Sells false opportunity.
Ponzi would be proud.
Yomu in trouble.
Commerce One stock the answer.
It doesn't exist.
Thought he was so sly:
Forgery with an inkjet
Spring comes to Frisco.
Snow in Canada.
- Trea Kines, Jack Lincoln, and me; proposals for an XML haiku contest that were never entered
In US v. Benjamin Trafford, Mr. Trafford was sentenced last Thursday (19 July 2001, after several postponements) to six months in a medium-security federal penitentiary, followed by six months in a halfway house, followed by three years' probation. He will be deported to Canada at the start of probation and barred from re-entering the US. He was also fined $30,000.
The company he founded and at which he employed me, Exemplary Technologies (later Yomu), was involved with ebooks. Ben's chief skills were idea evaluation and salesmanship. I don't know if he was capable of producing original ideas - it was really hard to tell, since he claimed credit for a lot - but wherever the ideas had come from, Exemplary had a fantastic vision of how money could actually be made in the ebook industry. I was sold, and traveled cross-country on three weeks' notice to join the company (leaving a decent job at O'Reilly, I might add). Ben had a hard time actually doing the work he was supposed to, though - writing business plans, etc. He was good in meetings, but not so good at follow-up.
Exemplary had just landed over $10,000,000 in funding from Malaysian investors. Despite this, it took a while for my moving and signing bonus to actually show up in my bank account - in fact, Ellie and I had left our jobs, left our apartment, and were already at Ellie's parents' house in Chattanooga on our way west before the money materialized. That should have been the first warning sign... I later learned that two other employees had given up making a deposit on an apartment so that I could get that bonus. Ben emphasized to them my importance to the company, and so they passed. (It later turned out to have been just as well, since they wouldn't have been able to pay the rent.)
Just after we got to California, the Malaysian money disappeared. It turned out that, due to the recent Asian economic crisis, the Malaysian government had slapped a steep tariff on funds leaving the country. Our friends, not wanting to pay the tariff, funnelled the money through a Swiss subsidiary, thence to a partner, and then to their American subsidiary, which actually invested the money. The Malaysian government noticed the transfer. They alerted the Swiss government, who in turn alerted the US Department of Commerce. They had the bank freeze the funds while they investigated our complicity. Finding none, they told Ben of the problem, that we were cleared, and that they were confiscating the illegally invested money. So much for the funding.
One constant in all of our crises, in the wake of the disappearing funds, was that Ben had worked at Veo Systems, which was then acquired by Commerce One, the golden child of the market in late '99. Ben of course had had options as an employee. He'd exercised those options, though he was going through a bureaucratic dance with Commerce One to get proof of the shares he owned (though some employees understood that he already had the stock). The worst-case exit scenario was that Ben would sell his shares short, put the money into the company, pay us off, and close the doors. So it was, relatively speaking, a low-risk venture. What we didn't count on was Ben's utter financial incompetence and his inability to admit even the smallest failure.
This latter was demonstrated by his behavior patterns with respect to deadlines. If something needed to be done by Thursday, if it was for you, he'd tell you it was just about finished, and then pull an all-nighter to get something half-baked out as a draft. If it was for someone else, he'd just tell you that sure, it was done. After he left the company, we found that many of our partners (with whom he had been the sole contact) had never received things that he had said he'd sent, including completed work.
With this behavior pattern, it was very hard to get funding actually secured, despite a group of very smart, hard-working people. We were all on emergency survival funds - enough not to get evicted, though a couple of cars were repo'd - and I took out a substantial loan from my parents and a smaller one from my grandfather to avoid being a drain on the company. (I was going to raid my 401(k), but my parents insisted on lending me money instead. So much for my independence...) I had deposited a couple of checks to cover the movers (the new apartment and three weeks in a hotel had eaten the bonus), and because my bank trusts me, they honored them. I paid the movers with a wire transfer (the PO Ben had sent had never arrived)... and then the checks went away when the Malaysian money did, leaving me with a gaping negative balance.
