Ryan Ballard and Minh Nguyen are to plead guilty to months of computer fraud against Hydra. Both remain directors at W4 after a class A misdemeanor plea deal filed with the FBI.
Ryan Ballard
Network Production Director
ryan@w4.com
aim:ryandballard
888.838.1572:x108
Minh Nguyen
Finance Director
minh@w4.com
aim:minh868
888.838.1572:x109
NOVEMBER 14, 2011
Ex-Employees to Plead Guilty to Information Theft
ADVERTISING: Plea deal could clear way for Hydra owners to seek damages.
By JOEL RUSSELL Staff Reporter
The ghost of Hydra LLC, a defunct online ad company, may rest in peace now that two former employees are scheduled to plea that they stole confidential information after they left the company arid went to work for a competitor.
The former employees recently agreed to plead guilty in a misdemeanor criminal case in Los Angeles federal court.
The competitor, W4 Media LLC, is a Venice-based ad network that was launched by three former Hydra partners who left the company in 2008 then waged a war of lawsuits against Hydra until it went into receivership in November of that year. The assets of the company were purchased by Adknowledge Inc., an ad network based in Kansas City, Mo. in June 2010.
According to the plea agreements, the two for Hydra employees. Ryan Ballard and Minh Nguyen, would face a year in jail and fines up to $100,000 in addition to restitution payments. Both still work for W4, Ballard as network production director and Nguyen as finance director.
The U.S. Attorney's Office filed an "information" in the misdemeanor computer fraud cases last month.
Ballard told the Business Journal he had no comment, Nguyen did not respond to a request for comment.
Zac Brandenberg, former chief executive of Hydra, said the company's demise was caused by a number of factors, and he thinks criminal conduct is on the list.
"I believe the criminal acts in the plea agreements caused damages for Hydra in excess of $1 million," Brandenberg said. There was a whirlwind of issues that hit the business. I think we could have managed through them, but there was a significant loss in having confidential client information compromised."
Hydra's endgame began when three of the company's founding powers— Doug Walker and Es sons, Jason and Adam — were fired. Brandenberg remained as the only co-founder at Hydra.
The Walkers then founded W4, a direct competitor to Hydra. Brandenberg filed suit, accusing the Walkers of defamation and unfair competition, and the Walkers sued for wrongful dismissal and accused Brandenberg of destroying the value of Hydra. The Walkers owned about 40 percent of Hydra's equity.
Meanwhile, the company's financial situation deteriorated rapidly when the Federal Trade Commission cracked down on the exaggerated claims of Internet online ads. Many advertisers went out of business and major sites such as Google and Yahoo changed their policies. As a result, Hydra faced a mountain of uncollected bills from advertisers.
Al the end of 2008, Hydra had reported annual revenue of $108 million and ranked sixth on the Business Journal's list of fastest-growing companies. In November 2009, the company went into receivership.
Ballard and Nguyen both left Hydra in July 2004. By September, they both worked for W4. For the next five months, according to the plea agreements, they logged on to the Hydra server multiple times with their former usernames and passwords. They accessed data that included names and contact information for clients, pricing of advertisements, profit margins and other statistical results of campaigns, Hydra's overall finances and the creative materials for ads.
Robyn Crowther, an attorney at Caldwell Leslie & Proctor LP in Los Angeles who represents the Walkers, said that neither the Walkers nor W4 are involved in the criminal case or the plea agreements. "W4 has never used trade secrets or improperly obtained information from Hydra," Crowther said. "The competition has always been fair."
Travis Gemoets, a partner in labor and employment law at the firm Jeffer Mangels Butler & Mitchell LIP in Century City, is not involved in the case but reviewed it at the request of the Business Journal. Gemoets said that once the ex-employees are formally sentenced. Hydra's former owners could file a civil suit that would delve into the motivation of the ex-employees' actions.
In many such cases, he said, the former employees may not have much money to pay restitution, so the civil suit would seek any companies with deep pockets that may have benefited from any illegal actions.
"Restitution in a criminal case is a blunt instrument, but the civil case has a statute of limitation of four years for unfair competition" he said. "And you don't have to choose one or the other, criminal or civil. You can squeeze on both ends."
Eric Vandevelde, assistant U.S. attorney for intellectual property and cybercrimes in Los Angeles, said the next step will come Nov. 28, when the two ex-employees are arraigned. Vandevelde anticipates they will be sentenced sometime in early spring.
Any restitution the court imposes at sentencing would be paid to Hydra's last shareholders, namely Brandenberg and investment firm Kayne Anderson Private Investors in Century City.
Looking back, Brandenberg, now chief executive at Meteor Games LLC in Beverly Hills, said Hydra could have used a more complex security system to limit access to its server, but technology can never guarantee people won't steal.
"You can create blocks and barriers all day long, but it's more important to find people with the right ethical and moral compass." he said. "It's always disappointing to find out people you hired didn't have that ethical and moral compass."
