POINTING THE FINGER AT WORLDPOINT!
Sightings from The Catbird Seat
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March 24, 2000
State breeds new
high-tech success
By Frank Cho, Advertiser Staff Writer
WorldPoint Interactive Inc., one of Hawaii's most recent high-tech success stories, is planning a billion-dollar public stock offering this year that could become the state's latest Internet windfall.
WorldPoint this week moved its offices from the Manoa Innovation Center to the entire top floor of the former First Hawaiian Tower. Now known simply as 1132 Bishop, the building is becoming a home for high-tech companies such as Uniden, Oracle, Sun Microsystems and Digital Island.
WorldPoint executives said the company needs the new space to grow before its public offering, expected sometime during the third quarter.
"It is a stepping stone in the evolution of this company," said Massimo Fuchs, WorldPoint's chief executive officer.
Plans call for the firm, which produces language translation solutions for Internet companies, to triple its staff to 250 employees over the next 12 months. To accommodate the growth, Worldpoint has options to lease an additional 38,000 square feet in the building.
This would be Hawaii's second high-tech startup to go public in a little over a year. Digital Island, which provides computer network services to companies doing business over the Internet, set the standard with its own public offering last year, which raised hundreds of millions of dollars for the company and its investors, including the state.
State officials are hoping they can repeat that success this year with Worldpoint. They are trying to convert a $580,000 loan to the Internet company into an equity stake before the offering.
"That is something that we would definitely like to entertain," said Fuchs. Fuchs said the loans from the state helped the company grow and he would like to share the success of the company with Hawaii.
Employees will retain a 25 percent interest in the company after the offering, Fuchs said.
Gov. Ben Cayetano, who has made diversifying Hawaii's economy with a viable high-tech industry a high priority, said the opening of WorldPoint's new office is another step toward his goal.
But to position the company for the offering, Fuchs said WorldPoint will split is corporate headquarters between Hawaii and San Francisco, where it just acquired a four-story office building in which its chief financial officer is based.
The company's Hawaii operation will narrow its focus to the Asia-Pacific area and be called WorldPoint Asia Pacific. The company has created a new subsidiary in Zurich for its European and Middle Eastern customers.
"It's a natural choice for expansion, given Hawaii's position as a gateway to the Pacific and combined with its convenient time zone," Fuchs said.
For more, GO TO > > > Act 221
April 22, 2001
Hawaii's high-tech parks
can learn from Asia
By Meheroo Jussawalla, East-West Center
Hawaii's focus on attracting information technology businesses offers much opportunity, but the state will have to compete with highly successful IT parks being developed in Asia. It can also learn from these Asian examples.
The East-West Center and Pennsylvania State University, with funding and support from the Ford Foundation and Campbell Estate, have undertaken a study of IT parks in India, Malaysia, Singapore, Taiwan and China....
As the state's policymakers focus more on developing an IT industry, Hawaii's prospects are becoming brighter. The Hawaii High Tech Trade Association is bringing together several industries to locate in the islands, and legislative initiatives would create greater tax incentives and better infrastructure options like fiber-optic conduits and DSL (digital subscriber lines) for Internet and Intranet corporate users.
Adtech, WorldPoint, Summit Communications and Sandwich Isles Communications are all making a mark in Hawaii's technology industry....
- Meheroo Jussawalla is an international communications expert
at the East-West Center.
June 9, 2001
State sues tech firm
to recoup losses
By Tim Ruel, Star-Bulletin
The state is suing one of Hawaii's former high-tech star companies over an outstanding $810,000 government loan and is seeking to foreclose on the Oahu properties of the firm's founders.
The lawsuit, filed yesterday in First Circuit Court, is over a 1995 loan of $580,000 to WorldPoint Interactive Inc. under the Hawaii Capital Loan Program, which seeks to help businesses having trouble finding capital. Interest added $230,000 to the initial amount.
The state is suing to get whatever payment it can for the loan.
WorldPoint translates Web sites into different languages for companies.
Early on, WorldPoint made total payments of $10,787, but stopped sending checks in July 1996, the suit said.
