|Collard: Contract based on bad info||
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|OTHER BUSINESS NEWS|
|Collard: Contract based on bad info|
|March 11, 2003
By KATHLEEN JOHNSTON JARBOE, Daily Record Business Writer
|A defective audit document contributed to flawed contract negotiations at
now-defunct Network Technology Group Inc. last June, according to the turnaround
specialist who was hired in the process.
John M. Collard, of Strategic Management Partners Inc. in Annapolis, said by using the document, and other false financial statements, NTG’s board of directors misrepresented the company’s financial health when hiring him to replace its former chief executive. Collard is now suing NTG’s board.
The telecommunications services provider collapsed just weeks after the contract’s ink dried, and Collard has yet to be paid for a large portion of his fees.
A different agreement would have been negotiated had NTG’s true finances been known, Collard said.
The audit document showed the company had lost $435,300 for 2001 with revenues of $29.9 million. In reality, the document was off by millions, according to the sworn statement of facts in a criminal case against NTG’s management.
Directors reaffirmed its validity as late as June 26, right before the final contract papers were signed, Collard said.
The directors had just met with auditors that day to find out when the board would receive the finalized audit report, Collard said.
According to Collard, board members told him that auditors were ready to finalize the report he had seen and would only be making two adjustments: an asset alteration of about $70,000 and a note about a bank loan.
Two of NTG’s top executives, including the former chief executive officer, pleaded guilty last month to fraud. The statement of facts in their plea agreements said some financial documents were hidden from auditors.
NTG's auditor was Baltimore-based Ellin & Tucker Chartered. The firm’s lawyer didn’t respond to requests for comment. But Ellin & Tucker officials have told The Daily Record that they never would have promised a final audit report with just the minor revisions.
They have said the document Collard saw, dated May 1, 2002, was far from final, since NTG management had been withholding critical documents to complete an audit. In fact, they said, it was essentially the same information that had been given to them by NTG executives.
Collard is using the lawsuit against the board to recoup $300,000 in unpaid wages and about $45,000 in attorney’s fees.
“I’m not getting paid. I’m suing for my fees,” Collard said.
Since the company collapsed, Collard has continued representing the company in legal matters concerning employee tax returns, retirement plans and other matters.
Collard’s original salary was $10,000 per week. Once NTG shut its doors, the contract was amended to pay him on an hourly basis at the rate of $250 per hour, according to court documents.
The defendants named in the suit were Robert M. Stewart of Spring Capital Partners in Baltimore, Nora Zietz, formerly of The Abell Foundation in Baltimore, and Gwendolyn Smith Iloani and Maritza Alverez of Smith Whiley & Co. of Hartford, Conn.
Zietz declined to comment on the case since she had not yet seen it.
Stewart did not return calls for comment.
Collard’s lawyer said the suit primarily targets the directors’ insurance policy. The board members had a $1 million policy through insurer American International Group Inc.
An official from AIG declined comment on the matter.
“I certainly feel it is a strong case,” said Collard’s lawyer, C. Edward Hartman III.
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