SOURCE: A Just Cause

A Just Cause

October 01, 2015 09:44 ET

Entrepreneurial Thinking Was Used as a Sword to Convict Software Innovators in Colorado

Federal Prosecutor Spun IRP6's Enthusiasm About Business Prospects Into Criminal Fraud, Says Advocacy Group, A Just Cause

DENVER, CO--(Marketwired - October 01, 2015) - Entrepreneurs see "things not as they were, but as they could be," says Entrepreneur Magazine (October 2015 Edition). "Unfortunately, the United States Attorney's Office in Colorado clearly doesn't understand small business or innovation and considers the entrepreneurial spirit a criminal act," says Cliff Stewart, A Just Cause. "Entrepreneurs everywhere should be aware that belief in their product, their appetite to take risks and innovation that disrupts the status quo could be perceived by justice officials as a scam or could be presented to them by a competitor as criminal," adds Stewart. "It happened to the IRP6 and it could definitely happen to you," exclaims Stewart.

The IRP6 case concerns six software innovators (David A. Banks, Kendrick Barnes, Gary L. Walker, Clinton A. Stewart, Demetrius K. Harper and David A. Zirpolo) of the IRP Solutions Corporation in Colorado who were convicted in 2011 on mail and wire fraud charges for to their failure to pay debts to staffing companies related to software development work done to support a sales to law enforcement agencies, specifically the Department of Homeland Security and New York City Police Department. "The IRP6 case wasn't about fraud at all," says Stewart; "it was about destroying small business innovation that challenged the status quo in Washington which is dominated by billion dollar defense contractors and systems integrators. The facts and evidence indicate that the government criminalized the debt and entrepreneurial practices of the IRP6 to eliminate them as competition against large companies," exclaims Stewart.

Court records reflect that on November 19, 2010 and October 13, 2011, FBI Special Agent John Smith testified that if IRP had sold their Case Investigative Life Cycle (CILC) software and paid their debts, there would be no case. "It wasn't staffing companies that initially filed a complaint with the FBI, it was an attorney in private practice who once served in the Colorado U.S. Attorney's Office that pushed for the criminal prosecution against the IRP6," says Stewart. "How this attorney became involved, who he represented, or why he pushed for indictments is still a mystery," adds Stewart.

Court records show that in March 2004, Denver Attorney Greg Goldberg of the Holland and Hart law firm, who was also a former federal prosecutor, hand-delivered a letter to his friend and former colleague at the United States Attorney's Office in Denver, Matthew T. Kirsch, stating that the IRP6 were acting "as though they were running a legitimate business," but were really operating a "bogus" business with the "specific intent of executing a scheme for obtaining money from staffing companies...under the guise of working in conjunction with law enforcement." However, in August 2005, six months after FBI agents raided the IRP Solutions Corporation, the head of the Denver division of the FBI, Richard Powers, sent a letter to a staffing company declining to conduct a criminal investigation into IRP Solutions, stating that the case would be "best handled civilly." Court documents also show FBI agent John Smith instructing staffing companies to contact Goldberg, who is in private practice, instead of AUSA Kirsch, the federal prosecutor on the case. "Who was driving the investigation and what was their real motivation?" questions Stewart. "Why was it necessary for Goldberg to hand-deliver the letter to Kirsch?" ponders Stewart. "Why didn't the head of the Denver Division of the FBI know about the major criminal investigation of IRP Solutions five months after the company was raided?" says Stewart.

According to the indictment, the government claimed that the IRP6 made arrangements for staffing companies to pay employees "purportedly working" at IRP Solutions and induced staffing companies to enter into business arrangements by making false representations" about "large current or impending contracts with one or more government agencies."

