Meta TV in Damage Control Following CEO's Arrest

Cable World, June 11, 2001 by Mavis Scanlon

ITV company tries to reassure investors and customers

On the morning of Saturday, June 2, two executives at MetaTV, a well-known provider of portals and applications for interactive TV, stood outside the office of the company's founder and CEO. Inside the office were FBI agents and police officers, who later confiscated some papers and personal items belonging to the CEO, Ranjit Singh Sahota. That same morning, Sahota was arrested in San Francisco's Golden Gate Park on two federal criminal charges. He was charged with coercing a minor he had met on the Internet to engage in sexual activity and for attempting to entice another minor he had also met on the Internet to engage in sexual activity.

Now, just days after the arrest, MetaTV has been thrown into full crisis-control mode. Throughout last week, Meta had three or four counselors available; employees were encouraged to meet with them privately. Meta also held a staff meeting each morning, giving employees the opportunity to direct questions to cofounder and president Andrew Lev. Lev called each investor and each board member immediately upon hearing the news.

Sahota has been held without bail since June 2. His attorney could not be reached for comment by deadline.

The news was a complete shock, says Mary Shank Rockman, a spokeswoman for Meta. "Employees are confused. They don't really understand what's happened Or what he's done," she says, "because they have only known him in a business setting." The impression of a CEO who is an alleged child molester is not one a company wants to leave on prospective customers, investors or employees. But it can be particularly damaging for an ITV company trying to earn the trust of cable operators.

In many respects, this crisis could not have come at a worse time for MetaTV, a 2 1/2-year-old company that provides the technology and applications for migrating interactive content, communications and transactions to the television. In April, the privately held company raised $28 million from some of the cable industry's biggest players. In addition to investing, Comcast and Cox Communications were looking to do business with Meta.

Even worse for Meta, Sahota's arrest came just a week before a new product announcement. Meta has a press conference slated for today at the NCTA show to make that announcement; in anticipation, the company had taken a large booth.

Despite the serious criminal charges levied against Sahota, the company and people close to it insist that, at least as far as operations go, it is business as usual and that nearly all parties involved with the company are solidly behind it. "From an organizational standpoint there is not a huge impact" because of the arrest, Lev says.

"I've spoken to all of the customers this week [who] are working with the company," says one investor who spoke on condition of anonymity, "and there is not going to be any slowdown, any change or any ramifications from this whatsoever." In fact, he adds, the [ITV] industry recognizes that Ranjit was just one of many people responsible for Meta's success.

On Thursday, Meta placed Sahota on administrative leave of absence, and appointed Lev CEO. Sahota, who also served as CTO, oversaw a 65-person engineering staff, roughly 60% of Meta's employees. John Carney, VP-engineering and also a cofounder, had reported to Sahota and will now report to Lev--probably the biggest operational change with Sahota out.

Sahota's day-to-day role in operations was small, says Lev. Sahota's role was more as an "ambassador" to investors and customers, raising the question of how his absence will affect fund-raising efforts in the future. "I like to think that no CEO is easily replaced," says Mitchell Kertzman, CEO of Liberate Technologies, a MetaTV investor and strategic partner. "But the truth is that none of us invests in an individual. Although the individual is important, it's always the fundamentals of the company, the whole management team and the products."

MetaTV is certainly not alone in dealing with this type of situation--in fact, it is the fourth high-profile technology company in California over the past two years that has had an executive charged with Internet-related sex crimes. Last September Patrick Noughton, 34, an EVP at Internet company Infoseek, was arrested after soliciting an FBI agent he thought was a 13-year-old girl he met on the Internet. In August, one of the founders of iBEAM Broadcasting, William Michael Bowles, 50, was arrested for allegedly soliciting a teenage boy over the Internet for sexual purposes. And Digital Entertainment Network founder Marc Collins-Rector and another executive are accused of sexually abusing young male employees.

From a legal perspective, MetaTV will have to tread carefully in dealing with Sahota. "Even to say he has engaged in conduct detrimental to the company may be dangerous," says Stephen Gulotta, a partner in the business-and-finance division of law firm Mintz, Levin, Cohn, Ferris, Glovsky & Popeo. He adds some employment contracts are very specific about the circumstances under which an executive may be fired. Meta declined to comment on whether Sahota is currently collecting a salary or on the details of his contract.