The chief executive and other officials of the now defunct ebusiness consultancy, MarchFirst, have been hit by an 11-count lawsuit brought by the bankruptcy trustee.
Less than 18 months ago MarchFirst had 9,000 employees and offices scattered around the world, including five in the UK.
But the bankruptcy trustee, Andrew Maxwell, claims in a 50-page lawsuit filing that MarchFirst chief executive, Robert Bernard, and his colleagues spent millions of dollars wastefully and breached their fiduciary duties.
"This facade of success came at the cost of wasting untold millions of dollars by building an infrastructure for growth that did not exist at MarchFirst," wrote Maxwell in the filing.
Bernard immediately hit back in an interview and said it was easy to pinpoint bad business decisions in hindsight, but allegations that MarchFirst executives sought to create an "unfounded illusion of success" were untrue.
"It's absolutely the most unfathomable thing you could imagine," Bernard said.
Maxwell is seeking to recover money for creditors and is no doubt eyeing three insurance policies worth a total of $50m that covered MarchFirst's officers and directors.
If his lawsuit is successful, he could collect on those policies.
Created in March 2000 by the merger of Bernard's Chicago-based Whittman-Hart and San Francisco-based USWeb/CKS, MarchFirst hired hundreds upon hundreds of consultants and invested in startups to cash in on the dotcom boom.
Maxwell alleges in his filing that the company's downfall was due to mismanagement, not just the dotcom crash.
One charge is that the company engaged in a financial practice known as 'roundtripping', where MarchFirst invested in a startup company only to have the firm hand the money back for MarchFirst's consulting services.
The gambit, which appeared to boost consulting revenues, gave investors and analysts a false impression of the company's financial health, Maxwell claims.
Bernard denies using roundtripping. "It was a process of strategically investing in opportunities," he said.
He added that the firms that received investment money from MarchFirst could have selected any firm for their consulting needs.
Bernard and other officials already face a consolidated lawsuit brought by burned investors.
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