During the last five years, the state and WorldPoint discussed converting WorldPoint's debt to an ownership stake for the state.
The talks dragged on, however, because of disagreements over WorldPoint's value as a company, especially after the Nasdaq stock market dropped below 1,700 points earlier this year from a March 2000 high of more than 5,000 points.
The venture capitalists that manage the state's investments were against the idea of investing in WorldPoint, a state official said at the time.
The company is privately held, although it had thought about going public before the high-tech bubble burst.
Meanwhile, WorldPoint obtained $14 million in private investments and moved its headquarters to the penthouse of 1132 Bishop St. from the state-run Manoa Innovation Center.
At an October 1999 banquet, WorldPoint received an award from City Bank for carving a niche in a billion-dollar high-tech industry.
However, in February of this year, WorldPoint announced it was firing the bulk of its employees and closing offices in Zurich, Dallas and Hong Kong.
WorldPoint President and Chief Executive Massimo Fuchs issued a statement yesterday that said, "If legal action cannot be avoided by the state, as it now appears it couldn't, which I personally regret, our objective is to resolve any such action as quickly as possible to the mutual satisfaction of all parties involved."
WorldPoint has paid $4.5 million in total wages in Hawaii and state taxes of $300,000, which should be seen as an excellent return on the state's investment, said Fuchs, a native Swiss banker who joined WorldPoint as chief financial officer in 1996.
The state's suit also names two of WorldPoint's founding directors, Larry Cross and Robert Peterson, who are alleged to have backed WorldPoint's loan with the equity in properties that they own on Oahu.
The state is seeking to foreclose on their homes to help pay off WorldPoint's loan.
Peterson, a local plastic surgeon whose property is located in Waialae Iki, was on the mainland and could not be reached for comment yesterday.
Cross, president and chief executive of the Economics Institute at the University of Colorado at Boulder, said yesterday he was surprised by the suit and that he was disappointed the matter was not resolved.
WorldPoint's board meets once a year to discuss strategy, Cross said, and he had been told that WorldPoint's debt would be converted to an equity stake without a problem.
"I'm sort of surprised and chagrined," Cross said. "For sure, it's not good news."
His property, located near Kalaheo High School in Kailua, was where he and his wife raised their four children.
"There's a lot of memories tied up with it," said Cross, who once was president of Hawaii Online, an Internet service provider now known as GST Hawaii OnLine.
Jerry Fuqua, who briefly worked for WorldPoint in 1995, was also surprised by the suit. The state is seeking to foreclose on the home where he lives in Kaneohe.
"This is amazing," Fuqua said, noting that he is frustrated both with WorldPoint and with the state.
"Essentially, WorldPoint has not communicated with me or the other parties that had left."
For more, GO TO > > > Act 221
July 13, 2001
WorldPoint evicted;
CEO stands alone
Prabha Natarajan and Terrence Sing, Pacific Business News
How do you say "virtually out of business" in 15 different languages?
The only company in town that could tell you doesn't exist in real-time anymore. WorldPoint Interactive was booted out of its offices at 1132 Bishop St. on Monday and has taken refuge in cyberspace.
"WorldPoint is functioning 100 percent virtually," says Massimo Fuchs, president and chief executive officer of WorldPoint.
Fuchs blames a state lawsuit against it for causing the eviction and loss of potential business. The state claims it supported WorldPoint, but not after the company reneged on its loan agreement.
Fuchs maintains he isn't giving up. WorldPoint will not file for bankruptcy or close shop. The company's zero cash balance and the $811,000 state claim are issues that could be dealt with if they are given more time by the state, Fuchs says.
However, former employees claim the nadir for WorldPoint was of its own making. They blame poor management and lavish spending for the company's downfall.
WorldPoint, which once had more than 100 employees, now has no one besides Fuchs on staff. Fuchs says the two who had been working for deferred salaries quit on Wednesday.
WorldPoint's first phase of funding, worth nearly $13 million, came from private investors, directors, officers and employees. The company's major backers were Larry Lacerte, a Texas businessman, and Marty Tenenbaum, founder of industry association CommerceNet.
Among its directors was Intel executive Claude Leglise.
Fuchs, who had worked with the Union Bank of Switzerland and Credit Suisse, was brought on board in 1996.
Rob Peterson of Athena Clinics, one of the early investors, resigned from the company's board June 25.
The new chairman is Larry Cross, also an initial investor.
Investors claim they never received financial reports or updates on the company's status. One mainland investor, who put in $30,000, says he was brought in by Peterson, the former chairman of the board.
"I'm very disappointed," says the investor, who preferred to remain anonymous. "I was up at their offices a year and a half ago and I was impressed by what I saw. Others have put in more money than I have."
WorldPoint says it will do all transactions and business online. However, the same investor says he e-mailed WorldPoint three weeks ago and to date has received no response.
Fuchs says working with a skeleton crew the business has averaged $25,000 in revenues per month for the last two months. The company also hopes to hold on to at least some of its assets -- equipment worth $500,000 and a security deposit of $264,000. If the state prevails, the company stands to lose all.
Last month, the state Attorney General's Office filed a lawsuit against the company to recover its initial loan of $580,000, which with interest is now $811,000.
"We believe we owe the state nothing," Fuchs says.
He contends that WorldPoint paid $4.5 million in wages and $300,000 in state taxes and that the state got an excellent return on its investment.
"That may be true, but it has nothing to do with the loan we made," says Joe Blanco, the governor's technology adviser.
The Attorney General's Office says it has given WorldPoint until July 19 to respond to its lawsuit and has heard no word from the company yet.
Fuchs says he filed a response last Saturday and that he's written to both the Attorney General's Office and the governor to resolve the matter out of court, but has received no response.
Peterson even offered his personal assets, including the equity in his house to placate the state, says Fuchs.
The state lured WorldPoint, says Fuchs, with the carrot of wanting to convert the loan to equity for five years, but when the Nasdaq Stock Exchange tanked the state wanted cash. He alleges the state also failed to approve a merger with San Diego-based Pacific Coast Software that included $25 million in venture capital funding. However, the state's failure to move quickly cost them the deal.
"This is another typical preposterous lawsuit driven by political reasons, simply to demonstrate that the state's loan program is not as badly managed as it truly is," Fuchs says.
Blanco disagrees and says it was "clearly a business decision."
"If we don't pursue the lawsuit others might perceive they can get a loan and default on it. We are doing what any other lender would do in protecting our interests. In fact, we have been a lot more lenient than a commercial lender," Blanco says.
Fuchs argues the state's actions are counter to its purported interest in building tech companies. He notes the state's actions on his company will reflect on its ability to develop a high-tech economy.
"This is too bad, as the state's people handling this just made another example of how inexperienced and unprofessional they really are when it comes to handling and promoting business issues and handling dynamic growth," Fuchs says.
Fuchs says he's considering filing a counterclaim against the state and blames the lawsuit for scaring off business and their eviction.
Colliers Monroe Friedlander, which manages the building, refused to divulge the reason for giving WorldPoint its marching orders. Fuchs concedes that he owes $30,000 in back rent but believes a $264,000 security deposit more than covered the rent.
However, the property manager says WorldPoint is still a tenant.
"They are still occupying their office. We are working with a situation here," says Laura Uyesato, assistant property manager.
But WorldPoint no longer works out of the building and its phones are dead.
© 2001 American City Business Journals Inc.
August 17, 2001
WorldPoint shareholder claims
fraud in suing state
The plaintiff, facing foreclosure on one of her homes,
is the spouse of the chairman
By Tim Ruel, Honolulu Star-Bulletin
A SHAREHOLDER of high-tech firm WorldPoint Interactive Inc. has countersued the state, saying the government breached its fiduciary duty, interfered with WorldPoint's business and committed fraud.
Aikahi resident Karen Cross, spouse of WorldPoint co-founder and Chairman Larry Cross, is seeking to collect an unspecified amount of damages to recover the value of her stock in WorldPoint, which is now virtually worthless.
