May 19, 2008, 12:00 AM

Former CEO of online marketplace PurchasePro convicted of securities fraud

Charles H. Johnson Jr. was convicted in federal court on charges that he falsely inflated the revenue of PurchasePro in 2001, the U.S. Justice Department announced last week.

Charles H. Johnson Jr., the former chairman and CEO of Inc., operator of the marketplace and a provider of online procurement software, has been convicted of conspiring to commit securities fraud, securities fraud, witness tampering and obstructing an official proceeding, the U.S. Justice Department announced last week.

Johnson was indicted in January 2005 on charges that he and other executives falsely inflated revenue in the first quarter of 2001 from software licenses and from an alliance with American Online Inc. AOL avoided prosecution by agreeing to pay $150 million into a compensation fund for investors and a criminal penalty of $60 million, in a deal announced by the Justice Department in December 2004.

Six PurchasePro executives have previously pled guilty to federal charges stemming from the alleged scheme. The company is no longer in business.

U.S. District Court Judge Walter D. Kelley handed down his verdict against Johnson last week in Alexandria, VA, following a bench trial that ended in December. Johnson faces up to 20 years in prison.

"This is an important victory in the fight against corporate fraud,” says Chuck Rosenberg, U.S. attorney for the Eastern District of Virginia. “Mr. Johnson tried to manipulate the system for his own gain at the expense of the investing public, and now will be appropriately punished.”

Johnson’s first trial before federal judge Kelley began in October 2006 and ended in a mistrial after Johnson’s attorney withdrew. In the second trial, which began in October 2007, the government added a charge of obstructing a federal proceeding stemming from Johnson’s alleged conduct during his original trial.

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