Update: See here.
Rumors about a possible $100 million acquisition by Yahoo of sports content site Rivals surfaced today. But two previous deals to acquire the company died once it was discovered that the CEO, Shannon Terry, was found to have been involved in a classic “pump and dump” scheme, and violated the anti-touting and antifraud provisions of U.S. securities laws in 1998.
Shannon was a principal of SGA Goldstar Research, Inc. In 1998, he and at least two others, Sheldon Kraft and Charles Huttoe, were accused of engaging in “a massive ongoing market manipulation” around touting shares of a company called Systems of Excellence, Inc. Kraft and Huttoe were sentenced to prison terms. Shannon, who reportedly “cooperated” with authorities, got off with a $828,000 fine. For background information, see here and here.
In 2005, sources say, Fox killed a deal to acquire Rivals at the 11th hour after a routine background check on Terry revealed the fraud. Terry had not previously disclosed the issue to Fox. Fox went on to acquire competitor Scout Media for $60 million in September 2005.
Shortly thereafter, AOL was supposedly close to acquiring Rivals as well, for as much as $90 million. Again, Terry reportedly failed to disclose the fraud, which was discovered during the due diligence phase of the negotiations. The deal was killed.
No word on whether Terry’s history has been disclosed to Yahoo as part of the current negotiations, and how it might affect the deal. My guess is that it could have an impact.
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What is the board doing here? Dont they want an exit?
“No word on whether Terry’s history has been disclosed to Yahoo as part of the current negotiations”
Well if they have not.. I am sure they have been informed now..lol.
Yeah, they might catch on now.
Shouldn’t matter to the deal necessarily except Yahoo can maybe hammer them down a bit based on this, even if it’s not really relevant.
I read that headline like three times trying to figure out who had committed suicide.
I am sure prominent investors and businesses do deals all the time with the likes of Michael Milkan despite his conviction of securities fraud.
brian,
The non disclosure is the issue.
Im sure he disclosed this to yahoo. History would have taught him that his past would be revealed in a simple Due diligence. What i think is that the possible negative effect such a story might do to yahoo PR might kill the deal regardless the fact that they have been informed about it.
“No word on whether Terry’s history has been disclosed to Yahoo as part of the current negotiations, and how it might affect the deal. My guess is that it could have an impact.”
Well, my guess is that someone obviously wants to disrupt Rivals.com’s deal with Yahoo.
Talk about an albatross. If a CEO’s past is sinking any potential acquisition deal (assuming that acquisition is a possible goal for the company) then it’s time to get a new CEO.
Who is posing as Mark Zuckerberg above? I hear Mark is irreverent - and this comment is funny as hell - but I doubt that it was actually written by Mark. But if it was, then Mark we definitely have to share a beer together sometime b/c you are even nuttier than I thought!
Yeah for anyone convicted of Sec Felony - hmmmmmm
- can felons own guns? - RB
scum bag!
The issue isn’t about Shannon Terry and his past. Although it should be considered, rivals.com is the asset, not Shannon Terry. From Yahoo’s perspective, they are trying to justify the economics of this deal. Is rivals.com worth a valuation of 100m? What are the revenues? Who’s visiting the site? What are the growth rates? These are the concerns of Yahoo and the board. It’s not like they’re going to ask Terry to remain the CEO, they will place someone else in that position. Is this deal worth adding rivals.com to Yahoo’s portfolio?
2007 is suppose to be the year of flying car like back to the future. Why are staring at oil sucking cars and populates chemical mix CFC on the air?
????
Today, greedy middle agers your want money & destory good things younger generations!!!. It’s nice to have anger baby boomers putting war, security fraud, nuts & bolt explosion, gun violence, burn more oils, create anti-protesting, racism remarks on TV & radios, and stupid dot com era. They goal is pass bad things to us… to us…
Why this news to us???
You baby boomers are terrible civilized apes. WEB 2.0 we predicted it will crash just like dot com era.
