Dead on Arrival: The CyberNet Scandal

"911 Emergency. What is your emergency?"

"Well, there's a gun in my mouth."

The man on the line was Barton Watson, CEO of The CyberNet Group in Grand Rapids, Mich., one of the largest solution providers in America and No. 110 on the 2004 VARBusiness 500 list. He called 911 just after midnight on November 24 last fall. Watson matter-of-factly told the dispatcher in a slow, meandering voice that he had a 20-gauge shotgun pointed at his head, and that he intended to commit suicide.

When the dispatcher asked Watson why he wanted to kill himself, the chief executive explained with a sense of twisted pride that he was "the missing CEO" of The CyberNet Group. Less than a week earlier, federal agents from the FBI, IRS and U.S. Postal Inspectors Office had raided the company's headquarters as part of a sweeping fraud investigation regarding CyberNet's business practices and financial records. The authorities, executing warrants in conjunction with the U.S. Attorney's Office, seized computers, servers, business records, digital files and other items.

Watson, who was not arrested during the raid, was now barricaded inside his million-dollar estate, armed and suicidal. The police responded to the 911 call and surrounded Watson's expensive home in the posh Ada Township in the nearby suburb of Kent County. Over an extended conversation, the dispatcher repeatedly pleaded with the 44-year-old chief executive to put the gun down and surrender to police. "No, it's a little late for that," Watson replied, intoxicated from expensive wine, including a $700 bottle of La Tache 1997. A few hours later, authorities heard several gunshots inside the house. After entering the house shortly after 9 a.m., police discovered Watson's body in an upstairs bedroom. He had died of a self-inflicted gunshot wound, just one day before Thanksgiving, 2004.

In the days and weeks that followed, Watson was revealed to be the chief architect of a massive scheme that defrauded millions of dollars from banks and creditors. CyberNet, it turned out, was not the $300 million IT services powerhouse that many employees, customers and industry watchers, including this publication, believed it was. Authorities now say the company was little more than a tool used by a handful of people to ensure their opulent lifestyles through an intricate web of lies, fraud and corruption. The company was an immense engine of criminal activity, and its fuel was the greed of Watson and his cohorts. This is the inside story of CyberNet.

'HYPE OR RESULTS?'

It's March, and CyberNet's headquarters is still bristling with activity and filled with people. Nearly four months to the day after its chief executive took his own life and the company collapsed, the offices are crowded once again: This week, under the direction of bankruptcy court, CyberNet's assets are being auctioned off to the highest bidders in an effort to return some funds to the company's cheated creditors. People from all over Michigan have come to find bargains, but many have also come to see the inside of the extravagant offices and gawk at the jaw-dropping riches, which have become legendary, if not infamous.

The building, located on a modest street in downtown Grand Rapids, is like any other building in the area: an aging, five-floor brick structure with a faded exterior. Inside, however, is an entirely different world that is out of place with the rest of the small, Midwestern city with a population of approximately 200,000 people. CyberNet's offices are the epitome of opulence; the office equipment and furnishings are first-rate and include such high-end brands as Herman Miller. The fifth-floor executive offices feature fine cherry-wood paneling and hardwood floors, as well as fireplaces. Then there is the wine cellar located in the basement, worth more than $100,000 and featuring such bottles as a 1997 Harlan Estate Cabernet Sauvignon priced at $1,354 and a 1989 Leoville Barton worth $1,000. Some claim that Watson's desk, allegedly made of a rare Cuban mahogany, is worth almost as much as the wine collection.

On paper, The CyberNet Group appeared to be every bit as rich as the rare, vintage bottles in its basement. The company's promotional and marketing materials claim sales from between $200 million to $300 million, while proudly displaying its VARBusiness 500 membership. CyberNet claimed $321.2 million in revenue for 2003 and boasted a client list that would make any VAR envious: ExxonMobil, Citibank, Boeing, Merrill Lynch, Blue Cross and Blue Shield, and Dupont, among other blue-chip enterprises. CyberNet also said it had more than 400 employees worldwide, with offices in the United Kingdom, Australia, South Africa, Hong Kong and other locations.

Employees tell a different story, however. Sitting in their old offices near enormous company banners that read, "Hype or Results? The Choice Is Yours," they reminisce about their now-deceased boss and the revelations around the business for which they used to work. "We had a lot of good people here," says Paul Curtis, now a director of systems engineering at SourcIT, a solution provider also based in Grand Rapids. "We did real work and had some big clients, but we were never a $200 or $300 million company. We were only about a $10 or $20 million company."

