Case Study 2: U.S. versus AOL
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u.s._v_aol.docx
U.S. v AOL
Real Cases 371
This case was quite interesting, and while it was a criminal case, not a civil one, it is worth examining here. There are two reasons for this.The first reason is that this was a criminal case that also involved civil litigation. The second reason is that the process of this trial is worth examining. The basic facts are that a number of America Online executives were accused of colluding with executives from PurchasePro, Inc. for the purpose of overstating revenue from software licenses
( • )that AOL sold for PurchasePro 1
Both parties were accused of accounting de
America Online and several of its executives reached out-of-court settlements that included payment of a $210 million fine. This settlement allowed them to avoid criminal and civil prosecution. This is the first element of this case that is relevant to this chapter; it is frequently the case that both a civil and a criminal case is brought against a defendant in order to increase pressure on the defendant to settle. If a person or company is facing criminal charges in addition to po tential losses in civil litigation, an early settlement may seem more advantageous.
A total of six individuals, including PurchasePro' s former chief executive officer Charles Johnson, were indicted on federal charges of conspiracy, securities fraud, obstruction of justice, and wire fraud. This is the second element of this case that merits our examination, specifically the wire-fraud charge.Wire fraud is usually done via electronic trading means, thus it is a crime that is related to computer systems. It is one of those crimes in which the computer system is a means to commit the crime, not the goal of the crime itself. There are many computer crimes in this category, including cyber stalking and identity theft. It should also be noted that in any significant financial case, computer records are seized, in cluding hard drives, e-mail records, and any other electronic-data storage med ium. This necessitates the proper application of computer forensics.
Among the accused were former AOL business affairs executive director Kent Wakeford, who managed the company's relationship with PurchasePro, and John Tuli, who was a vice president in AOL's NetBusiness unit. Both of these individuals, along with PurchasePro's top executives, also faced civil litigation from the Securities and Exchange Commission. Here we see a combined threat of civil and criminal prosecution from the federal authorities.
372 Chapter 13 • Civil Matters Relating to Computer Crime
. Two of the former executives at America Online were acquitted on all counts of charges that they conspired with PurchasePro to inflate PrchasePro,s evenue with secret side deals and back-dated contracts. John Tuh, a former vice pre sident in AOL's NetBusiness unit; Kent Wakeford, a former executive director at AOL,s business-affairs unit; and Christopher Benyo, a former senior vice president of marketing at PurchasePro had been accused of deceiving PurchasePro stockholders about the company's revenue in the first quarter of 2001 as the dot- com economy collapsed2•
The final element of this case that is pertinent to our discussion is the outcome. As of this writing, the former CEO of PurchasePro is still awaiting trial, but Mr. Tuli and Mr. Wakeford of AOL were acquitted at trial. Even with what seemed like fairly substantial evidence, and with some of their co-defendants making settlement and plea agreements, these two were still found not guilty at trial. This illustrates a fact we mentioned earlier that the outcome of any trial is never certain, and is also why both parties in civil litigation often wish to come to some sort of out-of-court settlement. A compromising resolution is often perceived as better than risking a total loss.