Only morons buys Rivals.com with ending name .com
Brian, it’s about the unknown. This guy is obviously a scumbag. Who knows what other skeletons are in his closet, and who knows what shady things he has done as Rivals CEO. Yahoo simply can’t take the risk.
Dumbfounder — Current advertising revenues don’t lie. And I’m sure they’ve checked with rival’s partners, affiliates, and general stakeholders to verify the validity of the relationships. You have a great point, but I would learn my lesson after nearly going to prison and being fined close to 1m. In addition, Terry has to live with the guilt of securing his co-workers seat in prison — a place where he should have gone. I just can’t see how this wouldn’t be a legit business. It’s got a loyal user base, and the revenues should do the talking. I’m sure Yahoo would severely audit before making the acquisition. I’m just saying, Terry should be considered innocent until proven guilty as it relates to rivals.com. So far, there is no evidence so suggest wrongdoing with this business. That is all that matters.
“Pump and dump”. I always picture a colostomy bag or my college flings when I read that phrase.
As a subscriber to a Rivals site, I can assure you they have legitimate revenue streams from advertising and subscriptions. I don’t question the validity of the business, but I do question the character of its CEO. Tigers don’t often change their stripes.
“No word on whether Terry’s history has been disclosed to Yahoo ”
No one bothered to ask?
Pump and dump?
More like…
“Pumps and a bump”
-MC Hammer
http://www.youtube.com/watch?v=wxp6W12QQbE
No I am not affiliated with Rivals CEO in any way and No I dont have any offense against Apple´s CEO.
But after I read the post, I couldnt keep myself from thinking that 1 CEO´s fraud is a nightmare for a company and other is singing merrily even after the disclosures and his company hitting milestones after milestones.
May be its all about green bucks after all. You make it, and we ll even hide your dirty laundry, you dont and you are a scumbag.
confucious say, big money appetite with no patience = money over the NEXT rainbow
What a shame. By the lack of information on the website the CEO may be the only shareholder. Otherwise, the Board of Directors would have surely fired him after the first discovery. Otherwise, the shareholders would of sued the company and Board.
This CEO has street smarts….. wasted talent. I would not be surprised if the CEO is also playing in online gambling. I’ll give anybody 3-1 odds:)
Look at the link on Kewtr’s name/comment (NSFW)
Pedophile 2.0?
@Sean Percival:You are right dude…
Mike just check comment #4 from Kewtr….The content on the site is well check it out for yourself.
Dominic
It’s absolutely astonishing that Mr. Arrington seems to find a way to crucify any wesbite, or individual, that got their start outside his personal sphere of VCs or cronies. If you’re not in his circle of influence, watch out. Not only can TC make a site, it can also break it into pieces. Whats the point? I did not see him hanging Steve Jobs on a cross for his options crap. Way to go Mike.
Shannon Terry should resign as CEO position…. that’s too bad CEO is good position job. Do you know how hard to get CEO job?
Very hard. By commited Fraud…. Only losers would do. I’m serious.
I guess it best to shanno to resign as CEO. SEC will bust, mess, harrass, invade security, school record, check your bank records, security code, assets, etc…
Advice. take resignation and start over… I think it’s good idea for shannon terry to take a job as flipping burgers.
Dominic - so….this shouldn’t be reported? I’m not following you.
America is finest country and the best economic power.
With securities fraud you can’t flee the country. The FBI will take your passport.
Two choices to make:
1. Quit CEO. Take burger flipping job and buy anti-depress pills.
Court will approve that you are mentally ill. You are not entitle to take
higher position job. The court cannot put you in jail. If are you
mentally ill. It’s against the law to jail mental ill business man/woman.
Genius goes to jail is not America! It’s nazi theory.
2. Go to court and than jail.
Oh yeah, you will be all over TV station. you will get media mug you and
take your pretty face snap shot. People on TV will make fun of you freely.
