Motricity Saga Continues: Company Sues Former Top Executive

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Motricity Saga Continues: Company Sues Former Top Executive

When Steve Elfman, one of Motricity’s highest-ranking executives, left to join Sprint Nextel earlier this year, it appeared to be a bad sign for Motricity, which had just paid $135 million for Elfman’s company, InfoSpace Mobile. But in an interview with us a couple months later, Motricity’s CEO Ryan Wuerch sounded upbeat, and suggested some potential upsides to his departure: “He’s the president at Sprint (NYSE: S), which is a customer.” Sprint was never a good customer, right? “No, it was never a good InfoSpace (NSDQ: INSP) customer, but for Motricity it has been a customer for awhile.”

Well, that optimism apparently vanished quickly: Just two days after the interview appeared in mocoNews, Motricity sued Elfman, according to the Kansas City Business Journal. The suit alleges that Elfman knew Motricity would only buy the InfoSpace mobile business if he committed to take the job of president and COO and stay for two years after the sale closed.

It’s the latest drama for Motricity, whose fortunes and set-backs are intensely followed in the wireless industry. When the company purchased InfoSpace’s mobile division, it moved to Bellevue and laid-off hundreds of employees who had worked at its headquarters in Raleigh, N.C. The company, which develops back-end infrastructure for wireless operators, such as AT&T (NYSE: T), has raised nearly $500 million to date, including money from investor activist Carl Icahn.

The suit, filed on July 16 in Superior Court of Washington for King County, alleges that Elfman’s “duplicitous conduct” enriched himself and damaged Motricity. The Motricity-InfoSpace deal closed on Dec. 28., and Elfman left about three months later to become Sprint’s president of network operations and wholesale. The Overland Park, Kan.-based Sprint said in a SEC filing last week that it had agreed on Aug. 4 to pay Elfman’s legal expenses in the case “to help mitigate distractions to the business and to protect (Sprint’s) interests.” Sprint told the Kansas City Business Journal that the company “reviewed the allegations, and Steve continues to have our full support.” Motricity’s general counsel said he was not allowed to comment. The suit seeks monetary penalties against Elfman “in an amount to be proven at trial.”

History of the Motricity-Infospace saga in our section

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Tricia Duryee

@triciad Nov 14, 2008 5:25 PM ET

Posted In: Legal, Companies, InfoSpace, Sprint Nextel, motricity, steve elfman

latest headlines

South Carolina Divorce Attorne

Dollars to doughnuts it was Uncle Carl. I expect he wanted some professional, experienced, educated management for his new baby. In addition, from what we read, RW was probably happy to see SE go, probable even encouraged it sotto voce, and probably wouldnât want to go into litigation,

Bert McGert

Here's the latest that I've heard:

1) MOT no longer paying for employee parking in the building garage (>$180/month each)
2) MOT no longer providing 401(k) matching
3) MOT not giving raises this year.

I wonder if they actually made a profit last year…

curious

Anyone know how the suit is going?

great salesman?

RW can't even sell his Raleigh house after several months of relistings and repricings in one of the strongest real estate markets in the country. Can't keep selling the dream to senior management as they dive like rats off a sinking ship. So, why is he in charge, again? One might wonder how all the investors who bet on him feel…

This is up

A merger or acquisition is most likely. Layoffs could come before or after that depending on when a suitor can be found - tough in the current environment. An out and out collapse is unlikely.

what's up

There hasn't been much motricity news lately. I've been expecting to read either about lost contracts, layoffs, and shutting doors OR a big merger or acquisition. What's going on over there?

none

Regarding Icahn's involvement, if you read and listen to Icahn's comments on the situation, it's clear that he regards the investment as a HUGE mistake made by his son. His son got snookered, recommended the investment to Carl, Carl made the investment, Carl put his son on the board, Carl realized the truth, Carl yanked his son off the board (and probably put him at the reception desk rather than the trading desk), Carl put himself and his number 1 guy, a vicious cost cutter, on the board, and they're waiting it all out. So Carl isn't a "sucker" in the sense of the rest of the investors, but maybe his son is, and Carl was, just one time and never again, a sucker for family sales pitches.

da bear cave

How can you not be amazed with RW's consistency:

1) RW has remained at the top while living an extravagant lifestyle despite the poor condition of his company or the broader economy <supposedly RW "raised a round" with God a few years back and is entitled to this lifestyle for perpetuity>.
2) According to RW, it's not his fault - which is why the sr leadership team must be turned over on a regular basis <they simply can't deliver on the dream>.
3) He consistently raises vast sums of money <I now know the meaning of “a sucker is born every day”>.
4) Motricity consistently loses money and NEVER returns a cent to shareholders <this is what happens to poor suckers>.
5) Return to #1 and repeat <very impressive to say the least>.

