Legal Problems and Founder's Fraud Conviction
In November 2008 a US court found the company had conspired with AOL executives to overstate revenue from software licenses that AOL sold for PurchasePro. The companies inflated the license-sales figures by not reporting that most of these sales were made in exchange for commitments to buy products from the licensees, which hid the fact that only a small fraction of customers ever paid for these licenses. PurchasePro also backdated and forged contracts to meet revenue projections. These accounting deceptions fooled investors into believing PurchasePro had met its sales projections and bolstered its stock price. Overall, revenues were overstated by 37% in the first quarter of 2001. AOL and a number of its executives reached settlements, including payment of a $210 million fine, to avoid criminal and civil prosecution. Johnson and other PurchasePro executives were charged with stock fraud. Johnson's first prosecution ended in a mistrial after his attorneys resigned upon discovering that Johnson was forging email messages to introduce false evidence in his favor. His second trial ended in November, 2008 with a conviction for stock fraud and obstruction of justice and a sentence of 8 years in prison.
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