Los Angeles Business Journal Article:
Los Angeles Business Journal - 11/14/2011 digital edition
Plea Agreements:
4shared - My 4shared - shared folder - free file sharing and storage
W4-Hydra_-_Ex-Employees_to_Plead_Guilty.zip - download now for free. File sharing. Software file sharing. Free file hosting. File upload. FileFactory.com
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Ryan Ballard
Network Production Director
ryan@w4.com
aim:ryandballard
888.838.1572:x108
Minh Nguyen
Finance Director
minh@w4.com
aim:minh868
888.838.1572:x109
NOVEMBER 14, 2011
Ex-Employees to Plead Guilty to Information Theft
ADVERTISING: Plea deal could clear way for Hydra owners to seek damages.
By JOEL RUSSELL Staff Reporter
The ghost of Hydra LLC, a defunct online ad company, may rest in peace now that two former employees are scheduled to plea that they stole confidential information after they left the company arid went to work for a competitor.
The former employees recently agreed to plead guilty in a misdemeanor criminal case in Los Angeles federal court.
The competitor, W4 Media LLC, is a Venice-based ad network that was launched by three former Hydra partners who left the company in 2008 then waged a war of lawsuits against Hydra until it went into receivership in November of that year. The assets of the company were purchased by Adknowledge Inc., an ad network based in Kansas City, Mo. in June 2010.
According to the plea agreements, the two for Hydra employees. Ryan Ballard and Minh Nguyen, would face a year in jail and fines up to $100,000 in addition to restitution payments. Both still work for W4, Ballard as network production director and Nguyen as finance director.
The U.S. Attorney's Office filed an "information" in the misdemeanor computer fraud cases last month.
Ballard told the Business Journal he had no comment, Nguyen did not respond to a request for comment.
Zac Brandenberg, former chief executive of Hydra, said the company's demise was caused by a number of factors, and he thinks criminal conduct is on the list.
"I believe the criminal acts in the plea agreements caused damages for Hydra in excess of $1 million," Brandenberg said. There was a whirlwind of issues that hit the business. I think we could have managed through them, but there was a significant loss in having confidential client information compromised."
Hydra's endgame began when three of the company's founding powers— Doug Walker and Es sons, Jason and Adam — were fired. Brandenberg remained as the only co-founder at Hydra.
The Walkers then founded W4, a direct competitor to Hydra. Brandenberg filed suit, accusing the Walkers of defamation and unfair competition, and the Walkers sued for wrongful dismissal and accused Brandenberg of destroying the value of Hydra. The Walkers owned about 40 percent of Hydra's equity.
Meanwhile, the company's financial situation deteriorated rapidly when the Federal Trade Commission cracked down on the exaggerated claims of Internet online ads. Many advertisers went out of business and major sites such as Google and Yahoo changed their policies. As a result, Hydra faced a mountain of uncollected bills from advertisers.
Al the end of 2008, Hydra had reported annual revenue of $108 million and ranked sixth on the Business Journal's list of fastest-growing companies. In November 2009, the company went into receivership.
Ballard and Nguyen both left Hydra in July 2004. By September, they both worked for W4. For the next five months, according to the plea agreements, they logged on to the Hydra server multiple times with their former usernames and passwords. They accessed data that included names and contact information for clients, pricing of advertisements, profit margins and other statistical results of campaigns, Hydra's overall finances and the creative materials for ads.
Robyn Crowther, an attorney at Caldwell Leslie & Proctor LP in Los Angeles who represents the Walkers, said that neither the Walkers nor W4 are involved in the criminal case or the plea agreements. "W4 has never used trade secrets or improperly obtained information from Hydra," Crowther said. "The competition has always been fair."
Travis Gemoets, a partner in labor and employment law at the firm Jeffer Mangels Butler & Mitchell LIP in Century City, is not involved in the case but reviewed it at the request of the Business Journal. Gemoets said that once the ex-employees are formally sentenced. Hydra's former owners could file a civil suit that would delve into the motivation of the ex-employees' actions.
In many such cases, he said, the former employees may not have much money to pay restitution, so the civil suit would seek any companies with deep pockets that may have benefited from any illegal actions.
"Restitution in a criminal case is a blunt instrument, but the civil case has a statute of limitation of four years for unfair competition" he said. "And you don't have to choose one or the other, criminal or civil. You can squeeze on both ends."
Eric Vandevelde, assistant U.S. attorney for intellectual property and cybercrimes in Los Angeles, said the next step will come Nov. 28, when the two ex-employees are arraigned. Vandevelde anticipates they will be sentenced sometime in early spring.
Any restitution the court imposes at sentencing would be paid to Hydra's last shareholders, namely Brandenberg and investment firm Kayne Anderson Private Investors in Century City.
Looking back, Brandenberg, now chief executive at Meteor Games LLC in Beverly Hills, said Hydra could have used a more complex security system to limit access to its server, but technology can never guarantee people won't steal.
"You can create blocks and barriers all day long, but it's more important to find people with the right ethical and moral compass." he said. "It's always disappointing to find out people you hired didn't have that ethical and moral compass."
Los Angeles Business Journal Article:
Los Angeles Business Journal - 11/14/2011 digital edition
Plea Agreements:
4shared - My 4shared - shared folder - free file sharing and storage
W4-Hydra_-_Ex-Employees_to_Plead_Guilty.zip - download now for free. File sharing. Software file sharing. Free file hosting. File upload. FileFactory.com
:drinkup::drinkup::drinkup::drinkup::drinkup:
