(FORTUNE Magazine) – A RAGS-TO-RICHES entrepreneur named William H. Millard was secluded in his elegant home on a hillside above Oakland, California, when a middle-class jury in a tiny courtroom downtown dealt him the worst blow of his life. Millard is the intense enthusiast who built ComputerLand Corp. into the McDonald's of personal computer retailing, and the jury's verdict handed a 20% interest in the company to a group headed by his bitterest enemies. Two days later the jury delivered a second heavy blow: it socked Millard with punitive damages of $115 million. For Millard, 52, the lawsuit has been a nightmare in which a fight over the stock conversion provisions of a $250,000 IOU turned into a battle that could end his almost total domination of the largest U.S. computer chain. The battle has brought into the open the inside story of how Millard's flourishing private empire was born. Courtroom testimony in the town where he was born and raised laid before the jury details of Millard's entire career in business and of his relationships with business associates and employees--in short, much of his life. Until the verdicts, ComputerLand was a closely held, family-run operation with nearly 800 franchised outlets in the U.S., Western Europe, Japan, and Australia, and even a new beachhead in China. It says its stores did $1.4 billion of business in 1984, and it is forecasting sales of $1.9 billion in 1985. ComputerLand has built its empire by buying Apples, Compaqs, and IBM PCs in enormous quantities at cut-rate prices, turning over its central warehouse inventory weekly, and shipping hardware and software out to its franchisees at cost. In return, the company takes 8% of the franchisees' sales revenues off the top, plus another 1% for advertising. Though Millard won't reveal the company's financial results, Franklin Morton of Alex Brown & Sons, a security analyst who follows computer retailers, guesses profits could be around $30 million this year. That assumes ComputerLand pays federal and state income taxes at the full rates; if the company could find ways to lower its taxes, as private firms often do, profits would be higher. At the price-earnings multiples that security analysts would expect for such a fast-growing company, ComputerLand's market value as a public company could run as high as $500 million. But unless the jury's verdict is reversed on appeal, ComputerLand's profits will be going into a much larger number of pockets. After listening to some of the highest-priced legal talent in the country, the Oakland jury bought the plaintiffs' claims that Millard tried to welsh on the terms of a promissory note issued to a small, private venture-capital group--Marriner & Co. of Lynnfield, Massachusetts--that had bailed out a previous computer company of Millard's when it was foundering. The jury decided Millard should be ordered to hand over 20% of the stock in ComputerLand and 20% of various other Millard holdings--not to Marriner, though, but to Micro/Vest. The latter concern is an investment group that bought Millard's $250,000 note from Marriner for $300,000 plus the promise of another $100,000 if it managed to convert the note into stock. The investment group includes several of Millard's former employees, one of whom, Philip L. Reed III, had been a close friend of the Millard family. Charges and countercharges of treachery and betrayal have added venom to suits alleging everything from fraud to violations of the securities laws. The latter charge, brought by Millard against Micro/Vest, stems from Micro/Vest's selling shares in the note--in effect, shares in the outcome of the lawsuit --to dozens of individuals who otherwise have nothing to do with the case. The investors say that selling shares in the note to outsiders--who include William Agee and Mary Cunningham of Bendix fame--was necessary to help raise the $1.3 million needed to fight their way through years of what they call legal ''stonewalling'' by Millard. A ComputerLand spokesman says Millard's legal costs have totaled about $3 million. While laying bare the history and inner workings of the ComputerLand success story, the suit has also generated intense local publicity--much of it hard for the family to bear. Millard has shown up in court day after day accompanied by his wife, Pat, a director of the company. The eldest of his three daughters, Barbara, 27, whom he trained for years for her current job as ComputerLand's president and chief operating officer, has also appeared. A college dropout like her father, whose high energy level she shares, Barbara is a tall, handsome young woman who sports highly styled blonde hair and clothes as striking and fashionable as her father's are pedestrian. Besides running the gauntlet of photographers, Millard has had to suffer an onslaught of partisan testimony and lawyers' denigrations. These have attempted to make him out as a businessman who has tried to wriggle out of obligations to some of his associates and who has dealt ruthlessly with some of the people who have helped and trusted him. Millard acknowledges that he has been hurt by the public accusations of treachery by individuals he in turn accuses of betraying his trust. The hurt, he says, goes ''right down to my toes.'' With his forceful gestures and beaming face, Millard does not show the strain of his public ordeal. A hugely successful salesman, Millard looks and sounds like a visionary graduate of the est course. That is exactly what he is; former car salesman Werner Erhard, the Seventies guru of pop psychology, is a close friend who says Millard has taken est's language of ''principle'' and ''commitment'' into his life and work. The rights and wrongs of the bitter fight between Micro/Vest and Millard are hard to extricate from the chaos that attended the creation of the personal computer industry in the Seventies. Back then, the first personal computers were do-it-yourself wiring kits sold by small-time operators who