CRIME AND PUNISHMENT-David Kent’s Point of Law

David W. Kent had joined that special niche of entrepreneurial tech geniuses. Like them, he assumed he could fly above the law.

After all, Kent had invented a version of LinkedIn for energy professionals in 2000. That was Rigzone. And it was before LinkedIn itself existed.

In the volatile oil and gas industry, Rigzone’s online platform created new value. That was by bringing together employers and job searchers in a unique user experience (UX).

Back Story of Hubris

In 2010, Kent sold Rigzone to Dice. The acquisition retained the brandname “Rigzone” and was under the corporate umbrella DHI.

After the non-compete provision expired, Kent launched his new enterprise Oilpro. His crime of hubris or over-reaching was hacking into the database of Rigzone users. He did that to juice the number of users for Oilpro. At the time, he was in the process of trying to sell it to DHI for about $20 million.

Kent admitted his crime in a plea arrangement. On November 24, 2017 — the day after Thanksgiving — he begins a one-year sentence. He has already paid $3.29 million in restitution.

That should be the end of that story, right?

Grit of Filing Countersuit

When that story didn’t end, Kent then transformed himself into an American anti-hero.

Instead of being “convict shamed,” Kent has filed a lawsuit through his lawyer James Munisteri of law firm Gardere Wynne Sewell.

Actually, it is a countersuit. The defendant is DHI, the company he illegally hacked after selling it.

In a civil suit, DHI is demanding $20 million in damages. That is even though the corpration cannot document a penny of losses.

Funny Money

The behavioral analysis unit on “Criminal Minds” could create a white paper on why the powers that be at DHI are demanding $20 million.

To laypeople who understand how the world often works it might be perceived like plain-vanilla greed.

The facts are:

  • Parent of Rigzone DHI had their executives testify under oath they could not point to a single Rigzone customer, job seeker, or member who stopped using their site because of Kent’s actions.
  • DHI never had calculated the value of any individual user or that user’s particular resume. There had been no in-house algorithm. Therefore, the $20 million assessment seems like a funny-money metric.
  • DHI is a public company. If there had been a loss it had the duty to report that to shareholders. That was material information. That never happened. Instead, it explained its decline in value to unfavorable market conditions. If the losses could be attributed to Kent, then DHI has a governance issue. Also, the SEC might be interested. Most importantly, the interests of investors could be at risk.

Point of Law

In my conversation with Kent’s lawyer James Munisteri of Gardere, he observed:

“DHI’s inability to show any loss due to Mr. Kent’s actions unmasks the greed and hypocrisy behind that company’s civil lawsuit against him. DHI wants to collect more millions from Mr. Kent even though he’s already made full restitution. It’s very curious that DHI claims to have lost more than $20 million in value for Mr. Kent’s mistake, but as a publicly traded company, it failed to report any loss because of Mr. Kent. These facts lead up to only one conclusion — a seeking of revenge without any real damages.”

Corporate Governance under Scrutiny

DHI’s behavior might alarm its investors.

Governance has emerged as a key variable in corporate success, including the price of the stock.

That is because, explains The Conference Board, this is a period of high uncertainly. That has been put in play by factors such as the Trump Administration and changes at the SEC.

Therefore, investors, both active and passive, are demanding more accurate detailed information and increased input in board appointments and the directors’ duties.

Through this civil lawsuit the DHI board and executives could be screaming the message: We are not to be trusted.

3 Takeaways

There is a platitude about crisis that mothers and mentors pass on: It’s not what happens to you that counts; it’s how you handle it.

Kent confessed to his crime and has paid restitution. Now he’s going to serve time in prison. He’s stepped up. Any more punishment represents a tilting of justice against individuals who admit any crime.

But DHI continues to act out of greed. Greed is not good. Globally, that mindset is undermining Brand Capitalism.

It should concern investors that, through its civil suit, DHI could be raising questions about its own corporate governance.

Jane Genova re-purposed this opinion-editorial from her syndicated legal blog Law and More. She had attended Harvard Law School.