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Top 2TheMart Execs Quit After Auditor Does

Internet: Irvine online auction company's president and CEO leave after parting shots from the outside agency.

March 30, 2000|From Staff and Wire Reports

The top two executives of Irvine online auction company have quit after its outside auditor resigned, citing a loss of confidence in management and a lack of adequate internal controls and management oversight.

Dominic Magliarditi stepped down as president, chief operating officer and chief financial officer. Steven Rebeil quit as chief executive but will remain as co-chairman.

Grant Thornton LLP, the outside auditor, informed the company of its resignation March 22, 2TheMart said in a document filed this week with the Securities and Exchange Commission.

2TheMart said Grant Thornton explained it would "no longer be able to rely on management's representations." It added that Grant Thornton also said the company "does not have adequate internal controls or the appropriate level of management or board oversight."

In July, the company's first auditor, Deloitte & Touche LLP, ended its relationship with 2TheMart a month after it was hired.

Separately, 2TheMart said it agreed to acquire shares of Inc. in a stock swap that would give GoToWorld control of the online auction company. Financial details were not disclosed.

Orange-based GoToWorld operates an Internet site that pays members to surf and shop the Web. GoToWorld shares advertising revenues with visitors, who on average receive about 30 cents for every hour they spend surfing the Net.

Merchants advertise on GoToWorld, in part, because so many potential buyers check out the site, Chief Executive Ian Simpson said. GoToWorld claims to get 10 million unique visitors per month, although industry ranking systems put the number at around 3 million.

The company said Simpson would become president, chief executive and co-chairman of 2TheMart.

Once the merger is completed, GoToWorld will own about 60% of the new entity and 2TheMart will cease to exist, Simpson said. Talks between the two companies began about a month ago.

GoToWorld said it will gain access to 2TheMart's platform of several high-powered computers, a major element in allowing GoToWorld to create a vast online marketplace for businesses and consumers, Simpson said.

GoToWorld's parent company, LanguageForce Inc. in Orange, produces software that can translate e-mails, documents and Web pages into various languages.

GoToWorld will be spun off into a separate company when the deal is completed, Simpson said. LanguageForce will be the majority shareholder.

Simpson said the resignation of 2TheMart's outside auditor is "cause for concern," but said a GoToWorld team of lawyers and accountants would thoroughly evaluate every aspect of the pending deal.

With just two days remaining before 2TheMart's deadline to file its 1999 audited financial statements with the SEC, Corbin & Wertz was hired to replace Grant Thornton to conduct the audit.

2TheMart said the resignations of Grant Thornton and the executives weren't related.

Three years ago, the Nevada Gaming Commission denied a gaming license application submitted by Magliarditi and Rebeil. It found they lied to state investigators and weren't qualified to be officers or directors of a publicly traded company.

2TheMart's stock moved up 6 cents a share to $4.94.

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