handed out two business cards: one from Viasoft and the other from First Dallas, Holland's consulting business before joining the company. Says Whiteman: "He was becoming abusive and arrogant and he disobeyed my direct orders."
Holland paints a completely different picture. He denies that he ever boasted that he would become chairman and dismisses the business card episode as trivial. In interviews and in his lawsuit, moreover, Holland describes a company with lax controls on travel expenses and questionable accounting practices.
Specifically, Holland charges in his complaint that the company moved in excess of $500,000 in overaccrued liabilities from the balance sheet to the income statement. These were mainly travel expenses, he says. By so doing, he says, Viasoft inflated pretax income to $1.7 million for the third quarter ended Mar. 31. Moreover, Holland charges that the switch was made during the last three days of the quarter while he was out of town and unable to do anything about it. Holland says that he confronted Whiteman about this and was rebuffed--which Whiteman denies. The company also points out that Arthur Andersen & Co. reviewed and signed off on the quarterly numbers.
Viasoft executives say Holland's trip to New York in late March, to meet with the financial community, was the real problem for Viasoft. One analyst, Kris Tuttle of SoundView Financial Group in Stamford, Conn., said he received a series of worried calls from fund managers after their meetings with Holland. "One client called to say Holland came in and only wanted to talk about raising capital to take over the company," says Tuttle. "She couldn't figure out if he was a genius or a knucklehead." Holland denies that he was trying to take over the company, saying he was trying to raise capital to let Viasoft buy out the original venture-capitalist investors.
NO REVIEW? When Holland was recalled early from New York, the atmosphere at Viasoft was tense. Carlton Vickery, an accountant brought on by Holland, says he was increasingly concerned that the company was falling behind its monthly sales projections. "The salespeople just said, `Don't worry, we'll catch up,"' according to Vickery. Holland says that he and Vickery weren't allowed to review the quarterly numbers before they were released. Holland says he demanded a meeting with the board. Instead, he says, he was whisked into Whiteman's office, told he was fired, and escorted to his car. Whiteman maintains that Holland was fired for cause. Vickery, a consultant, was also let go--for being a Holland ally, according to Vickery; because his job was completed, claims the company.
Whiteman insists he was never confronted by Holland with any questions or doubts about the company's accounting practices during the nine weeks Holland worked at Viasoft. And he claims he never agreed to any stock deal other than the standard package of options in Holland's written employment contract.
Both sides now vow to finish their battle in the courts. "My reputation is at stake," says Holland. But for the investors who have driven up Viasoft's share price to sky-high levels, and have so far ignored Holland's charges, this may be more than just another boardroom slugfest.