Corrections or additions?
This article by Barbara Fox was prepared for the May 7, 2003 edition of U.S. 1 Newspaper. All rights reserved.
Unraveling the Torkelsen Case
Investment banker John B. Torkelsen has always been
something of a puzzle in this conservative town, perhaps because he
shunned publicity but spent money extravagantly. An alumnus of Princeton
University, Class of 1967, he has been a generous giver, using his
Library Place home for the site of philanthropic benefits and lavish
political bashes. People talked about his fantastic Christmas parties,
for which he hired big-name stars. Torkelsen’s employees and cohorts
have nothing but kind personal comments, and they say he paid them
very well indeed.
Torkelsen’s valuation firm, Princeton Venture Research, provided valuations
and appraisals of both public and private companies, primarily for
the financing of small technology companies. He was the favorite expert
witness for Milberg Weiss attorney William Lerach, the recognized
king of shareholder class-action suits. Torkelsen also had a venture
capital fund, Acorn Technology, for start-up and early stage companies
particularly in Internet-based technologies, and he has funded at
least three Princeton firms — Mikros Systems Corp., Princeton
Video Image, and VeriVoice. At one point Torkelsen had 47 people in
an office at 5 Vaughn Drive plus an office in San Diego.
Torkelsen’s office has turned down many requests for interviews over
the past decade, but several years ago its response changed. When
reporters called his business on a simple matter, such as to confirm
an address, those who answered the phone not only would refuse to
answer any questions — but would also be vehemently angry in their
replies.
As it turns out, the office had been undergoing investigations, first
by the press, then by the government. The September 4, 2000, Fortune
magazine published a scathing expose of Lerach that also accused Torkelsen
of several kinds of wrong doing (www.Business2.com). Then last January
the U.S. Attorney’s Office in Philadelphia filed a civil fraud lawsuit
against Acorn Technology Partners, now based in New Hope, and four
principals — Torkelsen, his son Leif, his wife Pamela, and a business
associate, Wood Tate. The Federal Bureau of Investigation is conducting
a criminal investigation, according to the U.S. Attorney’s office.
The past three years have not been good ones for the Torkelsens.
The Torkelsens’ current trouble involves Acorn Technology Fund’s status
as a Small Business Investment Corporation or SBIC. Several Princeton
area venture capital funds — including Sycamore, Edison, and Early
Stage Ventures — are also designated as SBICs. Under this arrangement
the federal government matches venture capital investments on a two-for-one
basis. In return the SBICs are supposed to follow strict conflict
of interest rules restricting their officers and employees from serving
as officers of businesses that receive the federal monies.
Acorn Partners LLC applied to be an SBIC in 1998 and was licensed
in 1999. The civil complaint alleges that John and Leif Torkelsen
and Tate “engaged in a scheme fraudulently to obtain and misapply
$32 million in government funds through the use of several corporations
which they controlled, and to funnel at least some of these ill-gotten
funds to themselves and to defendant Pamela Torkelsen.” The complaint
alleges that the partners did not follow the SBIC conflict of interest
rules with regard to two companies — SemiSystems and TyreLynx,
and that another Torkelsen firm, Princeton Technology, fraudulently
inflated its bills to SemiSystems.
“At all times since the formation of Acorn, Torkelsen directly
or indirectly controlled the affairs and operations of SemiSystems
as well as Acorn. He used his dual control to carry out precisely
the kind of self-dealing that the conflict-of-interest regulations
were designed to prevent. Specifically, Torkelsen and other defendants
used SemiSystems as a conduit to channel funds from Acorn back to
the Torkelsen family,” the complaint says.
Tate — who had once written a technology article
for this newspaper (U.S. 1, June 10, 1998) did not reply to calls
but the Times of Trenton reported him as saying that “They have
taken some information and drawn some erroneous conclusions.”
Attorneys for the four defendants either decline comment or promise
to “vigorously contest” the case. The court has frozen the
assets of the defendants and designated the Small Business Administration
as the receiver for Acorn Technology. Assistant U.S. Attorney Paul
G. Shapiro says he expects to take this case to trial in the fall.
Torkelsen is also not taking calls, but some information on him is
available, because though he liked to keep a low personal profile,
sometimes he just couldn’t help making the news.
