Criminal past, jail rewrite a dot-com success story

Michael Adam Fenne, whom a Virginia judge once called a "golden-tongued salesman," surfaced in California last fall and set the dot-com world afire.

After launching a splashy Internet company and raising $23 million from investors, he spent $10 million on a lavish party in Las Vegas that had the rock band The Who plugging his company, Pixelon.com.

It was the Web party of the decade. It was also a sign of something terribly wrong.

Last week Fenne, whose real name is David Kim Stanley, surrendered to Virginia State Police and was being held in a jail in Wise, Va. He is a fugitive, a convicted embezzler who bilked people of hundreds of thousands of dollars and then failed to appear in court. He had been on Virginia's most-wanted list for the past three years.

Stanley, 39, and his attorney Anthony Collins did not respond to numerous messages seeking comment.

Fenne's case illustrates perhaps the most extreme example to date of the frenzied hunger among venture capitalists in the New Economy, where phenomenal returns have made backers so eager to jump aboard the next hot dot-com that they sometimes fail to exercise diligence and ignore warning signs.

Lately investors have retreated from Internet companies, and ethical questions have surfaced about slipshod accounting and business practices at some Web companies. The board at Pixelon dismissed Stanley days after the Las Vegas bash last fall, but the company is only now learning the details of how a convicted felon blithely hid his past and fooled fellow executives and venture capitalists.

Pixelon, which officials describe as an online broadcast network, creates software that allows people to get audio and video programs over the World Wide Web. The Southern California company was founded in 1996, after former President Stephen Curtis met Stanley on a project to license images from "Star Trek: Insurrection."

The company said in a statement it will investigate whether Stanley stole any of its money.

Court records indicate that Stanley was the company's founder and, at some point, president. Initially, the company kept a low profile. It compiled video clips and television performances and honed its technology. It did "Web casting" for the Anaheim Angels and Mighty Ducks, streaming video of the games over the Web.

Such ventures and his marketing skills helped Stanley raise millions of dollars.

While established Silicon Valley investment companies have made billions of dollars by backing technology ventures, hundreds of imitators have sprung up to compete for the hottest new deals. As a result, venture investing has exploded from $3 billion in the first quarter of 1999 to an estimated $25.5 billion in the same period this year, according to Technologic Partners in New York.

With so much money floating about, reasonable business plans get funding quickly, but so do dot-com long shots.

"There has been less due diligence in some respects," said Mark Heesen, president of National Venture Capital Association, representing 380 companies. "It's more compressed. If investors don't jump on a deal, someone else is going to."

Advanced Equities, a venture-capital firm in Chicago, was the lead investor in Pixelon.

"I can't speak for Mr. Fenne's past, or whatever his name is," said Keith Daubenspeck, head of Advanced Equities. "But the technology that was developed was absolutely fabulous."

Stanley - the son of a Baptist preacher - worked as a securities broker in the 1980s, when he handled many investments from members of his father's church, officials said.

Stanley pleaded guilty in 1989 to 55 counts of fraud, and admitted to illicitly taking about $750,000 from Virginia residents and another $500,000 from Tennessee victims. A judge at the Wise County Circuit Court described Stanley as "the man who fleeced his father's flock," according to law-enforcement officials and local sources.

Stanley received a deferred sentence and the court delayed sending him to prison to give him time to pay back the money he had taken. After repaying a portion of the money, law-enforcement officials say Stanley disappeared from his Kingsport, Tenn., home in 1996.