Curtis has joined several former colleagues at CyberNet's headquarters to view the auction items, which include everything from servers to a Segway and luxury automobiles. For many, it's the first time they've been back inside the offices since the raid. Rob King remembers coming to work that day and finding the doors locked and the building covered with federal agents. "We had no idea what was going on when we walked up that day and the doors were closed," says King, who now works with Curtis at SourcIT. "Some of the executives were telling us not to worry, that it was nothing, but we never got our last paychecks."

For most of the 100 or so displaced CyberNet employees, it's likely they never will get that last paycheck. That's because approximately 70 banks and creditors have made claims against the now-defunct solution provider for allegedly committing fraud to obtain sizeable loans and leasing agreements. By the end of the week, when the auction is complete and all of CyberNet's extravagant items are sold off, it will only net about $1.1 million total and hardly make a dent in the claims against Watson's company, which at press time had surpassed $100 million. "A lot of us knew something was wrong," says Sean McTaggart, a former CyberNet executive who now runs his own company, Triline Solutions, "but we just couldn't put our finger on exactly what it was."

In the aftermath of Watson's suicide, however, the smoke began to clear. According to FBI documents and courtroom records, Watson and several top executives, including his wife Krista, president James Horton, vice president Jonathan Mast and Watson's personal assistant, Paul Wright, were allegedly involved in a massive conspiracy of fraud by using phony collateral and documents, including fraudulent tax returns, accounts receivable and other financial statements, to secure lines of credit and leasing agreements. In an apparent Ponzi scheme, the affidavit states, Watson--and his inner circle--fraudulently obtained new loans to pay off old loans in a seemingly endless cycle.

'A HIGH FLYER AND VERY SMART MAN'

According to the people who knew him, Watson was driven by a desire to be wealthy and powerful. James Cameron, a prosecutor for the Attorney General's Office in Maine, grew up with Watson in the blue-collar town of Belding, Mich., and recalls how his former friend worshiped wealth.

"He was attracted to wealth like a moth to a flame," says Cameron, who is currently writing a book on CyberNet and its late chief executive. "He knew from the very beginning that he wanted to be an entrepreneur."

Early on, it appeared he would achieve that goal, as Watson's life was marked by enormous potential. A straight-A student, Watson was extremely intelligent and reportedly scored above 150 on an I.Q. test. He eventually graduated as valedictorian of Belding High School. He also stood out. Sources familiar with his childhood say Watson, the son of a liquor storeowner, would attend classes in grade school dressed in a suit and carrying a briefcase, only to be ridiculed by classmates. Later, he would claim he earned an M.B.A. from Stanford University and attended a prep school far away from his modest hometown.

"He always pretended he came from money and was a big player," says Ellie Wood, a former CyberNet employee. "He called himself Barton Watson III, even though there was no I or II in his family."

An FBI affidavit for a seizure warrant obtained by VARBusiness sheds some light on the shady past of CyberNet's late chief executive. According to the documents, the FBI first investigated Watson in 1986 as the subject of a fraud probe. During his career as a stockbroker with E.F. Hutton in Washington, D.C., in the 1980s, Watson convinced an investor to put money into a company called Interstate Consolidated Investments (ICI). The unnamed investor cut a check for $10,000 payable to ICI, but the funds were never invested in the company. Why? ICI did not exist. Authorities discovered Watson himself was listed as the president of ICI, and his mother, Geraldine Watson, as vice president. The company's address wasn't located within a capital office building or business park but in Watson's apartment.

In 1987, Watson pled guilty to mail fraud after investigators determined he had swindled the unnamed investor as well as others and used the money for his personal expenses. He was sentenced to three years in prison, serving just under 24 months at Allenwood Federal Prison in Pennsylvania before being paroled, and fined $230,000. During the course of the investigation, the FBI interviewed Dan Roland, a co-worker at E.F. Hutton, who described Watson as "a high flyer" and "a very smart man."

John Straayer, co-founder of the company that would become The CyberNet Group, says he had no idea about Watson's troubles when he met him just a short time after he was released from prison. "He was very intelligent," Straayer says, "and we were young and ambitious." Straayer decided to start a business with his acquaintance in 1989 called WS Services: Watson-Straayer Services.