So it seems that Ben never actually executed his options (which would have cost $54 dollars or so and netted over $10,000,000 at their peak). He was sure he really owned them, though. He used their existence to secure loans, and when someone demanded proof... he forged it. He printed up a fake stock certificate, and showed them a photocopy. He claimed the copy was all he had, that the original was in a lockbox in Vancouver that he couldn't get to.
This brings up another personality trait. He would tell different people different things, but get those people not to talk to each other about the subject. One example is that I heard later from other employees that making HTML links blue and underlined was Ben's idea. It was barely plausible - he'd been in the markup industry in the early-mid-'90s, including working for SoftQuad in Toronto. But oddly, he'd never told that story around me, as the other old-school markup nerd in the company. He also claimed to be responsible for naming XML - but again, never to me. As another example, another markup nerd had invested in the company, supposedly $200,000. Due to a "bank error", we'd only received $20,000. Ben was working on straightening it out, but we were all going to a conference where the investor would also be, and we were asked not to mention it to him because we would appear unprofessional. Of course, the investor had only given us $20,000, but that wasn't enough to survive, so he didn't tell us that.
That conference was a lot of fun. This was XML '99, and for a small, scrappy start-up to send so many people (14 out of 20, or so) really impressed a lot of people in the industry. Of course, Ben kited the checks that paid for attendance, and so now I can't attend any other GCA conferences, but hey.
Shortly before that, I interviewed Deb Hooker for the position of Vice President of Engineering. Ben had already interviewed her, but wanted others' opinions. He expressed an innate dislike for transsexuals; he said he was very impressed by Deb's abilities, but he wanted to be sure he wasn't overcompensating for his bias. Deb's partner, Amy Millard, came to the interview too, which was a little weird. (Read her thoughts.) I liked Deb - the interview was very impressive, though the fact that I could possibly pass for her, skinnier and in drag, was a little odd. And I didn't care for Amy at first, which made it much easier to side with Ben as tension started to grow in the company.
After the conference, cryptonerd Rob Hansen joined us. He proceeded to kick some ass; his prototype digital rights management software was among the only actual working code we'd developed. (Read his rather bitter tale, including some of the statements in evidence at the trial.)
One of our salesguys, Scott Hinz, had some small stock experience; he'd done telesales for a brokerage or something, and while not an expert, knew a little bit about the industry. He'd also lent Ben some money personally, secured against the stock. So he offered to help Ben get the proof he needed from Commerce One. He kept running into denials from Commerce One that a Benjamin Trafford had any stock at all. The salesguy insisted that he'd seen a certificate. Commerce One said that was impossible, and that if he found it again, they'd really like to see a copy. (Other employees understand that Ben resisted the offers to help, and that the salesguy was told that Ben had rejected his final package as not valuing his worth appropriately.)
Scott also has some perspective on the Malaysian money:
During the last month of the company's existence, when everything was falling apart, I was tagged "the bad guy". This is because of my knowledge in the securities industry and the fact that I wanted to help him get his money. I want to clear something up right now with all who read this email, I had nothing to do with getting a particular person arrested. This was all his doing and that's the fact.
As for the Malaysian money, I know all about this! This was the reason I came on board on October 18th, 1999. I was told that funding was completed and the money came from a Malaysian company. Ironically, the day after I started, I was told that they pulled their funding. When I finally opened my eyes and noticed a lot of double-talk coming from our leader, I asked [one of the board members, with Malaysian connections] about this. Apparantly he had another venture capital deal going with another company other than Exemplary that experienced this. Exemplary never had a deal even close to being set up that involved Malaysian $$$. For more info on this, I suggest you speak with [the board member] though I have experience that at least [another board member] decided to cut all ties to me when she (speculation again) was given a sum of money.
In summary, if anyone wants to discuss facts I have the ability to do so, however, I consider this water under the bridge and have moved on with my life and have other things to work on that memories of the past.
