When 24/7 Media Inc., New York, acquired Website Results for $95 million in stock in August, it said the purchase of the business-to-business marketing firm would help it broaden its “suite of technology-based interactive marketing solutions.”
Little did it know that Website Results would also broaden its financial problems.
In late December, three former employees of Website Results, a company that boosts clients' placement in third-party search engines, sued the company in Los Angeles Superior Court for allegedly “failing to honor its employment agreements with staff.” As the new parent of Website Results, 24/7 Media is responsible for the disposition of the lawsuit.
24/7 Media recently said that Website Results' technology needs a major overhaul, which it expects to cost about $2.5 million. Company executives cited it as a major reason for 24/7 Media's reduced revenue expectation for the fourth quarter last year.
The lawsuit alleges that Website Results repeatedly gave false statements “with intent to deceive and defraud employees” for the purpose of financial gain. It also charges breach of contract and misappropriation of funds.
The plaintiffs in the lawsuit are former sales consultants Christina Wells and Stephen Simkovich and former senior technical programmer Garen Razoian. They are seeking $850,000 that they allege is owed them, plus damages. If they win, 24/7 Media could be liable for millions of dollars.
Mitchell Simmons, a spokesman for 24/7 Media, said the lawsuit was “without merit” and attributed it to “disgruntled employees.” He was confident the company would prevail.
None of the plaintiffs were available for comment.