Hella Nation - Evan Wright [107]
I quit in September, and a week later I got a call from the company’s new general counsel, Eric Blank, who told me that Warshavsky had asked him to sue me on the company’s behalf for violating a non-compete clause in my employment agreement and for tortious interference—inducing employees to leave. (I was in negotiations for a job at a start-up Internet company, and I had hastened the departures of several IEG employees by helping them to find other jobs. Adding to Warshavsky’s fury, I had directed the employees who reported to me to file complaints with Washington state’s Department of Labor & Industries when their paychecks bounced.)
Soon after letting me know of Warshavsky’s intention to sue, Blank also abandoned IEG. According to Blank, Warshavsky had told him to file the lawsuit in order to get me to sign a sweeping confidentiality agreement. But Blank refused, telling Warshavsky to “fuck off.” “I started feeling like I was helping a scam artist,” he later told me. Blank, thirty-one, had taken the general-counsel position at IEG two months earlier. He came from one of Seattle’s largest law firms, Graham and James, with the purpose of helping to position IEG for its stock offering. At six-four and 230 pounds, he was physically imposing, and for three years, between Georgetown and the University of Michigan’s law school, he had worked as a cop in Washington, D.C. Shortly after Blank quit, Warshavsky hired another lawyer to sue me.
He also named Blank in the suit. Warshavsky had vowed to spend “a million dollars,” Blank says, to have him disbarred for his disloyalty. Blank seemed elated by the prospect of a battle with Warshavsky. And given the kinds of battles he’d fought as a cop, Warshavsky hardly seemed an intimidating target. One night six years earlier, Blank was approaching a car on foot when the driver shot him in the chest. A Kevlar vest saved his life, but the bullet pulverized his ribs. Knocked to the ground, he fired his Glock 17 at the car and killed the driver. “Nothing improves your aim like getting shot in the chest,” he says. “Your hand is steady because you can’t breathe, and your motivation is pretty high because someone just tried to kill you.”
Blank set about gathering from our former colleagues compelling evidence of Warshavsky’s rumored scheme to bilk credit cards. In nearly four years of operation, IEG had collected hundreds of thousands of credit-card numbers in its database. The system was run by a network administrator who reported directly to Warshavsky, and in the previous six months two of them had quit suddenly. One, Ron Chao, agreed to speak to Blank. Chao explained in detail how Warshavsky had ordered him to “reactivate” accounts belonging to customers who had canceled and to charge current accounts multiple times for the same transaction in order to raise extra cash. Chao provided a sworn declaration: “Seth demanded that I cause the billing system to generate between $400,000 and $2 million on various occasions. Just to be clear, the revenues Seth was demanding that I generate were not to come from corrections of system or database error but from re-billing of credit-card customers for purchases (usually monthly memberships) for which they had already been charged.”
John Zicari, a customer-service rep at IEG, volunteered a statement that read, in part: “I and others in customer service have noticed thousands of accounts that have been reactivated and billed. In July 1999, almost every account I came across in Clublove.com was billed two or three times, and some were billed as many as a dozen times.”
Zicari’s and Chao’s statements regarding fraudulent billing were supported by eight others. Two former senior staff accountants also detailed an incident in which Warshavsky had faked accounting records. Somebody else provided an internal IEG e-mail containing a list of more than five thousand credit cards that had been intentionally overbilled. A tape recording of IEG employees discussing double billing also surfaced.
Sharon Waxman, a correspondent for The Washington Post,