You can be famous CEO jailer. You will get free food in jail that good news.
Think of Martha stewart she went to jail and go to out. She start over
again.
Two choice…. Lesson to learn never commited fraud. Don’t mess with U.S.A it is great country. We all like it.
“Due diligence” is the responsibility of the acquiring firm. The company being acquired needs to answer all the questions fully, but if nobody is asking the right questions, the acquisition target isn’t under any obligation to reveal any skeletons in the closet.
It’s like being in court. You answer honestly, but if nobody asks the right question, you are under no obligation to reveal anything.
The thing about all this ruckus is that - outside of the scenario if Yahoo! knew or didn’t know yet - all this negative attention / PR to the situation will probably cause the deal to break…
Very lucky for yahoo. If yahoo brought rival.com. yahoo stock will plummed super fast — and investors will yell so loud, screaming, losing money, and pull their hairs out.
My brother works in wall street. All the investors need know the future acquistion targets. If they don’t… U.S will lose money…. money will ship to dubai, europe, and round the globe.
Today, I think we see mike as hero. He’s my idol…
Greed…greeed…greeeeeeeed! when will that stop??? What a shame!!!
Smiley
myCuteGalaxy.com
http://www.mycutegalaxy.com
@Sean and Bilal -
Man, now I have to send a strongly worded letter to Techcrunch for being defamed in the comments? Dammit.
Not to waste space here, but none of those videos are hosted by me, and all of them can be reported to the site hosting them and removed for inappropriate content. The end
Later I have to figure out how to monetize ‘Pedophile 2.0′.
Michael,
People make mistakes. Some of them are hard to forgive. But most of them are forgivable and lessons were learned. I think the CEO of Rivals.com deserves a fair chance. Noone should judge him now for mistakes he made a long time ago. Potential buyers of Rivals.com should be careful and find out if the company is healthy, but thats it. All I am saying is DON’T burn the guy because he made a mistake. Noone here is 100% clean, including you and me. And if people would start digging in your past they would probably find something too, right?
Amen,
Tim
fd
http://www.beforeyoukillyourco.....ies-fraud/
Does this website have permission to basically repost your article???????
You state: “No word on whether Terry’s history has been disclosed to Yahoo as part of the current negotiations, and how it might affect the deal. My guess is that it could have an impact.”
I believe instead of saying “it could” have an impact, you mean to say “I hope”.
What is your problem? Did you crash some techie convention where Shannon Terry brushed you off? Grow up.
His lawyer is correct and you are wrong. Shannon was not a principal in SGA Goldstar. He was barely a few years out of college when he was hired as an employee of Mr. Melcher’s SGA Goldstar newsletter. He went to work there thinking it was a legitimate investment newsletter.
He is the one who convinced Mr. Melcher to take it online and took charge of the transition. For that, Melcher granted him a bonus of stocks, stocks which turned out to be part of the pump and dump. That’s the $828,000. It was not a fine. It was a forfeiture. Shannon sold his shares when the stock rose, like many investors do to take a profit.
It was only after he sold his shares that Shannon found out the run up was due to market manipulation. Shannon did not know this was a pump and dump operation. He was not involved in soliciting companies to tout, nor was he involved in fabricating information about the stocks.
When the SEC investigation discovered what was going on, Shannon did indeed cooperate. Not to get himself leniency (he wasn’t guilty of anything), but to cooperate because it was the right thing to do. He felt he had been duped as well. The resolution of the SEC investigation confirms this.
Mr. Kraft and Mr. Huttoe initiated the pump and dump. It was their operation. Mr. Melcher became involved later in the process. Mr. Terry was not privy to any of the conversations or manipulations involving the pump and dump. That is the real reason Kraft, Huttoe, and Melcher served prison terms and Mr. Terry did not.
The way you are casting this story is in a completely false light. It IS defamatory, and shows you have only the most shallow and confused idea of what happened.