State to
file suit against
’Net firm

Government says
WorldPoint Interactive
still owes $804,000
from a 1995 loan

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By Tim Ruel
Star-Bulletin

ONLY A YEAR AGO, WorldPoint Interactive Inc. unveiled its new offices in the downtown penthouse once occupied by executives of First Hawaiian Bank. Flat-panel plasma screens worth $15,000 and a wireless computer network were among the cutting-edge hardware greeting visitors.

The company was once one of Hawaii's few dot-com darlings. Now, the state is set to sue WorldPoint for failing to make payments on a government loan.

The state loaned WorldPoint $580,000 in 1995. By August 1996 the company was past due. As of April 2, WorldPoint owed the state $804,992, including interest.

The state is preparing its lawsuit and is looking at what collateral to go after, said Myra Kaichi, a deputy with the Attorney General's Office. The loan is backed by nearly every asset WorldPoint owns, including its high-tech equipment, intellectual property, furniture and deposits.

What's more, the company's debt is backed by mortgages on properties held by Robert Peterson and Larry Cross, who founded the company in 1995, and still serve as directors. Neither could be reached for comment.

Kaichi said she is not happy to go after the assets. "Their homes are on the line. I personally am very uncomfortable with that," she said. "I don't want to send out negative vibes" to Hawaii's high-tech businesses.

But the state has waited long enough to collect, after bending over backwards to help WorldPoint, Kaichi said. The Attorney General's Office has held off suing WorldPoint since last year, largely because Gov. Ben Cayetano had made an initiative of promoting Hawaii's fledgling technology sector, Kaichi said.

At the time WorldPoint opened its plush new office at 1132 Bishop St., the company said it was going to offer its stock publicly by September 2000, and open six more offices in Europe and Asia by the end of 2001.

In November, state officials and WorldPoint devised a plan in which the state would take an equity stake in WorldPoint, provided the company could get funding from the venture capitalists who manage the state's high-tech investments.

The venture capitalists have not gone for the plan, however, likely because of the downturn in the market for technology stocks, as well as fundamental disagreements over the value of WorldPoint as a company, said John Chock, president of the state agency that administers the loan.

"The investors are very timid right now," Kaichi said.

Attorney General Earl Anzai gave his final go-ahead to sue WorldPoint earlier this year, around the time the company confirmed it was laying off 70 of its workers and closing its offices in Switzerland, Hong Kong and Dallas.

"We're not going to sit around and wait for another three years for the market to turn around," Kaichi said. She noted that she has not heard from WorldPoint officials since company announced its cuts.

The state's latest announcement came as a surprise to WorldPoint President and Chief Executive Massimo Fuchs. When reached for comment, he acknowledged the loan as well as the company's layoffs. "We are trying very hard to get through this. We have tremendously cut back in the operation," he said.

WorldPoint has retrenched to two offices, in San Francisco and Honolulu, keeping a total of 30 employees. The company has closed its research and development division and is now focusing on its main service, the translation of Web sites into different languages for businesses.

A previous statement issued by Fuchs said: "After the usual tough moments that come with layoffs and drastic cost reductions, we are all very focused again and committed on making this company work, for the good of all stakeholders involved, including the high-tech industry in Hawaii. Hawaii has always been an excellent place for us, in terms of human resources and local support."

WorldPoint is focusing its resources on a new contract to provide translation services for Houston-based www.Trade-Ranger.com, an online exchange for the energy and petrochemical industries, as well as a pending bid to work for an unidentified international e-commerce initiative.

Fuchs, a native Swiss banker, joined WorldPoint as chief financial officer in 1996. In previous interviews, Fuchs has said the company was short on cash when it went past due on the loan in August 1996. Later, when WorldPoint secured up to $14 million in venture capital to fuel its expansion, WorldPoint could have paid off the loan, Massimo said. But by then, the company had entered talks with the state to convert the debt to an equity stake, and WorldPoint wanted to encourage the arrangement, Fuchs said.

Some have questioned whether the Hawaii state government should continue to invest in high-risk technology start-ups such as WorldPoint. However, Chock notes that the state's return on its overall loan portfolio has been strong, with good investments balancing out the bad.

The loans are furnished under the Hawaii Capital Loan Program, an agency of the state Department of Business, Economic Development and Tourism. Since 1964, the program has made more than 540 business loans. Over that time, the state has received a 130 percent return on its total appropriations of $8.9 million, according to the program.

Moreover, the program serves a vital role as a lender of last resort to tech start-ups, which have faced a long-term shortage of venture capital in Hawaii, Chock said.