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27 January 2005 – LAWFUEL – The Law News Network – A former senior …

27 January 2005 – LAWFUEL – The Law News Network – A former senior vice president and chief of sales for the Internet advertising company L90, Inc. was indicted today on various federal charges related to a scheme to commit securities fraud by booking fraudulent revenues to boost the company’s perceived performance.

Keith Jon Kaplan, 36, of Westport, Connecticut, was named in a three-count indictment returned this afternoon by a federal grand jury in Los Angeles. The indictment accuses Kaplan of conspiracy, securities fraud and falsification of books and records.

The indictment alleges that Kaplan conspired with two other former L90 executives to inflate the company’s earnings so that it would meet Wall Street analysts expectations. Those other two executives – John C. Bohan, L90’s former CEO, president, and board member; and Lucrezia Bickerton, L90’s former vice president of finance – have already pleaded guilty to criminal charges.

At the time of the alleged offenses, L90 was based in Santa Monica and Marina del Rey, and its stock was traded on the Nasdaq National Market System. L90 is now known as MaxWorldwide, Inc.

In the final quarter of 2000, Kaplan and his co-conspirators were concerned that L90’s total revenues for the quarter would not meet analysts’ projections, according to the indictment. In order to make up the anticipated revenue shortfall, Kaplan and his co-conspirators allegedly developed several schemes to fraudulently inflate L90’s revenue numbers.

Among these fraudulent schemes was one involving a start-up internet company called JoeDriver.com, Inc., which operated a website targeting young people who were learning to drive. In late 2000, JoeDriver was on the verge of failure. Nevertheless, the indictment alleges, Kaplan asked JoeDriver’s founder if he wanted L90 to run approximately $500,000 worth of internet advertisements for JoeDriver in December 2000. Kaplan further promised that JoeDriver would not have to pay for any of this advertising unless, as a result of the advertising, JoeDriver’s overall business prospects improved such that it was able to secure substantial amounts of new investment.

Even though Joe Driver never paid for any of the advertising, Kaplan and his co-conspirators caused L90 fraudulently to record more than $546,000 in advertising revenue from JoeDriver in the fourth quarter of 2000. The indictment alleges that without this fraudulent revenue from JoeDriver, L90 would have failed to meet analysts’ announced revenue projections for Q4 2000.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.

Kaplan is expected to be arraigned on the indictment on February 22, 2005. If he is convicted of the three counts in the indictment, he faces a statutory maximum sentence of twenty-five years in federal prison.

Two other defendants have also pleaded guilty to criminal charges related to the various schemes to inflate L90’s revenues. Those defendants are Mark D. Roah, L90’s former senior vice president of business development and board member, and Thomas A. Sebastian, the former chief financial officer of the company.

The criminal case against the L90 executives is the result of an investigation by the Federal Bureau of Investigation, which received substantial assistance from the Securities and Exchange Commission.

British MP George Galloway and his opponent the Daily Telegraph will leave no stone unturned to sort out what could be a spectacular libel case.