lacked lawyers, accountants, and cash. Millard, by his own account, never really wanted to do anything except own his own company. He grew up in Oakland, the oldest of six children. His father, a clerk for the Southern Pacific, had seen hard times and had gladly settled for the security of a union job and a seniority system. No one could say a word against the Southern Pacific in his presence. Young Bill Millard had an afternoon paper route distributing the Oakland Tribune from the time he was 12 until his senior year in high school. He also worked as a drugstore clerk and held other summer jobs to help make ends meet. He recalls, ''We never went hungry, we never had a lot of extra things.'' At parochial school Millard took an interest in technology, science, and mathematics. After graduating he got his first real job, as a Southern Pacific switchman. He bounced from one blue-collar job to another, working on the assembly line in an ammunition depot at the start of the Korean war and in a mill where he shoveled gravel into a cement mixer. He later drove a truck and eventually became a welder's helper. Finally he decided to take part-time jobs and attend the University of San Francisco, but he was unable to meet the costs of college and dropped out after three semesters to become a lending officer for a finance company in Oakland, where he worked his way up to branch manager. In 1958 the finance company decided to set up a central electronic data- processing facility in Los Angeles to handle transactions from branch offices across the country. Millard's head for numbers got him a job in its computer operations at a time when degrees in computer science were rare. The late Fifties, he recalls, were the dinosaur era of computers: the first one he ever worked on--or in--was the Univac I, a monstrosity the size of a room with a door to allow technicians to walk inside and check the arrays of vacuum tubes and wires that were soon to be replaced by silicon chips. Millard worked as a programmer, a systems analyst, and supervisor of data processing. The experience got him jobs supervising the computerization of county government in the Sixties, first in Oakland, then across the bay in San Francisco. He also put in a brief stint as a salesman with IBM. In 1969 Millard finally set up the company he had wanted: Systems Dynamics, an outfit that sold custom-tailored software to businesses that used certain IBM computers. It went belly-up three years later with a debt to the local bank of $25,000. That exceeded the value of the Millards' house, leaving them technically bankrupt. Millard, with his bankers' help, persevered. He launched a software consulting firm called Information Management Science Associates Inc., or IMS. That experience led him into tinkering with the microprocessor chips that were becoming available in the early Seventies, often sold for assembly with circuit boards in hobbyist kits advertised in the back pages of magazines like Popular Electronics. Inspired by these primitive devices, Millard in 1975 came up with one of the first personal computers, the IMSAI 8080. Millard, his wife, and their three young daughters would gather around a kitchen table covered with muffin tins filled with parts. They would hand-sort parts out of the tins into plastic bags, which went off with instruction sheets to hobbyists, who paid $399--later $499--for the opportunity to solder them together. Beginning in 1976, as the personal computer market suddenly sprang from the hobbyists' magazines and into the storefronts, IMS tried to manufacture and market the 8080 as a finished product. For a time the IMSAI 8080 was at the leading edge of the PC revolution. But Millard had no experience with manufacturing operations or financial controls, and his furious drive to get product out the door led to serious quality problems. The window of opportunity closed on the 8080 as more advanced products began coming out of the kitchens and garages of such other entrepreneurs as Steven Jobs and Stephen Wozniak, whose Apple II appeared in 1977. The IMSAI manufacturing subsidiary of Millard's parent company, IMS Associates, went bankrupt in 1979 with debts of $1.9 million. Among the debts was a $250,000 promissory note due to the Marriner venture capital group, which had tried to keep the 8080 computer alive. Millard dutifully continued to make the scheduled interest payments on the note before attempting to pay off the principal amount at the note's expiration in May 1981. Even before IMSAI folded, Millard had come to the conclusion that marketing other people's personal computers was a business he ought to be in. In September 1976 he used $10,000 to found Computer Shack, which became a franchised chain of stores selling personal computers to hobbyists and small businesses. After a legal challenge from Tandy, which owns Radio Shack, Millard changed the chain's name to ComputerLand. Its stores began springing up like mushrooms in every downtown and mall in America, and Millard found himself going from 24 stores and $1.5 million in sales in 1977 to 147 stores and $75 million in sales by 1980. IBM's introduction of the PC, and its initial decision to retail the machine solely through IBM stores, Sears Business Systems Centers, and ComputerLand, sent sales by the franchises soaring: $151 million in 1981, $451 million in 1982, $963 million in 1983, $1.4 billion in 1984. Years of family struggle and one brilliantly successful idea had finally paid off. That, at any rate, is the authorized version. The version Millard's enemies and their lawyers fought to sell to the jury in Oakland was very different: a story of greed, betrayal, and fraud. Philip Loring Reed III, a tall, handsome, boyish former car dealer who was for a time a close friend of the Millard family, testified that it was his efforts to develop a computer system for his New Mexico car dealerships, and Millard's consulting work with him, that led to the development of