The union, however, didn't last long. Later, Watson changed the company name to CyberNet Engineering, but put all records of ownership in his wife's name. "That was the first red flag," Straayer says. "I found out later that he put everything in Krista's name because he had a criminal record." Straayer left CyberNet in 1992 after suspecting Barton Watson of embezzling company funds and falsifying company records. He told authorities that his former business partner was involved in criminal business practices, but the investigation never came to fruition. Says Straayer: "I always felt that if the authorities pressed a little harder back then, then none of this would have happened."

'IT'S ALL ABOUT IMAGE'

After Straayer left the company, CyberNet became Watson's kingdom. He turned the company's headquarters into his own lavish palace with expensive office furnishings and fine wood floors. Watson had a fascination with Chinese and Japanese culture and decorated his office with Asian art. He also had a passion for expensive cars and wine; he built the wine cellar in the building's basement and purchased luxury automobiles, like a rare 1980 Rolls Royce. "It's all about image. Barton was obsessed with maintaining the façade with all of the opulence," McTaggart says.

Perhaps most of all, Watson enjoyed intimidating his people and making them jump at his beck and call. Numerous former employees of the company describe Watson--an imposing, heavyset figure, standing over 6 feet tall--as an abusive and bullying dictator who created an atmosphere of fear, uncertainty and doubt inside the company starting in the mid-1990s. Internal e-mails obtained by VARBusiness show that Watson, his wife and Horton routinely derided employees in companywide memos, calling some workers "pathetic" and "dead wood," along with other personal attacks.

Ellie Wood only worked at the solution provider for about a year-and-a-half, leaving in early 1997. Wood, who served as an assistant to Barton and Krista Watson, says Barton would demand that his favorite imported iced tea be served to him at very specific times throughout the day, for example, and that his Whopper from Burger King be served on the fine china in his luxurious office. One of Wood's first tasks after being hired was to find a good deal on a new BMW for the Watsons. "It didn't take long to see the writing on the wall," she says. "There was a lot of immoral activity there."

The mid-'90s was also when Watson began building his web of deceit. The FBI affidavit sheds some light on CyberNet's activities during the past decade. It is difficult to determine when and how Watson began to defraud numerous banks and lenders and deceive business partners and customers. A number of ex-employees who were interviewed by VARBusiness for this article have a plethora of stories regarding the various schemes Watson committed over the years. But for many, the pivotal moment came one day in 1996 when several staff members saw something peculiar: A group of temp workers were peeling stickers from dozens of boxes of computers using hair dryers and putty knives.

Former CyberNet Group employee John Westra, who only spent about six months at the company, discovered the stickers were tags identifying the inventory as remanufactured products, and found out that the company was passing the computers off as new. "Once I saw the stickers being removed by temp workers, it was time to get out," Westra says.

This incident triggered the FBI to take a closer look at the company. In 2000, the FBI began an investigation into Watson's company after a legal dispute between CyberNet and a local school district came to the FBI's attention. Hastings Public Schools in Michigan had accused CyberNet of fraud regarding an order in 1996 for 131 new Compaq Presario desktops from the solution provider, an order totaling more than $230,000. After receiving and paying for the shipment, school officials received an anonymous tip that the computers were used and that CyberNet had passed them off as new products to increase its margins.

The FBI investigated, and according to its report, several employees said the computers were remanufactured equipment from Compaq and that the boxes had red stickers that indicated as much--the same stickers Westra and other employees had witnessed the temp workers removing. According to the FBI report, Barton Watson, Krista Watson and vice president Jonathan Mast had told employees to remove the stickers, claiming they were expired warranty labels.

Hastings Public Schools filed a lawsuit against CyberNet, and the case was later settled out of court. Thus, authorities didn't pursue criminal charges against the Watsons, Horton or Mast. But the FBI file on Watson was becoming thick. Meanwhile, more and more employees began to suspect that the company's books were being cooked, wondering how CyberNet made as much money as it claimed to generate. "Barton would always tell us that the subsidiaries overseas were huge and were growing faster than the U.S. business, but it just didn't add up," McTaggart says.

Even when people did pinpoint Watson's fraud, they were no doubt afraid of crossing the chief executive and being sued. Nevertheless, the exodus of employees continued. After learning of the Hastings Public Schools scheme and seeing her colleague Westra hit with a lawsuit following his resignation, Wood left the company, too. "They were removing the stickers right there in the middle of the office, but everyone was afraid to say something," Wood says. "Everyone knew they could be sued if they left or made a complaint. But we all knew the truth."

