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Edited on Sun Nov-21-04 11:26 PM by lilpnut
Suit cites high-tech shell game Friday, November 19, 2004 By Ed White The Grand Rapids Press GRAND RAPIDS -- A day after the seizure of equipment and records from a high-tech company, a lender accused Cyberco Holdings Inc. of fraud in a lawsuit involving a $3 million deal to acquire dozens of computer servers.
Kent County Circuit Judge Dennis Leiber signed an order allowing a Cyberco creditor to study the company's books and hunt around the downtown headquarters for servers and other assets.
Charter One Vendor Finance said it has a financial agreement that allowed Cyberco to acquire 66 servers. But Charter One could find only 25 during a Sept. 29 visit to offices in the Heartside neighborhood, according to a civil suit filed Thursday. "It is without question that Cyberco is ... perpetrating a scheme to defraud Charter One and likely other creditors," the Illinois-based lender said.
Cyberco does business as CyberNET Engineering and CyberNET Group. It sells high-tech services, including data storage and computer security. Separately, on Wednesday, federal agents armed with a search warrant swarmed the offices at 25 S. Division Ave. and seized records as part of a fraud investigation. The Ada home of Cyberco executives Barton Watson and wife Krista Kotlarz-Watson also was searched.
Barton Watson, 44, has a rocky past. In Washington, D.C., he was accused of fleecing investors out of $230,000. He agreed to a plea deal in 1987 and was sentenced to one year to three years in federal prison.
"I have a lot of regret over what happened," Watson told a judge at the time, "not just because I stole a great deal of money from a number of people but particularly in that I abused their trust and friendship."
In 1994, Watson admitted using a phony tax return to get an $80,000 bank loan to buy a yacht two years earlier. He was sued by the government and agreed to pay a $5,000 fine. In its lawsuit, Charter One accuses Watson of the "same pattern of behavior" in the deal to acquire computer servers.
A server is a piece of high-tech hardware, acting as the data center for a network of computers. Charter One wanted to confirm that Cyberco actually had the 66 servers because they were collateral for the $3 million financing.
Charter One claims Cyberco used phony financial statements and tax returns when it sought financing for the equipment.
In an affidavit attached to the lawsuit, Grand Rapids-area accountant Guy Hiestand said his signature was forged on a letter about the company's finances for 2002 and 2003. He said he didn't work on the audit.
A check of state records also showed Cyberco has pledged more than 100 servers as collateral to more than one lender, based on a check of serial numbers, Charter One attorneys said.
The Watsons could not be reached for comment. Cyberco's Boston-based attorney, John Harding, was informed before the suit was was filed. On Nov. 1, Charter One sent three high-tech consultants to Cyberco offices for an inspection that lasted just 40 minutes.
"The data center was ... a sloppy, disorganized, high-risk environment," Linda Connor, of Technology Professionals Corp., said in an affidavit.
In an interview, Barton Watson's former executive assistant said working for him was chaotic.
Elaine VanSuilichem said she watched as Watson dodged bill collectors and used a deck of credit cards to take lavish vacations, buy handmade clothes and order his favorite sausages from New York.
"I don't know how he stayed afloat," she said. "I would have to call people and say the check will be sent out tomorrow or we're not paying because there was something he didn't like about the service. He never paid anything."
Press writer Barton Deiters contributed to this report.
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