Days before iVillage is scheduled to go public, a former chief financial officer has accused the company of inflating revenues to lure investors.
"Based on my experience at and knowledge of iVillage, I would not be comfortable today being the CFO taking this company public," said former CFO Joanne Hindman in an affidavit filed Friday in US District Court in Nashville, Tennessee.
The affidavit was one of two filed by former iVillage executives in support of a lawsuit by a third former executive, Todd Kenner. Both affidavits painted iVillage CEO Candice Carpenter as a self-serving tyrant.
Hindman claimed she was fired by the mercurial Carpenter in January 1998 after Hindman questioned the company's accounting practices.
IVillage, which runs a network of Web sites for women, hopes to raise US$46 million in a widely anticipated initial public stock offering on Monday.
"This could potentially devastate the company's IPO," said Steven Tuen, director of research at IPO Value Monitor. "If they get caught at the outset trying to boost the numbers, they're dooming themselves."
"We are aware of the affidavits," said Jason Stell, a spokesman for iVillage. "We fully stand behind our company, our position regarding the Kenner suit, and our financials, which have been fully audited by PricewaterhouseCoopers."
Stell said US Security and Exchange Commission regulations governing communication before an IPO prevented a more thorough response from iVillage.
A former VP of finance at Newsweek magazine, Hindman was hired as iVillage CFO in 1997. She claimed Carpenter relentlessly recruited her for months, finally coming flat-out with the promise, "You've got to understand -- I'm trying to make you rich."
The troubles began shortly thereafter. "As soon as I accepted the position, Ms. Carpenter's attitude towards me changed dramatically," she said. "Frankly, her tone became nasty and demeaning."
Hindman's first assignment was to fire the original owners of Better Health, a Web company that iVillage had just purchased, and, in Carpenter's words, "get their options back." Soon, Hindman said she began to notice what she called "marginal" and "even inappropriate" financial practices.
"I felt the company was recognizing revenues prematurely -- indeed, in some cases before letters of intent were even signed," she said. "I was unwilling to accept any 'fudging' of the numbers, and I began to express my concerns."
Hindman said Carpenter's response was, first, to demote her and, finally, to fire her.
"The motivation for these practices was clear -- Ms. Carpenter's single-minded desire to establish 'trends' or seemingly positive financial results in particular fiscal periods. These would create the appearance of momentum towards an eventual IPO."
After just two years in business, iVillage hired its fifth CFO.
"This pattern of false promises and statements applied not only to employees, but also to sponsors, advertisers, and strategic partners of the company," Hindman concluded. "Simply put, it was my experience that Ms. Carpenter will say whatever she feels she has to say to accomplish her purpose at the time."
At least one ex-iVillage executive familiar with the matter disputes the circumstances of Hindman's firing.
Hindman was let go not because she raised questions, but because she didn't know what she was doing, said the executive, who asked not to be named. "She didn't have an Internet background. She was an inappropriate hire."
Hindman is simply lashing out because she lost out on her chance to cash in when iVillage goes public, said the executive, adding that Carpenter could be profligate in her spending, but never dishonest.
A third ex-iVillage executive, former executive vice president of sales Steven Carter, has also filed an affidavit in the Kenner case that claims Carpenter cheated him out of stock options.
Carter, who previously ran cable channels MSNBC and CNBC for NBC television, called iVillage a "highly dysfunctional company" in his affidavit.
Carpenter was "hostile, uncommunicative, and arbitrary," Carter said, and treated executives in "a consistently opportunistic, dishonest, and malevolent manner."
Carter joined iVillage in 1997 after Carpenter lured him from NBC with the promise of 280,000 iVillage shares, he said.
Last spring, Carter brought in an executive to interview with Carpenter for a position that was subordinate to his own. According to ex-iVillage executives, Carpenter hired the applicant to replace Carter, who was subsequently fired and his stock options terminated.
"I guess you can see why [Carter] says she's opportunistic," said an iVillage executive.
In his affidavit, Carter said he recalled the warning of another iVillage exec before he took the job: "You get lured in, and [Carpenter] sucks all the life out of you, like a black widow. Then you're thrown into the dust pile."
