'Financial Times': Internet Executives More Likely to Have 'Unsavory Backgrounds'
DEBORAH MARCHINI, CNN ANCHOR: A new report contains some chilling information about executives in the Internet industry.</s>DAVID HAFFENREFFER, CNN ANCHOR: It is a fascinating story. The report is in today's "Financial Times," and it's all about unsavory backgrounds. And we get details now from Ed Crooks. He's at the "FT"'s London newsroom. Hi, Ed. What can you tell us?</s>ED CROOKS, ECONOMICS EDITOR, "FINANCIAL TIMES": Hi, good morning. Yes, well, you're right, it's a cracking story we carry on the front page today about, as you say, the unsavory pasts of many dot.com executives. But perhaps when you see some of these valuations and what's happened to the share prices and how quickly they go up and how quickly they come back down again and all the rest of it, you might have thought perhaps there's something not quite right there. And it does rather seem to be the case. We got this report done by Kroll Associates, of course the very famous New York-based security company. They say that when they investigate the backgrounds of Internet company executives, they're four times as likely to find problems in their backgrounds as they are with the backgrounds of ordinary, standard business executives. And they say that, I think, something like they checked out 70 dot.com directors of which 39 percent -- that's a breathtakingly high number -- had some kind of murky secrets in their past, problems with the SEC and that kind of thing. So certainly I think enough to make anyone think twice about putting their money into a dot.com.</s>MARCHINI: Did the study, Ed, give any indication as to why it was that this dot.com area seems to be fertile ground for people with unsavory pasts?</s>CROOKS: Well, yes, I mean, it's very interesting. Actually, one of those things they say is that perhaps when one thinks about problems with dot.com management and things that go wrong in dot.com companies, you think about the young kids. They start off, they have a bright idea, perhaps they know a lot about computing but they don't really know a lot about the world of business, and they're the ones, then, that run into trouble. But they're not really the key problem that Kroll Associates have been identifying. They talk about these people they describe as "vampire investors," this lovely term for it, essentially, perhaps, older people, people with a bit of past behind them, people with perhaps a slightly shady past behind them who have seen the dot.com world as a place where a lot of money is being made very, very quickly and have seen that perhaps because the industry is growing so fast, because perhaps the checks aren't all they could be, they can move into a dot.com company, invest a little bit of money into it and then take a whole lot money more out for themselves by putting their friends and family on the payroll and that kind of thing, charging massive consultancy fees and so on. And it's those people that Kroll say are the real problem with a lot of dot.com companies.</s>HAFFENREFFER: Is there any indication by way of this study as to geography and location of these people with the unsavory backgrounds? Is it mostly U.S. or does it go outside the borders as well?</s>CROOKS: I think it's the U.S. that they've been looking at, but certainly I think anyone obviously -- I wouldn't like to mention any names, but I certainly think in a large number of other countries around world, I certainly -- indeed, we've got to be very careful here -- but certainly I think that in Europe as well this is something definitely that we've noticed. But some of the cases of Internet companies, when you look at those kind of names that are cropping up and you perhaps remember things about these people's pasts, you think, well, hang on, you know, what's going on here? Are these really people we want to be trusting? Are these people you should be confiding large amounts of money in? So certainly I think it does seem to be a global not just a specifically U.S. problem.</s>HAFFENREFFER: All right, Ed, thank you very much. Ed Crooks at the "Financial Times."