VMworld UCS sign brings back an unrelated memory

The sign at the entrance to Moscone Center last week specified that the impressive display of 16 UCS systems was not just "blinking lights", but was powering VMworld. That made me think of a situation I was fortunate to escape where racks of mostly blinking lights were used to fraudulently extract $120 million in loans from unsuspecting banks.

On September 12, CNBC's American Greed will air Fraud in Cyberspace, which chronicles the career and Ponzi-like scam of Barton Watson, CEO of the CyberNET Group. He used proceeds from newer borrowings to stay current with older loans while continuing to fund his lavish lifestyle. When the Feds finally stopped the music, he was found to owe somewhere north of $100 million against assets of only $2 million.

I first encountered Barton, or "Mr. Watson" as his employees were forced to refer to him, nine years ago when he came to northern California to discuss acquiring my Citrix integration company, RYNO Technology. Barton had been recommended to me by a senior Wyse VP, and seemed to have impeccable credentials including a Stanford MBA and former Goldman Sachs partnership. During the next six months, we had over a dozen meetings including multiple all-day affairs at his opulent Grand Rapids, Michigan headquarters.

Certainly, the first thing most people would notice about Barton was his sheer size of around 6'2" and 400 pounds. This would be quickly followed, though, by an impression of extraordinary intelligence. Barton had an uncanny knowledge about almost any subject. A valedictorian of his Belding, Michigan high school, Barton was said to be without question the smartest kid in the school district.

Barton and his wife, Krista, traveled first class around the world staying in the best hotels and eating at the finest restaurants. He drove a Ferrari, Bentley and Rolls Royce among other luxury autos. While I've never been much for the trappings of luxury, I was beguiled by Barton's charm and intelligence. He and Krista would frequently fly to San Francisco where he'd meet my wife and me for wonderfully entertaining meals at expensive restaurants. I met his top executives and spoke with his two largest Citrix clients, both of which gave his organization glowing references.

I began to see another side of Barton as negotiations progressed. He exploited his talent of quickly reading character in order to throw people off balance and make them more susceptible to his thinking. The "gut feeling" cliché became increasingly tangible for me in the form of an aching stomach, but I was determined to see the acquisition through… until he made an offhanded comment about being friends with Citrix CEO, Mark Templeton. Shortly afterward, I happened to run into Mark who assured me that he did not know Barton…and Barton was not the type of man anyone was likely to forget meeting even one time.

This encounter prompted me to hire a private eye firm to investigate Barton which eventually revealed a significant record of litigation, fraud and jail time. In the interim, I did some deeper due diligence on my own. I called back CyberNET's two big Citrix references, and this time reached someone different at one since Barton's contact was on vacation. The replacement said terrible things about CyberNET and that his company would never again work with them. I also called up both Stanford University and Goldman Sachs to verify Barton's claims of an MBA and former partnership respectively…both of which turned out to be untrue.

I emailed Barton about the strange inconsistencies and he angrily retorted, "I will not have my integrity questioned. THE DEAL IS OFF!!!" This was quickly followed by a letter from his attorney demanding the return of every document related to our aborted merger and stating that if I mentioned a word about the details of our transaction to anyone that I would be sued.

Barton managed to keep his charade going another four years. CyberNET was listed as #110 on the VARBusiness 500 with 2003 sales of $300M, though actual sales estimates are between $10M - $12M. On November 18, 2003 the Feds surrounded Barton in his posh Grand Rapids, Michigan home. After drinking a $700 bottle of Le Tache wine, he placed a 911 call to police. "Hi, this is 911 Emergency, what's your emergency?" asked the sheriff's dispatcher. "Well, there's a gun in my mouth," replied Barton. He repeatedly urged the dispatcher to relax. "The theory is that I wouldn't call you if I didn't want help. But…I just want someone to clean up the mess." Barton proceeded to lecture the dispatcher about what was necessary to make a good bottle of wine. He was found dead at the age of 44 from a gunshot wound to the head.

Comments

[Dumbass]

Great story but what about UCS????

[Steve Kaplan]

Thanks for pointing that out, I changed the post title to clarify. Please see my other posts on this blog as well as on www.dabcc.com on UCS. More coming soon...

[twitter.com/stevie_chambers]

Amazing story, Steve. Thankfully your bloodhound nose and gut instincts saved you from what would have been a nightmare business partnership. The Kap lives to fight another day! ;-)

[Steve Kaplan]

Thanks for the compliment Steve, though I'm afraid my detection was due more to neurosis than nose. I'm just glad I didn't know anyone named Madoff!

[Nick Weaver]

Wow, I wad behind on my RSS reader and can't believe I missed this post. Facinating. Thanks for the story. Would you say the moral is "always do your homework"?

[Steve Kaplan]

Thanks Nick. I think the moral goes back a bit further than homework. Maybe, "All that glitters is not gold".