Internet Startup Company Draws FBI Investigation

The FBI is looking into allegations that The CSI Group LLC of Little Rock hacked into World Lynx’s computer system to steal its customer list, a former CSI employee said.

Brian Shaddock, president of CSI, a software developer that also offers dial-up Internet access under the name ArkansasDirect.net, said he knew only that the FBI was investigating a former employee for something he did to World Lynx.

For three years, Shaddock was executive director of World Lynx, whose corporate name is Arkansas iNet LLC of Little Rock. He left in November 2001 to form CSI, and he persuaded four other World Lynx employees to join him.

The former CSI employee, who only spoke on the condition of anonymity, said the FBI is looking at Shaddock for ordering employees to retrieve the list. The employee wouldn’t release any more information because FBI agents told him not to talk about the case.

Shaddock denies that allegation. An FBI spokeswoman wouldn’t comment or confirm that there was an investigation into the alleged incident.

Still, the FBI is just one of The CSI Group’s list of problems.

• On Jan. 14, attorney James Lawson of North Little Rock said his client, Darragh Investment Co. of Little Rock, had locked CSI out of its offices at 1431 Merrill Drive because Shaddock gave the landlord a third check that bounced.

• The Arkansas Employment Security Department has a lien against the company for not paying its unemployment insurance tax.

• CSI’s last three employees quit in November. Two have been replaced.

• Two former employees say they are close to suing CSI to collect money they say they are owed.

• The phone number listed on the company’s Web sites and flyers has been disconnected.

“All this stuff that you’re talking about comes from [the fact that] we had money problems,” Shaddock said. “We’re a new business. I’ve had a handful of employees leave at once. It’s taken some time to recover from that. … We’ve gotten them all worked out and are moving forward.”

He said the attacks against him are coming from disgruntled employees.

“I mean, these guys, they filed for unemployment. It’s been denied,” Shaddock said. “It’s getting old.

“Sure we’ve had some money problems and we’ve had some staffing problems but [we did] nothing dishonest,” he said.

Beginnings

Two former CSI employees said Shaddock misled them from the beginning of their relationship.

In late November or early December 2001, Shaddock arranged a meeting with several World Lynx employees at Cuzins Sports Café in Little Rock. Sitting near the pool table and talking over dinner and drinks, Shaddock told them about his vision for a new company in which the customer would come first and profits second.

Shaddock, who said he left World Lynx over disagreements with the company’s direction, was willing to offer them more money if they would come to work for him.

One former employee said he believed everything Shaddock said and wanted to work for an honest company in an industry in which it’s easy to take advantage of customers who don’t understand the technology they are buying.

Another key selling point for coming to work for Shaddock was a persistent rumor that World Lynx was being sold to EarthLink Inc. of Atlanta and all of the local employees would be fired.

Shaddock said he had heard the rumor but denied starting it.

It was almost a year after that meeting at Cuzins that the former employee said he was told by a World Lynx official that Shaddock was asked to resign after “financial discrepancies were discovered.” World Lynx President Fred Wood said he couldn’t comment on the reason why Shaddock left, and Shaddock denies that allegation.

But at the time that Shaddock made his pitch to the employees to come to work for him, they had no reason to doubt his word.

“At World Lynx, everything was OK,” said another employee who also asked not to be named. “That’s why I left and went with him. I trusted him.”

World Lynx officials had denied that the company was for sale. “But two of us had been at places before that they had said they weren’t for sale, and then, all of a sudden, everybody didn’t have a job,” one employee said.

So four employees left World Lynx and came to work for Shaddock last January.

Problems Develop

At first, everything seemed normal at CSI, the employee said.

But as time went by, some wondered why World Lynx was still around.

Shaddock also had begun pressuring employees to contact every customer they had at World Lynx to get them to switch to CSI.

“He was giving us customer lists and told us to call them, but we never did,” the employee said.

In April, Shaddock declined to say exactly how many customers subscribed to Arkansas Direct.net. It was a “pretty low number,” he said at the time.

Other projects started rolling in, and CSI picked up one job that brought in $38,000 for a Web design project, the employee said.

During the course of the year, two of the original employees left. Then some of the company’s basic bills, such as the phone and electricity, were going unpaid, one ex-employee said.

One day in October, the employees noticed the company’s generator had turned on. When they went to investigate, they were told that the electricity was being shut off because CSI was several months behind on its bill, which was $680, the employee said.

One employee talked the electric company worker into giving the company more time. Shaddock eventually instructed an employee to pay the bill just before the power was going to be shut off.

The phone bill also was past due and shut off several times, forcing the employees to use cell phones to make calls, the employee said.

In fact, phone calls to the company now go through cell phones.

When first asked about the cell phones, Shaddock said CSI is using cell phones because he’s trying to decide which local telephone provider to use.

But when asked why the phone number advertised on flyers and on the Internet site had been disconnected with no forwarding number listed, he said, “We disputed charges on our bill, and basically I refused to pay them … and they shut them off. That happened during that time when those employees left.”

Shaddock blamed the former employees for the financial trouble. “When you lose those people that are bringing in the revenue, then you have financial issues,” he said.

When one employee quit in November, he filed for unemployment insurance but was told there was no record of him working at CSI.

The Employment Security Department also filed a lien on Sept. 11 against CSI, charging it owed $205 for unpaid unemployment insurance tax, as of Aug. 19.

“We still owe our third-quarter unemployment tax,” Shaddock said.

He said he knew he had some late fees on the second-quarter tax because it wasn’t paid on time, but it was eventually paid.

“That’s a typical small, new business problem,” Shaddock said.

One of the biggest blows to the company came on Dec. 11. The Darragh Investment Co. filed a lawsuit against CSI in an attempt to evict them and collect back rent.

Darragh’s lawsuit, filed in Pulaski County Circuit Court, said CSI had on two occasions paid rent with checks that were returned for insufficient funds.

Darragh Investment then tried to take back the offices, but Shaddock refused to leave, the lawsuit said.

In its lawsuit, Darragh asked for possession of the offices plus back rent. The lawsuit didn’t say how much rent was due, but rent was $2,083 a month.

Shaddock claimed that “the rent is straightened out. … It’s a short-term cash-flow problem. That is directly related to the employees leaving.”

But Lawson, Darragh’s attorney, had a different take on the chain of events.

“My understanding from the owner of the building is that the most recent check that was given to the landlord was insufficient,” he said.

“They have been evicted.”