In the late 1990s, the dot-com bubble generated billions in paper wealth and heralded the coming of the Internet age. Then the bubble burst, and revelations emerged that some tech titans were built on phony accounting. Since then, sliminess has oozed out of some of technology's most stalwart companies. Here are our picks of tech's biggest disgraces.
10: Savvis — Expense this
This isn't anywhere near as destructive as most of the events on our list, but it gets a nod anyway for being a mix of pure debauchery and cluelessness.
Robert McCormick, former CEO of IT services company Savvis, resigned in 2005 after he and several associates ran up a $241,000 tab on his company credit card during a single visit to Scores topless bar in New York.
The New York Daily News dubbed him "The Lap Dunce."
Turns out McCormick's fall failed as a cautionary tale. John Arnold, cofounder of Intelius, which offers online background checks, engaged in sex acts with strippers from a Seattle-area club but told a grand jury he didn't. For perjuring himself, Arnold was sentenced last month to spend 45 days in jail and pay a $30,000 fine.
9: AT&T's black ops
In 2006, a former AT&T employee revealed what many people had suspected for a long time: The Bush administration was using the Web to spy on Americans.
AT&T had set up a secret room at its San Francisco facilities where the government — without obtaining a search warrant — collected and monitored Internet traffic belonging to individual Americans.
The Electronic Frontier Foundation filed suit against AT&T and in 2008 filed a complaint against U.S. President George Bush. Congress later passed a bill that exempted companies like AT&T from these kinds of lawsuits. EFF says it will continue to fight to stop the National Security Agency's "massive program of illegal dragnet surveillance of domestic communications."
8: Sex-harassment claims sink Hurd
Mark Hurd's glittering five-year tenure as HP CEO imploded in August after Jodie Fisher, a former HP contract worker, claimed Hurd sexually harassed her. HP's board investigated and said it could find no proof Fisher's allegations were true. And then, abruptly, the board switched gears and fired Hurd for falsifying expense reports.
Hurd negotiated a settlement with Fisher, a former soft-core porn actress, before directors could interview her. According to The Wall Street Journal, some on the board believed Hurd's settlement was an attempt to prevent them from "learning the truth."
Hurd did okay, though. He landed at Oracle, and the HP board was criticized for firing a successful CEO. New info emerged last week that suggests Hurd may have leaked HP's plans to buy EDS months before the deal was completed.
7: Web retailers sell out
Hackers once spooked shoppers away from Web retail. Maybe consumers should have feared online merchants more.
Orbitz, Continental Airlines, Ticketmaster, Pizza Hut, Movietickets.com, eHarmony, Hertz, and Live Nation were among 80 companies paid to help dupe their own customers into joining loyalty programs, the government reported in 2009. After making secret pacts with marketers, such as Webloyalty, Affinion, and Vertrue, the e-tailers presented buyers with what appeared to be an offer of free goods or services. Tucked into the fine print, however, were terms that said by providing an email address, a customer agreed to join a loyalty program and allowed one of the marketers to charge their credit card about $20 every month.
A former employee of Webloyalty said such charges were known in the industry as a "stupid tax." If you fell for it, you were stupid.
The Senate Commerce committee held hearings and shamed the retailers into halting the practice. Andrew Cuomo, New York state attorney general, in recent weeks succeeded in getting two of the marketers and a handful of retailers to pay refunds and fines.
6: The murder of Nina Reiser
Hans Reiser founded Namesys, developed a pioneering computer filing system, and was convicted of murdering his wife.
After Nina Reiser went missing in September 2006, police began compiling a case against Reiser. During his murder trial, Reiser's attorneys tried to use a "geek defense." Neighbors saw him hosing down his car's interior and he also removed his car's front passenger seat. Why? Because geeks do odd things, said his lawyers.
Reiser was convicted of first-degree murder, but the charge was reduced when Reiser agreed to reveal the location of his estranged wife's remains. For second-degree murder, he was sentenced to 15 years to life.
5: Smartest guys in the cell
Enron once called itself the most innovative company in America. But executives there were probably most groundbreaking in cheating investors. In 2001, Enron, an energy company that also provided broadband and streaming media services, created offshore companies that were essentially trash containers. Enron hid losses by shifting them to these dummy firms.
Investors, many of them Enron employees, were left holding the bag as the stock plummeted from $90 per share to pennies. Most of the company's top managers went to jail, except Ken Lay, the company's chairman, who died before serving time.
Jeff Skilling, Enron's former CEO, was sentenced to 24 years in prison. The once swaggering exec was interviewed recently by Fortune magazine: "Could you buy me a cup of coffee?" Skilling asked the reporter. "Inmates aren't allowed to touch money."
4: Sony rootkit
A mountain of criticism and lawsuits were heaped on Sony BMG after it was discovered the company loaded copy-protection software, known as a rootkit, onto about 100 CD titles. When the CDs were loaded into a PC, the software covertly launched and created vulnerabilities that could be exploited by computer worms and viruses. Within weeks of the October 2005 rootkit discovery, several Trojans and worms were written to take advantage of the software-created openings.
Sony BMG recalled the CDs and later settled lawsuits filed against it by the states of Texas, New York, and California. To many techies, the rootkit was proof some of the major labels would stop at nothing to fight file sharing.
3: HP "pretext" scandal
For 60 years, Hewlett-Packard helped provide a moral compass for Silicon Valley. The company promised to adhere to "The HP Way," a list of principles that included operating with "uncompromising integrity."
In 2006, HP tarnished its reputation when Chairman Patricia Dunn — with the approval of then-CEO Mark Hurd — sent private detectives on a mission to spy on members of the company's board as well as reporters from such publications as The Wall Street Journal and CNET. HP managers were searching for the source of a boardroom leak.
Investigators followed their victims and eavesdropped on their conversations. To gather private phone records belonging to the reporters and board directors, HP investigators called up telephone companies pretending to be the victims, a practice known as pretexting. Dunn eventually resigned, and Hurd got a stern talking-to by lawmakers before replacing Dunn as chairman.
Hurd gets a special shout-out for being the only exec to make our Top 10 twice.
2: Yahoo helps jail Chinese journalists
America is supposed to be the land of the free and home of the brave. But in China five years ago, the journalists were not so free and Yahoo was not so brave. The Sunnyvale, CA-based Web portal was denounced as an enemy of free speech by members of Congress and human rights groups after the Internet portal turned over information that helped China's government jail two journalists.
The journalists were attempting to report that Chinese dissidents could be in danger if they returned to the country to mark the 15th anniversary of Tiananmen Square massacre. Both reporters received a 10-year prison sentence.
Poor Bernie Ebbers.
In 2000, WorldCom was the second largest U.S. long distance phone company. It eventually became the country's largest accounting scandal, although in 2008, another Bernie (Madoff) seized the title away. Nonetheless, the $11 billion accounting fraud at WorldCom, coupled with the resulting nosedive in the company's stock price, was destructive enough to investors to make WorldCom tops on our list.
Ebbers once told a church congregation that he hoped his actions hadn't jeopardized his "witness for Jesus Christ." Maybe he should have worried more about the witness for the prosecution.In 2005, Ebbers was convicted of conspiracy and securities fraud. He won't be eligible for parole until 2028, when he's 85.