'THE MOON IS BLUE'

David Martin spent only a few years at CyberNet, but it was during a critical period for the company. By the late 1990s, many ex-employees, including Martin, say that Watson's unscrupulous activities were becoming more and more obvious, while at the same time increasing in scale. At that point, it was common knowledge within the upper echelon of the CyberNet staff that the company's leadership routinely overstated revenue and falsified financial records to secure big loans and leasing agreements. Martin was recruited to open a new CyberNet office in Tampa, Fla., in 1998, and although he was far away from the eye of the storm in Grand Rapids, there was still an air of malfeasance.

For example, Martin was one of CyberNet's primary contacts for Tech Data, through which the solution provider bought a significant amount of product. But not long after Martin joined, Tech Data began to pull back from CyberNet and, at one point, put a hold on the company's credit. That's when Martin was introduced to a strange, unspoken CyberNet policy. "I was told that we were never allowed to say inside the office that the company had a credit hold," Martin says. "We were told by Barton and Krista that we had to use a code word instead. So we'd say, 'The moon is blue with Tech Data,' for example."

By the time Martin left in 2000, CyberNet was seeing more and more blue moons. Martin had seen all of the schemes at that point, he says, such as the phony leasing agreements and the falsified financial statements. When Martin resigned, he, too, was threatened with a lawsuit.

At around the same time, Watson's carefully designed image and CyberNet itself were crumbling elsewhere. Steve Kaplan, who then owned a Citrix-focused solution provider in Silicon Valley called Ryno Technology, was introduced to Watson by a senior vice president at Wyse Technology. According to various sources, CyberNet was one of Wyse's top partners and was designated as a Gold Reseller. Wyse declined to comment for this article on its involvement with Watson and CyberNet.

Watson later approached Kaplan about acquiring Ryno, and Kaplan decided to explore the offer. Kaplan, now principal and co-founder of By the Bell, a technology ROI consulting firm in Benecia, Calif., recounts the experience on his Web site, admitting that he was "beguiled by Barton's charm and intelligence." Already impressed with the glowing endorsement from Wyse and Watson's credentials, Kaplan ventured several times to Grand Rapids, where he had several meetings at CyberNet's "opulent headquarters" and was also wined and dined by the Watsons, who would travel to San Francisco and shower Kaplan and his wife with expensive meals at the best restaurants.

But as the acquisition plans progressed, Kaplan confesses he began to see another side of Watson. "He was intellectually dominant," Kaplan told VARBusiness. "He could talk about any subject with authority, or at least make it appear that way, and he used that to intimidate people." Kaplan's relationship with Watson began to fray when he discovered several holes in Watson's background, such as his Stanford M.B.A., which did not exist. When Kaplan asked Watson about the inconsistencies, he became belligerent, called off the merger and threatened Kaplan with a lawsuit.

Perhaps even stranger than Wyse's endorsement was the fact that Kaplan received positive feedback from two of CyberNet's top clients, UPS and Con-Way. By all accounts, the fraudulent solution provider did have a small number of legitimate customer accounts and performed actual services for them. One such customer was Con-Way, a multibillion-dollar transportation services company located in nearby Ann Arbor, Mich. CyberNet helmed a major project for Con-Way in 2001, deploying more than 2,500 Wyse Winterm terminals throughout the company.

But that relationship turned sour when the two parties got into a contract dispute. According to court records and various sources, CyberNet filed a lawsuit against Con-Way in Oregon Circuit Court after the client complained about the solution providers' effort on a major LAN implementation. The case went to court in 2003, with CyberNet seeking full payment for the job. Peter Alexander, principal consultant at Alexus Consulting in Corona Del Mar, Calif., served as an expert witness for CyberNet. "It was a classic example of a contract dispute where both sides started shouting at one another and things turned ugly," Alexander says. "I examined the work CyberNet did and found nothing wrong with it. But when I examined the company itself and its financials, it did look strange. I could never understand what their business was and how they made so much money."

While CyberNet won the case and received an award of more than $600,000, Watson's company hardly came out a winner. CyberNet's relationship with its biggest legitimate client was irreparably broken, and its biggest vendor partner, Wyse,was left wondering what had gone wrong with such a promising engagement. All of it exposed more holes in Watson's charade.