Numerous court documents contradict claims of false statements by the IRP6 and prove that staffing companies relied on Dun & Bradstreet credit reports to extend credit to IRP Solutions. In an FBI interview with Ron Brennan of Productive Data Commercial Solutions, a Denver-based staffing company, Brennan is reported saying that Banks told him that IRP was "currently working to secure contracts." In an FBI Interview with Susan Holland of ETI Professionals, Holland says Harper told her the company "was planning on marketing their software product to NYPD and DHS." In another email to Renee Rodriguez of Express Personnel, Harper says: "IRP Solutions are diligently moving the sales cycle with the agencies below (BOP/DOJ/NYPD)." In a February 2, 2004 confidential memorandum from Peter Jozwik of Professional Consulting Network (PCN) to FBI Agent Smith, Jozwik said he "had lunch with Mr. Harper and Mr. Stewart where they explained the software product and what they were doing to sell it to organizations involved in criminal investigations."

Another email to Robert Half International, Banks tells Tiffany Zelenbaba: "I have clarified the matter and concerning the credit application and we would like to proceed on the premise relating to the value and viability of our product, vice divulging our financials." Zelenbaba, in response to an email from her boss concerning the risk of doing business with IRP, said: "Yes, I am pushing to get this business. I could really use it and there is potential for a long-term relationship with many more job orders. I do understand that we have to make a good business decision and that we do not want any write-offs."

Zelenbaba's approach to doing business in the staffing industry was echoed in letters from two independent staffing experts who, two months before trial, contacted the U.S. Attorney of Colorado, John Walsh, concerning the charges against the IRP6 and the government's misunderstanding of staffing industry business practices.

Andrew Albarelle, Principal Executive Officer of the Remy Corporation, a Denver-based staffing firm, addressed the government's allegations and staffing industry business practices in a letter he sent to Colorado U.S. Attorney John Walsh months before the IRP6 trial. "In our due diligence of companies", Albarelle explained, "we have found that the term contract has little to-no bearing on whether we engage with a company or not. We base our decision to engage with a company on its credit-worthiness, cash flow or the product they are developing," said Albarelle. "There is no gun put to our heads and we are free to choose who we engage with," added Albarelle.

Kelly Baucom, an Account Manager of the Remy Corporation with 13 years of experience in the staffing industry, also sent a letter to Walsh addressing business risk and staffing company representatives taking responsibility for their decisions. "It is important to understand that there is risk involved in the staffing/recruiting business," said Baucom. "The agencies were in no way forced to conduct business with these men-they CHOSE to do so" and "should stop trying to place blame on these men and they should take time to re-evaluate their decision to assume the risk!" adds Baucom. "In this business-as in any business, you have to spend money to make money. I think these agencies saw the opportunity to make a lot of money and chose to assume the risk."

"We definitely signed contracts and extended our financial obligations with multiple staffing companies to payroll software developers to satisfy continuing requests for modifications from DHS and NYPD," says David Banks, Chief Operating Officer, IRP Solutions. "IRP Solutions was not a household name like IBM, Oracle or Lockheed Martin, so we felt compelled as a small business to go above and beyond to prove ourselves to a large customer," adds Banks. "DHS and NYPD officials expressed great excitement when they first saw CILC, but because IRP Solutions was unknown to them, it was natural for them to want to see more before putting their name behind it," says Banks. "We felt there was a great opportunity to gain their business if we allowed them to test drive CILC with customizations centered around their agency," adds Banks. "This approach to closing a sale is used successfully in corporate America," exclaims Banks.

Court records show that retired NYPD Sergeant John Shannon, who was staffed as a contractor with IRP Solutions and responsible for socializing CILC throughout the NYPD, testified that CILC "was the best stuff he had ever seen," Paul Tran, a senior information technology official with DHS, testified that a $12 million dollar pilot project was in the works with IRP in 2003 because they "were excited about its potential" to enhance their investigative capabilities and the effectiveness of their internal communications. "And the software had a lot of features that law enforcement and the case agent can really use," said Tran. Email evidence not only shows that the Colorado Bureau of Investigation agreed to purchase an earlier beta version of CILC software for $375,000.00, but also Shannon stating that he anticipated IRP would close business with the NYPD in the first quarter of 2004. In December 2004, DHS requested and received quotes for two CILC modules exceeding $100 million dollars.