In 1990 he married his current wife, Pamela, who had owned an
antique shop in South Carolina. The pair hired Jerry Ford to renovate
their 6,000 square foot Victorian on Library Place. Today the house
is listed for sale at $4.5 million. It has an acre of land (a large
lot for that street) and an annual tax obligation of $65,000. It has
seven bedrooms, 7.5 baths, a 35-foot living room, two solariums, a
pool, and a two-story luxury cabana with a Lalique glass-paneled staircase.
In 1994 Torkelsen’s $50,000 contribution to the Clinton campaign
— a result of a call from Bill Clinton in the White House —
made the news because it prompted a Justice Department inquiry.
Torkelsen helped give several Princeton companies the financial boost
they needed.
At Mikros Systems Corp. Torkelsen was a director and minorityshareholder (U.S. 1, May 27 and June 3, 1998). In 1993 when Mikrosmade high tech communication and control systems for the defense department,it was a poster child for the New Jersey Commission on Science andTechnology. That year it landed the NJCST’s first-ever Small Businessand Innovation Research grant. It sold the government business andthe remaining part of the business — high speed data transmissiontechnology for the commercial marketplace — moved into Torkelsen’soffice on Vaughn Drive and now is a tenant at the Daily Plan-It onAlexander Road.Princeton Video Image opened as Princeton Electronic Billboardin 1990, and in 1993 Sarnoff alumnus Brown Williams received patentsfor his hardware and software. The company is known for the virtual10-yard line that it “draws” on screens during televised footballgames, as well as for virtual ads televised at sporting events.It began marketing the technology in 1995, the year that Torkelsenjoined the PVI board (U.S. 1, October 22, 1997). It is strugglingand did not return calls (www.pvi-inc.com).VeriVoice. A group of former Applied Data Research employeessaw market potential in the ability to control electronic access viavoiceprints. They located military-grade voiceprint verification technologyin the United Kingdom and interested venture capitalist John Torkelsenin their idea. The result was VeriVoice, which at one point had eightemployees on 501 Forrestal Drive.But VeriVoice did not get the additional funding it needed, and itceased operation, says Joe Mannino, who was president of the companyfor the last three of its five years. “When I worked for Verivoice,and John Torkelsen was chairman of the board, he was very supportiveof our work,” says Mannino. Mannino believes that if second roundfunding had been obtained before the stock market declined, VeriVoicewould be operating with a viable technology. Mannino is now busy workingon commercializing new technologies at NEC Laboratories America.In late 1997, Fortune Magazine reported in its 2000 expose, the IRSfiled tax liens against Torkelsen for $6 million, and it also saidthat Torkelsen had $5 million in bank loans. He refinanced his debt,with the help of Milberg Weiss, and opened a new firm, Equity ValuationAdvisors.The Fortune magazine article by Peter Elkind cited Torkelsen as thedamage expert for Lerach, “the king of the shareholder class-actionsuit — the kind of suit that is routinely filed when a companyannounces bad news and its stock plunges” and “the lawyerwho single-handedly turned shareholder litigation into a lucrativevolume business.”Torkelsen’s calculations of shareholder losses routinelysupported the hundreds of millions of dollars Lerach sought —and he was fabulous in front of a jury should a company decide tofight,” wrote Elkind. “Over more than 20 years, Torkelsen’sfirm, Princeton Venture Research, not only had made tens of millionsworking for Lerach’s firm Milberg — by far its biggest client— but also had become the damages expert of choice for the entireplaintiffs side of the securities bar.”Elkind notes that Torkelsen courted plaintiff’s lawyers. “He sentthousand-dollar gift baskets as baby presents, and he invited hismany friends in the plaintiffs’ bar to an annual black-tie Christmasparty that was mind-boggling in its extravagance. At one, guests arrivingin Torkelsen-provided stretch limos were heralded by buglers and greetedby costumed Disney characters. Entertainment was invariably providedby a big-name act: Little Richard one year, Aretha Franklin another.”The magazine also charged that payments to Torkelsen — in sizeand in mode — were improper, a charge he vehemently denied.Among those who are willing to go on the record to say good thingsabout John and Pamela Torkelsen is their architect, Jerry Ford, ofFord Farewell Mills and Gatsch. “I did a lot of interior workfor them and did a site plan to take a pretty ordinary house and upgradeit and give it some amenities,” says Ford. “I had a very nicerelationship with the Torkelsens, and I can’t believe that anythingis amiss. They struck me as very straightforward and upbeat people.”Acorn Technology Fund LP, CN 5373, Princeton 08543.John Torkelsen, president. 609-924-3000; fax, 609-452-2700.Next StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