'SMOKE AND MIRRORS'

After the falling out with Con-Way and Hastings Public Schools, CyberNet was finding it increasingly difficult to make legitimate sales, which, according to various sources, led Watson to try to accelerate his schemes and borrow more money. But it was becoming harder than ever to maintain CyberNet's image. In recent years, according to various sources, employee turnover had risen rapidly and funds were running low; as a result, the Watsons instructed employees not to remove the name plates of departed co-workers from their cubicles and offices, and to make sure such areas were not cleaned out. "They wanted to make it look like there was still plenty of people working there when they brought in important folks," McTaggart says.

People outside of CyberNet were catching on, however. Several leasing companies and banks, concerned with possible fraud, had either ceased doing business with CyberNet or had made complaints to authorities. One of the last straws came in the spring of 2004 when Charter One Vendor Finance of Lisle, Ill., purchased two CyberNet lease agreements from another leasing firm. The solution provider had acquired financing to lease 66 computer servers from another Grand Rapids-based technology firm called Teleservices Group. Charter One, according to records, paid more than $3 million for the leases. Soon after, CyberNet asked Charter One for additional financing to lease another 70 servers, again from Teleservices.

In September, after discovering some discrepancies with the invoices sent by Teleservices, Charter One decided to do an on-site inspection at CyberNet's headquarters and verify the existence of the original 66 servers. To their surprise, Charter One officials discovered only 25 servers. According to FBI records, Horton could not explain why 41 servers were missing. Later, Horton forwarded an e-mail to Charter One that he had sent to a Teleservices executive named Dan Roland, chastising him for the inaccurate invoices.

FBI investigators had seen that name before. It was the name of Watson's former colleague at E.F. Hutton, but it had also popped up in some curious places. In fact, a year earlier, the FBI had investigated a complaint against CyberNet by First American Equipment Financing (FAEF), which had been in negotiations with the solution provider to lease more than $1 million worth of computer equipment and office furniture to CyberNet. One of the vendors was Teleservices Group, and when FAEF representatives contacted the company to confirm the computer order, they spoke with a Dan Roland.

Several sources inside CyberNet told authorities that Dan Roland was not a real person, but an alias used by CyberNet executives. In the FBI warrant, sources claimed that Mast had been instructed by Horton to sometimes answer the phone by saying, "Roland." The sources also told investigators there were no servers; employees had been instructed to install blinking lights into empty server cases and place them in the basement data center in order to fool prospective clients and lenders. "Once he started lying, there was no turning back," McTaggart says. "Each lie had to be bigger than the last because it was all a cover-up."

Indeed, when federal agents raided CyberNet's headquarters a few months later, they discovered the fake servers in the data center, complete with phony serial numbers, Teleservices logos and blinking lights. During the raid, an employee told investigators he knew of the fake servers and said CyberNet's business was all "smoke and mirrors."

'I JUST WANT SOMEONE TO CLEAN UP THE MESS'

By 2004, the various frauds, schemes and legal disputes were spiraling out of control so badly that even Watson himself could no longer manage them. He admitted as much during his 911 call the night of his suicide, telling the dispatcher that he had committed a "horrible crime" and confessing that he was sad and lonely. "I just want someone to clean up the mess," he told the dispatcher. "I want this to end tonight."

Not long before federal agents stormed the company headquarters, Watson apparently made a few last-ditch efforts to keep the schemes going and expand CyberNet's holdings. Watson was so desperate to borrow more money that his schemes ultimately became self-destructive. For example, the FBI affidavit states that in early 2004, CyberNet's former CPA, Guy Hiestand of Hiestand and Co. in Grand Rapids, received a call from a Chicago bank regarding financial statements that Hiestand had prepared for CyberNet for 2002 and 2003. There was just one problem--Hiestand had stopped working for CyberNet in 2002, after discovering discrepancies in the company's accounts and suspecting fraud. When Hiestand asked the bank for the paperwork it had received from CyberNet, he found that someone had created phony audit opinions and financial statements with his firm's letterhead and Hiestand's name attached to it.

With every successful con, Watson's ego and bravado grew to the point where he simply convinced himself he would never be caught, no matter how risky the stunt was. "Every time he pulled the wool over someone's eyes, it excited him and emboldened him to lie more and take even bigger risks," Wood says.