"We didn't casually increase debt with staffing companies and put our personal and business credit at risk by signing personal guarantees," says Banks. "There were huge opportunities in front of us that gave us confidence that we were on the verge of closing a sale," says Banks. "In fact, an RFI (Request for Information) for the Federal Investigative Case Management System (FICMS) initiative was heavily-based on the CILC solution," adds Banks, "and it's the reason that one week after the RFI closed and all the submissions were received from the likes of Lockheed Martin, SAIC, IBM, and Accenture, a joint Department of Homeland Security and Department of Justice meeting was scheduled for IRP Solutions to demonstrate CILC to representatives from the FBI, Immigration and Customs Enforcement, U.S. Marshals, Border Patrol, Secret Service and others," says Banks. "Following the demonstration, we were told by a high-level DHS official that the FBI was impressed with CILC and instructed us to develop a partnership with a large systems integrator or defense contractor who could serve as a prime contractor," adds Banks. "To be raided by the FBI a month a half after the FICMS demonstration and labeled as a "purported" software company was shocking to say the least," muses Banks. "It's unfathomable that we would have three retired federal agents on staff and be engaging in criminal activity," says Banks.

Entrepreneur Magazine discussed that entrepreneurs are unconventional thinkers, especially those on the front end of their ventures, who violate rules of the status quo. "Infractions range from overly-aggressive courting of investors to fictitious big-name dropping to exaggerating sales or size. We never dropped a fictitious big-name or exaggerated a sell of our software, but we did truthfully and enthusiastically communicate to staffing companies that DHS and NYPD had an intense interest in acquiring CILC and we were working towards securing a contract with them," says Banks. "However, in the eyes the U.S. Attorney's Office in Colorado, this type of entrepreneurial jockeying is criminal," adds Banks.

Trial records show that Kirsch told the jury that none of the IRP6 defendants got rich from the alleged scheme, but during closing arguments he told the jury that IRP wasn't interested in selling software to law enforcement and that IRP Solutions existed only to "maximize the money they were getting from staffing companies for themselves, for their friends, for their family." Kirsch also told the jury that IRP had about as much chance as of landing a contract with DHS or NYPD "as they had a chance of winning the lottery."

Court records show that months before Kirsch took the IRP6 case to a second grand jury, the Philadelphia Police Department and the Philadelphia Inspector General's Office had agreed to terms with the IRP Solutions Corporation for the purchase and installation of CILC because IBM had failed to deliver as part of their contract. Kirsch filed a motion to have evidence of IRP's Business with Philadelphia excluded from trial, which was granted by the trial judge. "Presenting the details of our business with Philadelphia would have completely destroyed Kirsch's narrative that our software was no good, that we had no interest in selling CILC to law enforcement and that we had a better chance of winning the lottery than closing business with DHS or NYPD," says Banks.

Court documents show that in an interview with the FBI, Gerry Cardenas, Director of Information Technology for the Philadelphia Police Department, acknowledged that the CILC software "looked exactly like what the PPD was looking to purchase" and that "PPD "was very close to having the product installed prior to discovery of the investigation." Cardenas is also reported saying that "Banks came off as a shy, self-deprecating salesman who was not all about the salesman part of the job but who really believed in his product."

"We accrued normal business debt and we made good faith decisions in an effort to settle that debt," says Banks. Goldberg, Kirsch and Walsh's interference in our business prevented us from executing business objectives," add Banks. "After undermining our ability to complete sales, Kirsch then, without ever viewing CILC, minimized its capabilities and spun our belief in our product as some naive fantasy we dreamed up to scheme staffing companies," concludes Banks.

For more information about the story of the IRP6 or for copies of the legal filings go to http://www.freetheirp6.org.

Related press releases: http://www.a-justcause.com/#!2015-press-releases/cl69.

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