Cross became the firm's chairman after Robert Peterson, another WorldPoint founder, stepped down two months ago.
Karen Cross filed the countersuit Wednesday in First Circuit Court.
The state sued WorldPoint in June to collect $810,000 from a government loan issued to the firm in 1995, when WorldPoint called itself Universal Resource Locator Inc. WorldPoint has offered to settle the case, and has until the end of the month to answer the suit.
The company has said it is running out of money. One of its creditors is its own legal counsel, bankruptcy firm Wagner Choi & Evers.
Karen and Larry Cross were both named in the state's suit, because one of their homes in Kailua was listed as collateral for the state loan. The state is seeking to foreclose. In response to the state's suit, Karen Cross admits she signed over her home, but denies that the state has the right to foreclose.
Cross claims that the state legally can't collect on the loan because the state once agreed with WorldPoint to convert the debt to an equity stake in the company.
WorldPoint stopped making payments on the loan in 1996. Fuchs, a native Swiss banker, joined WorldPoint in July 1996 and started talking with the state to covert the loan to an equity stake.
The talks dragged on for the past five years. The state department that furnished the loan had only one officer. When WorldPoint failed to offer its shares publicly in September 2000, the state told WorldPoint it wanted to close the matter. Fuchs offered in writing to pay the loan in cash, but the state refused, saying it still wanted the company's stock. After the Nasdaq stock market dipped below 2,000 points earlier this year, however, the state wanted the cash.
Cross accuses the state of reneging on its promise for equity.
WorldPoint Chief Executive Massimo Fuchs said that the company has lost business because of the state's lawsuit, which he calls unreasonable. In 1998, the state failed to approve WorldPoint's merger with Pacific Coast Software Inc. of California, the countersuit says.
The state Attorney General's Office declined comment. WorldPoint, meanwhile, has battles on other fronts.
An auction firm hired to sell WorldPoint's assets has sued the company, primarily as a defensive maneuver after items were removed prior to the sale and the auction yielded far less than expected. Fuchs said he plans to countersue.
The state's Securities Enforcement Branch said earlier this week that it is looking into complaints against WorldPoint by two of its investors and three of its former employees. The company fired all 100 employees, except Fuchs, earlier this year in an effort to cut costs.
The two investors are claiming the company committed securities fraud, while the former employees say they bought into a stock option plan that never existed. WorldPoint representatives have dismissed the claims, saying they amount to sour grapes following the collapse of the once-hot market for technology issues. The company's stock was available only to sophisticated investors who sported $1 million in net worth and $200,000 in regular income.
WorldPoint has since closed its headquarters at the penthouse of 1132 Bishop St. Fuchs continues to run the firm alone from his home in Aina Haina, but he won't be doing that for long. He's in a rent dispute with the landlord of the beachfront property.
The owner is WorldPoint's largest investor, Japanese businessman Hiroshi Teramachi.
For more, GO TO > > > Act 221
May 17, 2002
WorldPoint ordered liquidated
U.S. Bankruptcy Court requires the high-tech firm's
assets to be used to pay creditors
By Tim Ruel, Honolulu Star-Bulletin
U.S. Bankruptcy Court yesterday ordered the liquidation of WorldPoint Interactive Inc. to pay the high-tech company's creditors, marking the beginning of the end of a peculiar legal saga.
WorldPoint's largest investor, Japanese businessman Hiroshi Teramachi, sued in March to force WorldPoint into Chapter 7 bankruptcy. Teramachi claims his family is owed $4.9 million by WorldPoint for convertible promissory notes that have become due.
U.S. Bankruptcy Judge Lloyd King yesterday ruled WorldPoint will be liquidated because the company failed to respond to Teramachi's suit within a court deadline of 20 days.
A year ago, WorldPoint closed its worldwide operations, including its Honolulu headquarters in the penthouse of 1132 Bishop St., and laid off 70 employees, making it one of the larger dot-coms in Hawaii to fail. The company's main business was translating Web sites into foreign languages.
Massimo Fuchs has been running WorldPoint virtually from his home at the Harbor Court downtown condominium for the past several months.