In fact, just a few weeks before federal investigators finally stormed CyberNet's offices, the company made a major acquisition, purchasing 60 percent controlling interest in AyalaPort Makati, a technology company based in the Philippines and a subsidiary of Ayala Corp., a major Filipino conglomerate. With all of the investigations, charges and lawsuits associated with Watson and his company, he was still able to fool enough people to make million-dollar deals. That's because, as Straayer says, Watson knew he could always find banks eager to lend CyberNet money as long as he could whet their appetites with his expensive cars, wine cellar and luxurious offices.

But when authorities entered CyberNet's building last November, everything came crashing down. Investigators discovered that CyberNet had created multiple shell companies, such as Teleservices, that existed on paper but were nothing more than post-office boxes and mail drops at virtual business centers across the globe. According to court records, CyberNet had 16 different aliases and shell companies, including Teleservices, Cyberco Holdings and CyberNet Engineering. The FBI seized mounds of paperwork and company records, while confiscating all office equipment as well as the Watsons' personal effects--their million-dollar home and expensive automobiles, among others. At press time, around $4 million in assets had been seized by the authorities.

In December, Ayala cut all ties to CyberNet and filed a lawsuit to retrieve all shares of its subsidiary. Lawsuits were filed against CyberNet, Watson and other executives almost immediately after the company was shut down. Approximately 70 banks, lenders and creditors claimed they are collectively owed approximately $115 million because of the company's fraudulently obtained loans. In fact, according to a statement by the court-appointed receiver for CyberNet, the company's fraud is estimated to be more than $60 million from the fake server schemes alone.

Sources close to the investigation of CyberNet believe authorities have spent several months tracking the money trail and uncovering hidden accounts, suspecting that several CyberNet executives may have been laundering the proceeds of the ill-gotten loans to third parties. In fact, sources say in the company's final days following the raid, a few CyberNet executives tried to extract approximately $25,000 from a secret account in the Asia-Pacific region in order to help out-of-work employees to retain legal assistance. The investigation has also led to finger-pointing among creditors as the courts and lawyers determine what the banks knew regarding CyberNet and when they knew it.

So far, Krista Watson, James Horton, Jonathan Mast, CFO David Roepke and Paul Wright have all been implicated in the company's wrongdoing and have been put under the microscope by the authorities. Mast, Roepke and Wright were unavailable for comment. Sources say that Horton and his attorney were considering cooperating with the authorities. Calls to Horton's lawyer were not returned. Reached at his home, Horton simply said, "I don't have any comment at this point."

Krista Watson, who was unavailable for comment, recently appeared in bankruptcy court and disavowed all knowledge of the company's fraudulent activities, repeatedly telling the court she couldn't recall the details of allegedly fraudulent checks with her name on them. In the past, Krista Watson's legal team has put the blame on Barton Watson and claimed that she had no knowledge of her late husband's activities. When contacted by VARBusiness, Krista Watson's attorney, Charles Chamberlain Jr., declined to comment.

Because of the ongoing investigation, authorities have refused to disclose any details on the case. But the day after investigators raided CyberNet's headquarters, massive amounts of money were sent via wire transfers from the accounts of the shell companies to the private accounts of various parties, including James Horton's wife and Barton Watson's mother, Geraldine Watson, who, according to FBI records, has been implicated in her son's Ponzi scheme. (Geraldine Watson could not be reached for comment.) When the FBI and IRS learned of the wire transfers, some as much as $750,000, on Nov. 22, they began the process of seizing the funds. Two days later, Watson committed suicide.

"There were multiple layers to this rotten onion," Westra says. For the future, federal authorities will attempt to peel back the shell companies and disguises as investigators and attorneys comb through mounds of paperwork and digital records, much of it fabricated and essentially useless. There are many questions to be answered. How was Watson, who had no formal business training or education, able to rip off so many for so long? Were bank officials or business partners aware of the fraud? Where will the money trail end? CyberNet's story may well go down as the channel's worst scandal, but the mystery around Watson's meticulously constructed schemes may never be fully deciphered to reveal where the lies ended and the truth began.

Editor's note: VARBusiness will continue to cover the case against CyberNet and its executives as the investigation and courtroom proceedings unfold. Look for more on CyberNet in upcoming issues and on the Web at VARBusiness.com.

CyberNet: The Aftermath

David Martin is disappointed that Barton Watson killed himself, and he's not alone. Many other ex-CyberNet employees and executives had hoped to see their former CEO face the music in court. "We had planned to get together and have a reunion of sorts with a bunch of former employees," says Martin, who now works at Bayshore Technologies, a solution provider based in Tampa, Fla. "I was planning on flying up from Florida to see Watson get his day in court."