the IMSAI 8080, in which he had royalties before IMSAI went bust. It was Reed who in 1976 made the pitch to his father, P. Loring Reed Jr., and the little Marriner & Co. venture capital group he headed, for the $250,000 IMSAI needed to keep going. The promissory note Millard signed was originally convertible solely into shares of IMS. But, according to his accusers, when Millard pulled money and people out of the floundering IMSAI computer company to set up ComputerLand, Marriner fought Millard for months to obtain the right to convert the note not only into IMS, but into ComputerLand and any other company Millard might set up. Millard eventually signed an agreement granting Marriner that right. Yet at the trial, Millard stubbornly insisted that the agreement was only temporary and that the note is now convertible only into shares of IMS. He also insisted that he had an ''oral agreement'' with the elder Reed that the promissory note could not be sold or assigned to any third party without Millard's approval. Reed denies any such agreement, and no reference to it exists in the documents drawn up following the loan or in Millard's own detailed diary of his business dealings. For Marriner and for Micro/Vest--the third party--conversion rights only into the stock of IMS, which pays no dividends, looked much less attractive. IMS is now a holding company for ComputerLand, as well as for other subsidiaries that own Millard's house in the hillside Piedmont community above Oakland, his three corporate jets, his northern California vineyards, and his Oregon ranch. The man who brought about the Micro/ Vest challenge to Millard is John MartinMusumeci, a small, nervous, high-pressure salesman who had sold everything from used cars to employment agency franchises. Martin-Musumeci sold ComputerLand franchises for Millard and claims credit himself for the entire idea of setting up the ComputerLand franchise empire--a claim Millard and former President and Chief Operating Officer Edward Faber flatly reject. MartinMusumeci ended up being fired by Faber in May 1977. He took with him 10 1/2 shares of ComputerLand stock, or 1.05%, which he sold privately in December 1980 to Bruno Andrighetto, a Bay Area fruit and vegetable magnate and stock market investor who was looking for computer industry plays. Martin-Musumeci tipped off Andrighetto to the existence of the Marriner note and the potential legal challenge over its conversion rights. Martin-Musumeci and Andrighetto formed Micro/Vest, which bought the note from Marriner. Phil Reed, who had left IMS before IMSAI folded, joined the Micro/Vest group later. They say that in March 1981, two months before the note expired, they informed Millard that they had bought it from Marriner and were exercising their right to convert it into 20% of ComputerLand stock. MILLARD'S DECISION to fight them to the bitter end, through years of legal battles, does not surprise former business associates. They describe him as an entrepreneur with long-range vision--tremendously excited, for example, over ComputerLand's invasion of mainland China--but with a short fuse in personal confrontations. The long fight created a portrait of a man with a tremendous sense of personal honesty and integrity, but one former colleague also found Millard so inflexible and contentious that he could talk himself into believing that he must be in the right. The possibility that the attackers from Micro/Vest could actually prevail seems never quite to have sunk in on him. Following the jury's first ruling Millard coolly flew off in a company jet for a scheduled meeting with European franchisees in Barcelona. The second verdict, on punitive damages, was a shock for which Millard and his family were utterly unprepared. After urgent phone calls, Millard canceled the rest of his European schedule and flew back to Oakland for meetings with his lawyers and financial advisers to plan his appeal. The partners in Micro/Vest frankly admit that they want to use the award of punitive damages to force Millard to take the company public to raise the cash he needs. To appeal, Millard will have to post a bond of 1 1/2 times the punitive damages against him, or $172.5 million--either in cash or on other terms approved by the court. If he has to post a cash bond, coming up with such a sum privately could prove extremely difficult. Attorney Herbert Hafif, the courtroom showman who won the case for Micro/Vest, has boasted, ''I may be able to force Millard into personal bankruptcy.'' IF MILLARD RAISES money by taking ComputerLand public, that would further dilute his ownership of the company that is his passion. If the judge accepts some other form of security and if Millard can get the punitive damages tossed out or greatly reduced on appeal, as happens often with such awards, the investors' 20% stake will entitle them only to dividends--hefty ones, to be sure. With Millard and his family still owning close to 80% of ComputerLand, Micro/Vest's investors would be unable to influence the company's operations; they would not even get a seat on the board. The Millards claim that the four-year legal battle has had little or no impact on ComputerLand's business or that of its franchises. Security analysts note, however, that computer retailing is in a competitive shakeout that has eroded profit margins. They also speculate that a protracted legal battle could cloud the outlook for ComputerLand and detract from its value if Millard had to take it public. Ed Faber, who helped Millard build the company, calls him ''one of the least fragile people I've ever met.'' But how he'll hold up through this ordeal remains to be seen. Millard reiterated throughout the trial his absolute determination that every major decision at ComputerLand be ''mine--and only mine.'' The main question for ComputerLand's and Millard's future is how--or whether--he could function as a manager without the total control he fought so extraordinarily hard to keep.