Only puzzling part is Ichan - his success clearly doesn’t land him in with the suckers <Perhaps Brett needs $100M of training before he is allowed to play with the public portfolio>.

Mark Burchard

Can you pay out a court settlement entirely in sweater vests?

Watching this company from afar beats any soap opera, bar Battlestar…

Pravda

@ Former INSPMOT: spot on, except that Thorkildsen didn't bail. He was told by RW that his role was gone - no R&D anymore?

Former INSPMOT

I'll second Sadbuttrue's comments about discovering one bad thing after another about the NC operations. Unfortunately with MOT as the buyer, the INSP team really wasn't able to do much due diligence before the transaction closed. MOT wanted the sr mgmt team but was dumb in not making them staying around a condition of the transaction. SE was smart to bail, as were the others on the mgmt team (Chaplin, Reisenauer, Thorkildsen). I hear their lawyer left after she learned that RW threatened to sue SE despite it blowing up the Sprint relationship. Now they've actually gone and done it. Amazing.

Perry Mason

Here are the court documents:

http://dw.courts.wa.gov/index.cfm?fa=home.casesummary&crt_itl_nu=S17&casenumber=08-2-23585-8&searchtype=sName&token=0A642133D698D3523FC10B89C921E9A4&dt=202CC18B0FB1DB41D6DD9B7CCCAD5494

what's really going on?

It would be really interesting if a reporter could do a little research, read the court documents, and tell us more details of what's going on. Motricity has been in the balderdash business for so long that these court documents, where they can't get away with just making up stories and numbers, are typically really enlightening. One question I have is whose decision it was to file this lawsuit. Dollars to doughnuts it was Uncle Carl. I expect he wanted some professional, experienced, educated management for his new baby. In addition, from what we read, RW was probably happy to see SE go, probable even encouraged it sotto voce, and probably wouldn't want to go into litigation, given it's propensity to air dirty laundry for all the world (customers, employees, etc.).

When is this thing just going to dry up and blow away, anyway? The economy must have really shut down the sort of impulse buys Motricity facilititates, and all the new projections for new cell phone sales (or lack thereof) must have a HUGE impact on Motricity's hockey stick (I'm sure) revenue and profit projections.

ExitStrategy

WOW - Handango STILL owns MotricitySucks.com. That is hysterical. They need to put something up there like a redirect or thread list for this site. WhoIs info:

Registrant:
Handango, Inc
ATTN: MOTRICITYSUCKS.COM
c/o Network Solutions
P.O. Box 447
Herndon, VA. 20172-0447

ExitStrategy

Someone needs to capture all the comments posted on the threads about Motricity on this site and post it someplace… like MotricitySucks.com. Oh yeah, I wonder if Handango still owns that address? Remember when they bought that back when Motricity announced their new name changing from PowerByHand? Hilarious.

sendmoremoney

Wow did I read that right? Motricity has raised $500m; for what is a simple business. RW - you're a genius!! Looks like the investors in Motricity went to the same business schools as the guys running the mortgage industry :-)

monstrosity

ahhhh….the gift that keeps giving. When was the last time anything was said about Motricity that related to the the growth of the business. If this saga weren't so entertaining, it would be pathetic.

Carl - if you're out there, would you please escort Mr, Wuerch back to the circus, they are missing a clown.

motrocity

Threatening ex-employees, suing to get out of contracts, and now suing Elfman for cutting out after cutting up Motricity. I'm not surprised to hear this.

sadbuttrue

The truth is Elfman got totally duped by RW and co. on the numbers. What he thought he was getting in limited disclosure, versus what he later discovered were two different things. Shame on both sides! The real losers are all the hard-working employees that made the two companies what they WERE. It's unfortunate that greed and narcissism got in the way. It could have been a successful merger. Now it's a complete disaster. Oh yeah, where was uncle Carl in all this? Icahn asleep at the wheel or punch drunk on RW's Kool-Aid?