Fuchs was served with the bankruptcy lawsuit March 12 and contacted attorney Bradley R. Tamm more than two weeks later, on March 28.
Tamm missed the April 1 deadline, and WorldPoint was placed into bankruptcy by the court. A hearing yesterday gave Tamm the chance to argue for an extension of the answer period, which would have released the company from bankruptcy.
In court filings, Tamm said he was late in answering the suit because of an electronic communications breakdown when Tamm moved his offices on the weekend of March 30.
Shortly before ruling against Tamm, King noted the lawyer was aware of the court's deadlines.
Meanwhile, Tamm has asked the court that he be allowed to withdraw as attorney for WorldPoint, because a third party failed to pay his retainer, records show.
Tamm declined comment yesterday. Fuchs could not be reached for comment.
It's not clear exactly how much WorldPoint has in terms of assets and debts. The company has until the end of the month to file a financial statement with the court.
Attorney Mary Lou Woo has been appointed to round up the company's assets and dispense payments.
But there's a hitch in dealing with WorldPoint: The company has two conflicting boards of directors, one led by Fuchs and another led by company co-founder Larry Cross, according to a court filing. The firm's May 7 meeting of creditors was postponed because Cross lives in Colorado and Fuchs didn't show up. Cross supported putting WorldPoint into bankruptcy, while Fuchs opposed it.
"Whether Mr. Fuchs even has the authority to act for (WorldPoint) is a point of debate," said an April court statement signed by Jim Evers, former attorney for WorldPoint.
WorldPoint assets include $100,000 that has been sitting in an escrow account after some of the firm's office items were auctioned last year. Other office items and company records have been stored in a Sand Island warehouse for several months because of a lawsuit filed by the company hired to do the auction. Mark Glen Auctions said it sued after Fuchs removed equipment from WorldPoint's offices before the auction could take place. The auction yielded less than $100,000.
Much of the money recovered from WorldPoint's bankruptcy will go to the lawyers who have been dealing with the company's legal troubles, observers said.
Wagner Choi & Evers, WorldPoint's former law firm, has a superior claim for payment of its legal fees, which total more than $100,000, according to a filing by Wagner Choi & Evers.
Plus, money will be needed to pay for Woo's expense of administering the bankruptcy estate.
As such, the liquidation may lead to little payment for many creditors, including the state of Hawaii, which sued last year to recoup $800,000 outstanding from a loan to WorldPoint. The state has received some payment of its claim by reaching settlements with WorldPoint officers who had backed the loan with their Hawaii properties.
Critics, including Fuchs, say the state Department of Business, Economic Development and Tourism dropped the ball by failing to deal with the loan when it went past due in 1996. The state then drove up legal expenses by fighting with Wagner Choi & Evers over claim to WorldPoint's assets.
More than 70 people, including Teramachi, invested a total of $13.5 million into WorldPoint through convertible notes, the company has said.
Fuchs claims the bankruptcy suit was Teramachi's attempt at revenge after Teramachi was forced by a state court to return a $20,000 rental deposit to Fuchs. Two years ago, Fuchs lived in Teramachi's beachfront home in Aina Haina for a monthly rent of $6,500, records show.
The two fell on bad terms. Teramachi sued to evict Fuchs and Fuchs countersued, alleging, among other things, that Teramachi's family had defamed his character.
Fuchs later moved out of the home.
For more, GO TO > > > Act 221; The Harmon Arbitration; Woo vs. Harmon; More Claims By Harmon: Mary Lou Woo
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STAY TUNED...
For more financial foolery in Hawaii, GO TO > > >
A Connecticut Yankee in King Kamehameha's Court
Confessions of a Whistleblower
Dirty Money, Dirty Politics & Bishop Estate
Ron Rewald: Flying High In Hawaii
The Rise & Fall of Summit Communications
The Morgan, Lewis & Bockius Report
Vultures of the Sandwich Isles
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MORE OF THE CATBIRD'S FAVORITE LINKS
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Last update March 23, 2008, by The Catbird