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
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
shareholder (U.S. 1, May 27 and June 3, 1998). In 1993 when Mikros
made high tech communication and control systems for the defense department,
it was a poster child for the New Jersey Commission on Science and
Technology. That year it landed the NJCST’s first-ever Small Business
and Innovation Research grant. It sold the government business and
the remaining part of the business — high speed data transmission
technology for the commercial marketplace — moved into Torkelsen’s
office on Vaughn Drive and now is a tenant at the Daily Plan-It on
in 1990, and in 1993 Sarnoff alumnus Brown Williams received patents
for his hardware and software. The company is known for the virtual
10-yard line that it "draws" on screens during televised football
games, as well as for virtual ads televised at sporting events.
It began marketing the technology in 1995, the year that Torkelsen
joined the PVI board (U.S. 1, October 22, 1997). It is struggling
and did not return calls (www.pvi-inc.com).
saw market potential in the ability to control electronic access via
voiceprints. They located military-grade voiceprint verification technology
in the United Kingdom and interested venture capitalist John Torkelsen
in their idea. The result was VeriVoice, which at one point had eight
employees on 501 Forrestal Drive.
But VeriVoice did not get the additional funding it needed, and it
ceased operation, says Joe Mannino, who was president of the company
for the last three of its five years. "When I worked for Verivoice,
and John Torkelsen was chairman of the board, he was very supportive
of our work," says Mannino. Mannino believes that if second round
funding had been obtained before the stock market declined, VeriVoice
would be operating with a viable technology. Mannino is now busy working
on commercializing new technologies at NEC Laboratories America.
In late 1997, Fortune Magazine reported in its 2000 expose, the IRS
filed tax liens against Torkelsen for $6 million, and it also said
that Torkelsen had $5 million in bank loans. He refinanced his debt,
with the help of Milberg Weiss, and opened a new firm, Equity Valuation
The Fortune magazine article by Peter Elkind cited Torkelsen as the
damage expert for Lerach, "the king of the shareholder class-action
suit — the kind of suit that is routinely filed when a company
announces bad news and its stock plunges" and "the lawyer
who single-handedly turned shareholder litigation into a lucrative
"Torkelsen’s calculations of shareholder losses routinely
supported the hundreds of millions of dollars Lerach sought —
and he was fabulous in front of a jury should a company decide to
fight," wrote Elkind. "Over more than 20 years, Torkelsen’s
firm, Princeton Venture Research, not only had made tens of millions
working for Lerach’s firm Milberg — by far its biggest client
— but also had become the damages expert of choice for the entire
plaintiffs side of the securities bar."
Elkind notes that Torkelsen courted plaintiff’s lawyers. "He sent
thousand-dollar gift baskets as baby presents, and he invited his
many friends in the plaintiffs’ bar to an annual black-tie Christmas
party that was mind-boggling in its extravagance. At one, guests arriving
in Torkelsen-provided stretch limos were heralded by buglers and greeted
by costumed Disney characters. Entertainment was invariably provided
by a big-name act: Little Richard one year, Aretha Franklin another."
The magazine also charged that payments to Torkelsen — in size
and in mode — were improper, a charge he vehemently denied.
Among those who are willing to go on the record to say good things
about John and Pamela Torkelsen is their architect, Jerry Ford, of
Ford Farewell Mills and Gatsch. "I did a lot of interior work
for them and did a site plan to take a pretty ordinary house and upgrade
it and give it some amenities," says Ford. "I had a very nice
relationship with the Torkelsens, and I can’t believe that anything
is amiss. They struck me as very straightforward and upbeat people."
John Torkelsen, president. 609-924-3000; fax, 609-452-2700.
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