One day in early April '00, we were looking for some software in the office, and rifling through the filing cabinets. The dumbass had left the original forgery in one of the drawers. There was a hushed conference in the hall which I didn't understand at the time, but I was asked not to tell Ben we'd found it. I didn't like this - there were forces conspiring against Ben, of course, and I was (for reasons I can't explain, except that I'm a sucker, and that I didn't like the forces against him as much as I did him - partly because I didn't have a lot of interaction with them) on his side then - but I kept quiet for a few days.
Then I went to northern Massachusetts/New Hampshire to speak at a conference (Documentation & Training 2000 in Tyngsboro, to be precise). I'd agreed to do it just before moving on the grounds that it was just up the road... oh, well. The day of my talk, I got a call from my wife. We'd been hanging out quite a bit with Ben's wife, Jen, though not so much with Ben. (I later learned that that was because Ellie had figured out that Ben was a sleaze, but I wasn't having any of it at the time. I blamed her resentment on the problems we were already having in our marriage before we moved.) Ellie said, "I just got a call from Jen - something about the FBI, Ben's resigned, and she's leaving the country." (They are both Canadian.)
I called Ben - he told me about the forged certificate, though of course he had only done that to prove what he knew to be true. He admitted that it was a hideously stupid thing to do. The salesguy had faxed the certificate to Commerce One, who identified it as definitely not one of theirs, and they had called the SEC and/or FBI. The FBI had shown up and taken Ben away in handcuffs. The Board had actually removed him as CEO - most of them knew the feds were coming - but allowed him to resign anyway. He spent the weekend in the Oakland Jail, and was then released on bail. (Jen Robinson, our gothy and very capable Webmistress had an impressionistic take in her journal at the time.)
The VP of Business Development, whose first day with the company that had been, stepped up at the request of the Board to be acting CEO. The company shifted to stripped-down operations - a lot of people who weren't being paid anyway were strongly advised to find other work. A couple of months later, the company closed its doors.
The company finances were in total disarray. There was almost no funding at all, and there never had been; we'd been surviving on a series of small personal loans from various suckers. As an example of the management style: Exemplary was incorporated in May 1999. In March or April, Ben tried to offer a job as an administrative assistance to a friend at his new company. The first employee of the company was a QA guy who was at that point a high school teacher in Alabama. He didn't like teaching, at least not there, and was looking for other work (as the admin assistant offeree was). He gave the QA guy a job and moved him and his wife across the country at a very nice salary.
My diagnosis is that Ben needs to be loved. And people love you if you give them things, right? So the admin friend got offered a job. The teacher got a job. The admin friend is cute, as is the teacher's wife, whom Ben had traveled to Alabama to meet based on her webcam and journal. They would love him now, right?
The management style is particularly highlighted by the decision to hire the teacher:
Ben's co-founder disagreed strongly with this decision - but the offer had already been made and the move started by the time he found out.
So Ben was sentenced last Thursday for stock fraud. The grace note is this: after resigning from Yomu (to protect the company, of course), he found a $200,000 job as VP of Engineering for a company called MemeStreams. He implemented his same hiring practices there; at one point he hired a DBA who couldn't A a DB; she worked in his office with the door closed, and at about that time the BenCam went off-line. He was having relations with three of his female subordinates, including being caught in flagrante delicto in the "engineering pit" with two of them after a company party at a bar. The DBA was fired after that because she was entirely unqualified, but everyone else remained. Investors came in and evaluated the company, picking off a lot of deadwood (including one former Yomu employee who, while smart and capable, was in way over his head at MemeStreams), but again keeping Ben. But this past Thursday, there was an interesting revelation. It seems that while the CEO knew about Ben's precarious legal situation, full disclosure had not been made to the investors. MemeStreams closed on Friday.
The double-grace note is that I was dumb enough to do some minor contract work for MemeStreams, on the grounds that Ben didn't actually control the money. I doubt I will ever get paid; the company is insolvent with $750,000 in debt and $3,000 in the bank. Oh, well.