Instead of a courtroom, many former colleagues assembled at CyberNet's headquarters during the bankruptcy court auction, visiting their old offices and catching up. Indeed, there is a kind of brotherhood that has emerged from the tragedy and evils of the CyberNet Group. "All of these professionals that worked there over the span of a dozen years have stayed in touch and continued to network with each other," says John Westra, who recently launched a new consulting venture called Professional Business Team.

One of the few positives of CyberNet's sad story is that the corrupt solution provider actually hired talented, quality people, many of whom continue to work together today. Rob King, for example, was hired by SourcIT, another Grand Rapids-area solution provider, shortly after CyberNet collapsed, joining several ex-CyberNet workers and friends like Paul Curtis.

In fact, many of the ex-employees that VARBusiness spoke with have moved forward from the nightmare environment Watson created and either joined other tech firms or started their own businesses, like Westra. Sean McTaggart, who started his own solution provider, Triline Solutions, sometimes does business with his friends at SourcIT. "One thing Barton did well was find good people," McTaggart says. "And that's the sad thing. All of the salespeople and engineers were good people."

CyberNet Group Timeline: A Progression of Lies, Greed And Corruption

1985: A lawsuit is filed in San Francisco against Barton Watson and his mother, Geraldine Watson, by investors who claim the mother and son duo defrauded them with illegal investments. A year later, the court rules for the plaintiff and awards the investors nearly $1 million in total damages.

1987: Barton Watson pleads guilty to one count of mail fraud in 1987 for scamming an investor while working at brokerage firm E.F. Hutton in Washington, D.C. He is sentenced to three years in prison and forced to pay $230,000 in restitution.

1989: Watson is released from prison in July on parole. He later joins John Straayer to form WS Services, a predecessor to CyberNet Engineering.

1992: Cyberco Holdings is incorporated in the state of Michigan. Straayer later leaves the company after suspecting criminal activity.

Barton Watson and wife Krista are investigated by the FBI on allegations of bank fraud for allegedly falsifying an income statement and tax return. Watson is forced to pay a civil judgment fine of $5,000.

1996: Hastings Public School system in Michigan contacts CyberNet Engineering and orders more than $230,000 worth of new computers, but after delivery and installation, the products are discovered to be remanufactured Compaq desktops.

2000: The FBI investigates the Hastings Public School case, which later results in an out-of-court settlement.

2002: CyberNet's accountant, Guy Hiestand of Hiestand and Co. in Grand Rapids, discontinues his work for the company after discovering discrepancies in CyberNet's financials.

2003: In January, First American Equipment Financing (FAEF) contacts the FBI with a complaint of fraud against CyberNet after the company tries to secure a loan from FAEF.

2003: CyberNet wins a lawsuit filed against the company by Con-Way, one of its biggest clients, after a lengthy contract dispute. CyberNet is awarded more than $600,000 by an Oregon Circuit Court.

2004: In January, Hiestand discovers that CyberNet is providing banks with phony financial documents and accounting statements with Hiestand's name and letterhead attached to them.

2004: On Nov. 17, federal agents raid CyberNet's headquarters and shut the office building down while confiscating financial documents, computers and digital records for the company.

2004: The day after the raid, the first lawsuit is filed against CyberNet by a creditor, Charter One Vendor Finance, claiming damages related to CyberNet's fraudulently obtained loan for $3 million. Several more lawsuits follow.

2004: On Nov. 18 and 19, several wire transfers are made, moving funds for as much as $750,000 from the accounts of CyberNet and its shell companies to Barton Watson's mother Geraldine and brother Karl, company president James Horton, and other executives.

2004: An order is issued in Kent County Circuit Court on Nov. 22, appointing receivership to Management Services Realty Inc. CyberNet officially ceases operations later in the week.

The FBI also begins to track CyberNet's wire transfers and freezes the company's various accounts.

2004: On Nov. 23, Barton Watson, armed and suicidal, calls 911 from his home. The next morning, police find Watson dead of a self-inflicted gunshot wound.

2005: On March 23, CyberNet's assets are auctioned off, including Watson's wine collection. The auction brings in about $1.1 million, which is split up among creditors and banks.

2005: On April 22, Krista Watson appears in bankruptcy court in Grand Rapids and disavows all knowledge of her husband's criminal activity.

2005: On June 28 and 29, the Watsons' home and personal effects are auctioned off by the court.