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Judge in Idealab Investor Case Seeks More Details Before Deciding Charges

November 08, 2002|Debora Vrana | Times Staff Writer

Los Angeles Superior Court Judge Ralph Dau on Thursday asked for more information before deciding which allegations can go forward to trial in a case involving angry shareholders of Pasadena technology incubator Idealab Inc.

After questioning attorneys on both sides for more than four hours on certain details of the case, Dau said he would make a ruling after he receives additional information by Nov. 18.

The civil case, filed this year by more than 40 shareholders who put about $1 billion into Idealab in early 2000, alleges that company founder Bill Gross mismanaged the firm after the tech bubble collapsed and that he arranged sweetheart financial deals for himself and company insiders with investors' money.

The investors, who own so-called preferred shares, want the company dissolved so they can take back at least a portion of the $350 million of liquid assets left in Idealab.

Gross, 44, says the allegations are false. He wants to continue operating Idealab, promising that many of the fledgling ventures in development will prove successful.

A spokesman for the plaintiffs said their attorney, Skip Miller, would be unavailable for comment. David Siegel, attorney for Idealab, also was unavailable.

On Thursday, Dau seemed particularly interested in the "breach of fiduciary duty" allegations, asking such rhetorical questions as, "Is it a breach of fiduciary duty to lose money?"

Dau also questioned plaintiffs' allegations that Marcia Goodstein, Gross' wife and the company's chief operating officer, is overpaid and unqualified to hold her job.

"It's staggering to think that one person owning one share of preferred stock can say, 'Wait a minute, the person you just hired is not competent, so I will put a stick in the wheel of your bicycle and file this lawsuit,' " Dau said.

In his next ruling, Dau is expected to decide whether the shareholders, who own only about 10% of Idealab even though they put up about 96% of its capital at the firm's peak, are significant enough investors to even have the right to call for the company to be dissolved.

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