The Digital Entertainment Network lost its chairman and two executive vice presidents, just as the company is preparing to go public. Sexual harassment allegations played a part in one of the founders stepping down.
This story has been corrected. - - - - - -
Marc Collins-Rector, 39, stepped down as chairman of DEN last week, citing a desire to devote more time to his new startup, a digital encryption firm. He controlled more than 56 percent of DEN’s shares.
Executive vice president Chad Shackley, 24, and 18-year-old director and executive VP Brock Pierce, the other co-founders of the money-losing online streaming video network, also resigned abruptly last week.
A New York Post article suggested the three were asked to leave the company in order to eliminate questions about their extravagant lifestyle, a charge DEN officials denied.
"It was their own choice to leave," said vice president of communications Anna Caldwell on Thursday. "They were ready to move on to the next thing. They were definitely not ousted."
Collins-Rector and Shackley live together in an Encino mansion formerly owned by Death Row Record's Suge Knight and are known for throwing extravagant parties. And at an age when most people are still trying to decide on colleges, Pierce draws a US$250,000 salary.
However, at a staff meeting at the company headquarters in Santa Monica on Friday, president David Neuman told employees that a sexual harassment claim against Collins-Rector had been resolved.
On Monday, DEN's CEO and newly appointed chairman Jim Ritts acknowledged that the claim, filed by an unidentified man, played a roll in Collins-Rector's departure.
"It played a role, but it was not the primary reason," said Ritts. "The company first learned of this personal claim against Marc in late September. Initially DEN was included, but it quickly became clear that this had nothing to do with DEN. The activities alleged go back to way before DEN was an operating company."
"The board suggested that Marc turn over his voting control of the company to two independent directors and that it was in the best interest of the company that Marc step down."
Collins-Rector did not respond to requests for an interview.
Prior to their involvement with DEN, Shackley and Collins-Rector founded the Concentric Network, one of the nation's biggest Internet service providers. Pierce was previously a child actor, performing in such films as The Mighty Ducks and The First Kid.
DEN filed an S1 with the Securities Exchange Commission in September to sell US$75 million worth of stock.
The document reads like so many dot-com offerings: The company lost $7 million in 1998 and hemorrhaged an amazing $20 million in the first six months of 1999, meanwhile taking in exactly zero revenue.
DEN depends on advertiser revenue, yet its only major deals allow for payment in barter rather than cash. Despite these figures, its top three executives pull in a combined US$2.5 million salary and much more in stock options.
Editor's Note:
This story has been corrected. Marc Collins-Rector was chairman and a co-founder of DEN. In the editing process errors were introduced that incorrectly suggested that all three founders were top company executives and that they all resigned in response to sexual harrassment claims. Wired News regrets the error.
