The founder, Marc Collins-Rector, was forced to leave the company after a lawsuit accused him of molesting a teenage boy, a charge he denies.
A planned stock offering that could have netted him and his
executives hundreds of millions of dollars was abandoned.
Investors also knew little about Collins-Rector
, the entertainment novice they entrusted with their money.
declined to be interviewed.
saw the potential of this booming technology earlier than most.
lined up major investors, grabbed key advertisers, and his
company was the first entertainment site to file for an initial public stock offering, positioning executives for the kinds of Internet riches that Hollywood moguls have come to envy.
was the main creative force.
A 40-year-old technology guru with no entertainment experience, his
background was murky even to the top executives he
did have tens of millions of dollars and a certain amount of tech industry cachet from an earlier company he
had founded called Concentric Research.
His two DEN co-founders were Chad Shackley, then 24, who had lived with Collins-Rector
since dropping out of a Michigan high school, and Brock Pierce, then a 17-year-old actor best known for his leading roles in such Disney films as "The Mighty Ducks" and "First Kid."
manifesto, crafted to energize early employees, Collins-Rector
sights on segments of so-called Generation Y that he
said were being ignored by mainstream television and movies.
identified punk rockers, extreme skaters and "hip-hoppers," and put gay teenagers at the top of the list.
The company would build a huge market by "globalcasting to a narrowcast audience," he
Collins-Rector often claimed to be in his late 20s, and associates and employees said he gave the impression he had been a computer student at UCLA.
But company filings show that he is 40, and officials at UCLA say there is no record that he was ever a student there.
In 1984, Collins-Rector
and an Orange County businessman named Stephen Fryer founded an Irvine-based company called World TravelNet that electronically coordinated tours and cruises.
In 1991, Collins-Rector rebounded by launching Concentric Research in Bay City, Mich.
After meeting online, according to associates, their relationship flourished and Collins-Rector
decided to base Concentric
in Bay City and bring Shackley, then 16, into the company.
The boy, now 20, says that Collins-Rector
, using the screen name "Cyberpoet," offered him part-time work handling customer complaints at Concentric
and flew him to Michigan and California for meetings.
By 1995, Concentric
was still relatively small, with 25 employees and $1 million in revenue.
But its rapid growth attracted attention from Silicon Valley.
That year, Collins-Rector
and Shackley sold control to a group that included the top-drawer venture capital firm of Kleiner Perkins Caufield & Byers
The windfall enabled Collins-Rector
and Shackley to pursue a lavish new lifestyle.
They called it the "M & C Estate," for Marc
spent $800 million trying to [solve the problem]," Collins-Rector
wrote in his
According to several former DEN executives, the inspiration was simple indeed: It was to move the camera as little as possible, so computers would have fewer image changes to process. (Palmieri, the attorney for Collins-Rector, said Pierce's "contributions to the company were enormous.
One former supervisor said Collins-Rector
directed him to hire certain teenagers who weren't qualified for the jobs they sought.
Company executives, including Gersh, Carpenter and Neuman, as well as board members, said they were unaware of any improper behavior by Collins-Rector
and regarded his personal life as beyond their scope of concern.
But two days earlier, Collins-Rector
was served with a lawsuit filed by the New Jersey boy he
had hired as a 13-year-old customer service employee at Concentric
in the early 1990s.
The suit, filed last May in U.S. District Court in Trenton, N.J., accused Collins-Rector of using his
position of influence to sexually abuse the boy repeatedly from 1993 to 1996.
In one instance, the suit alleged, the boy was flown to Bay City for a work assignment and invited to stay in Collins-Rector's home.
That evening, according to the suit, Collins-Rector
entered the boy's room and "moved his
hand down [the boy's] chest, repeating the question, 'Do you trust me?' "
The suit alleged that sexual encounters continued after Collins-Rector had sold his controlling stake in Concentric, moved to California, and founded Digital Entertainment Network.
The age of consent in California is 18.
At first, Collins-Rector
denied the allegations and indicated he
would fight the suit.
That strategy collapsed after the emergence of a tape recording of a phone conversation between Collins-Rector
and the boy, according to a source familiar with the case.
Palmieri denies the existence of any such tape.
said that in his
first meeting with the boy's attorney, he
demanded, " 'If there is a smoking gun, let me see it.' There was no such thing."
agreed in mid-October to settle the suit, paying the plaintiff, now 20, an undisclosed sum but admitting no guilt.
Palmieri characterized the suit as "classic IPO blackmail," and said Collins-Rector
agreed to settle only to minimize publicity and damage to DEN
After the settlement, Collins-Rector, Shackley and Pierce left the company.
One of the few artifacts from the previous era is a defaced photo of Collins-Rector
hanging in a computer room.
Someone has scrawled a mustache across his
face in black ink, and the words, "Our former fearless leader."
Collins-Rector's stake in DEN
has dwindled to less than 20%, according to his
attorney, and executives say he
has no influence over management.
, Shackley and Pierce recently returned to their Southern California mansion and incorporated a new company, World Wide Technology & Internet Ventures Ltd.
, in the British Virgin Islands.
Palmieri, the attorney, said Collins-Rector had nothing to do with bringing Burton into the company.
"It does sound like a pattern, but it's not Mr. Collins-Rector
who has done this," Palmieri said.