Anatomy of a company downfall/ Software problems usher in bankruptcy

0 Comments | Gazette, The (Colorado Springs), Jan 14, 2001 | by Chris Walsh

Darnell Dent first noticed something wasn't quite right with AdminiQuest Inc.'s software last spring, when he was the company's chief marketing officer.

AdminiQuest, a 4-year-old Colorado Springs company that developed software and networks for the insurance industry, was performing work for its first major client - manufacturing giant General Electric Co. The company was transferring information from the computer systems of a business GE recently acquired to AdminiQuest's networks. It would then be responsible for record-keeping, billing, customer service and other administrative tasks related to that segment of GE's business.

If done correctly, the job could thrust AdminiQuest's technology into the limelight.

But Dent became concerned in May when he noticed that the initial phase of the project, slated for completion in April, was taking an inordinate amount of time to complete.

His concern escalated when he became president and chief executive officer of AdminiQuest in August and the firm still hadn't completed the project.

"I just had some burning questions as to why it was taking so long for us to get things done," Dent said in a recent interview. "I thought, 'You know, there's something to this,' and so I started asking questions."

Dent's inquiries led to the discovery of a nasty glitch at the core of AdminiQuest's flagship software product.

It was a glitch that would test Dent's integrity and place the fate of the firm directly in his hands.

A glitch that, in the end, was so serious and costly that it would lead to the company's bankruptcy.

"Way back when, someone, quite frankly, didn't do the best job of nailing down the business requirements our software relies on," Dent said. "But no one knew about it, and it turned out to be fatal."

Dent joined AdminiQuest in January 2000 as chief marketing officer, a position created for him by a co-founder and chief operating officer of the company, Judith Gilbert, with whom Dent had been friends for several years.

Dent, a former Marine, had a 23-year history in the insurance industry, working in executive positions for such organizations as QualMed Health and Life Insurance Co. and Foundation Health Systems in Pueblo.

AdminiQuest hired Dent just as it was beginning to unroll its product and services. The company's Internet-based software was designed to help insurance companies manage their clients more efficiently.

Dent quickly moved up at the company.

In May, John Fraser, who was named AdminiQuest's president and CEO a year earlier, left the company to pursue other interests. Dent was named interim president in July and became president and CEO in August. At the time, the company was performing work for GE and had recently signed another major client - insurance giant MetLife.

But there were underlying problems at AdminiQuest. The company experienced several setbacks working with GE, and employees often had to manually correct errors the AdminiQuest software was supposed to fix automatically.

Dent hired an independent team of technicians in August to test the software.

"That's when the onion started to peel," he said.

Technicians found a host of problems centered around the software's ability to recognize beneficiaries of claim payments. When an insurance company received a claim, AdminiQuest's software was supposed to recognize the beneficiary based on client-specific information. But technicians found that the software sometimes failed to make the distinction between different claims - say, for life and disability insurance - and would recognize the wrong beneficiary.

The software's safeguard system, which was designed to flag errors and miskeyed information on insurance forms, also had problems.

"No one at the company knew there were problems with the software, all they knew is that every time they went to load data, it just wouldn't work correctly," Dent said. "I didn't know how deep the problem was. My first thoughts were, 'We need to do something about this.'"

Dent initially thought the problems could be fixed in a matter of months, but soon discovered it would take at least a year and $6 million.

Dent faced a tough decision: pull the product and risk losing clients, or stay silent and hope nothing major happened.

"I could have played the game. We could have brought in more employees, manually fixed problems and brought in more revenue," Dent said. "But I think something major would've happened in six months. Anything we built for companies would've been a house of cards. The liabilities would be huge, and we would've had customer complaints. We didn't want to risk any of that."

Dent told the company's investors about the problems. They declined to pump in more money. Investors, which included US Bancorp Piper Jaffray and GE, had poured $7.5 million into the company in 2000. AdminiQuest had raised about $19 million since its inception in 1996.

AdminiQuest pulled its software product from the market in September as executives tried to come up with a plan to save the company.