SAN FRANCISCO (www.redherring.com) - Jay Walker, once hailed by news magazines as the Internet's Thomas Edison for founding Priceline.com is under investigation by Connecticut's attorney general for possible violations of state and federal employment laws, Red Herring has learned.|
Connecticut Attorney General Richard Blumenthal told Red Herring on Tuesday evening that he is "investigating" Walker Digital, Mr. Walker's troubled incubator, which is based in Stamford, Conn.
"We're taking a very close look at this," he said. "We're looking into whether there have been any violations of law."
The once high-flying Walker has been grounded by a steady stream of bad news. His flagship company, Priceline.com, has seen its stock price crash to 2.2 percent of its 52-week high, making Priceline.com the target of class-action lawsuits.
Walker has burned through hundreds of millions of venture capital in failed startups, and now he has been accused of laying off employees without proper notice or severance pay. His credibility as one of the country's top Internet entrepreneurs is under serious question.
Mark Dziaglia, a general partner at General Atlantic Partners who sits on the board of Walker Digital, appeared exasperated by this latest turn of events. "I would hope somebody at [Walker Digital] is taking the time to figure this all out," he said. "But you should really talk to Jay; he's a pretty candid guy."
Walker declined to return repeated phone messages over several days.
The latest allegation against Walker is that Walker Digital laid off 100 of its 115 employees last week without giving them reasonable notice or any severance pay. Jay Walker's spokesman, Kevin Goldman, denied the claims, saying "we offered severance." He declined to give any specifics.
Two former Walker Digital employees -- Thomas Wisniewski, former senior vice president, and Dianne Zaremeba, who helped handle Mr. Walker's schedule -- both say they were not given notice before they were laid off and were not given severance pay.
Indeed, the office of Dannel P. Malloy, mayor of Stamford, Conn., has itself fielded similar complaints, and Malloy says if that if Walker didn't adhere to state guidelines on the terminations, there could be "very serious consequences."
According to the Connecticut Department of Labor, companies that employ 50 or more people and lay off more than 30 percent of their workers must by law give 60 days' notice. Wisniewski and Zaremeba say they showed up for work last Monday and were then told their services were no longer required, an alleged violation of the Worker Adjustment and Retraining Notification Act.
If the attorney general finds wrongdoing, Walker Digital may be required to pay "severance and termination pay," Blumenthal said. He added, "We don't know whether they [at Walker Digital] have an obligation to pay this yet," and that he hopes to "reach a preliminary conclusion in the case early next week."
If found guilty, the penalties would most likely be civil fines, Blumenthal said. To make matters worse, some former Walker Digital employees have retained counsel and are considering legal action, Wisniewski says.
Misery and company
Walker Digital isn't the only troubled company in Jay Walker's portfolio.
Three other Walker Digital companies -- High Circle, Pulse-123, and Atlantis Interactive -- have closed up shop, putting an undisclosed number of people out of work. This past October, Mr. Walker's Webhouse, a reverse auction house that let consumers bid on groceries and gas, folded after burning through $363 million in funding. And Perfect Yardsale, an affiliate of Priceline.com, announced that it was folding.
All that's left of Jay Walker's once formidable empire are Synapse, Retail DNA, and Priceline.com. Priceline.com's stock closed at $2.31 Tuesday, down from its 52-week high of $104.24 in March. Walker also holds 67 technology patents.
Jay Walker's latest troubles began when he was unable to secure an additional $35 million to $50 million from his previous backer, General Atlantic Partners, to keep Walker Digital alive. It remains unclear at this point why Walker, estimated to be worth millions and who holds 64 million shares of Priceline.com stock, didn't reach into his own pockets to cover the loss.
General Atlantic Partners confirmed to Red Herring last week that it had no plans to put more money into Walker Digital at this stage in the game.
Zaremeba contends that Walker Digital has shuttered its doors for good.
Goldman strenuously denied this. "Walker Digital is going to be around for a long, long time," he says. Asked how Walker Digital could continue functioning as an "invention laboratory" with only 15 employees, Goldman said, "Next question, please."
Despite the turn of events, former Walker Digital executive Wisniewski said he has no hard feelings against his former boss, a man he spoke of sometimes in awe, sometimes in pity. It's a shame the way things have turned out for Jay Walker, he said, because the man is so smart and possesses so much potential.
"The tragedy is the company failed not because the ideas in the pipeline weren't good ideas, but rather because the VCs couldn't look beyond the recent failures," Wisniewski said.
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© 1997-2000 Red Herring Communications. All Rights Reserved