FAI's founder lays blame for problems on executives

CHESAPEAKE

Two years ago, George Christian said he had amassed enough wealth to leave his company in other executives' hands and spend his time traveling the world and playing poker.

Today, Christian said, he is broke. The founder of Financing Alternatives Inc. filed court papers Monday blaming those former executives for the downfall of his company and its failure to deliver computers as promised to thousands of customers.

Christian said he cannot afford to hire an attorney to respond to the Virginia attorney general's charges against him and his company. Representing himself, he filed a third-party complaint in Chesapeake Circuit Court against six former FAI managers and one of the companies that he claims they formed using FAI's assets and business model.

"The third-party defendants breached their duties of loyalty and good faith by, among other things, self-dealing and misappropriating trade secrets for the unlawful use in a competing business," Christian's filing reads.

The complaint accuses the defendants, including former FAI President and Chief Executive Officer Michael Shrader, with violations of Virginia

laws governing trade secrets. Christian has asked the court to award him $5.27 million to compensate "for the loss of his company" and "to restore injured consumers."

In March, the state added Christian as a defendant in its lawsuit, which charges that the company misled consumers with poor credit who hoped to buy computers through FAI's payment plan. The suit seeks to collect more than $7 million it says Christian paid himself over six years as FAI's sole shareholder.

David Clementson, a spokesman for Attorney General Bob McDonnell, declined to comment Monday on whether the state planned to pursue other individuals in the FAI case. Christian has requested a May 28 hearing on a separate motion he filed to stay the case.

Christian, 42, founded FAI in 1998. The company sold computers and flat-panel televisions on layaway plans, targeting consumers with poor credit. FAI withdrew weekly, biweekly or monthly deductions from customers' bank accounts and pledged to deliver their orders after three months of steady payments. Typically, customers would complete the purchase in a year, paying $1,871 for a Dell desktop computer.

In an interview late Friday, Christian said he turned over FAI's operation to Shrader in September 2005, while still earning a salary from the company. Shrader paid himself an annual salary of $400,000 by 2007, according to the filing.

"I didn't sign a check or make a decision for two years," Christian said in the interview. "I let Michael do what he wanted to do."

Shrader could not be reached for comment on Monday.

Shrader and the others named in Christian's complaint launched Evolution Financial Services LLC, according to the filing. Christian contends that they used FAI's marketing materials and vendor information to conduct the same business.

At FAI, Shrader provided monthly reports to Christian and continually told him the company was running smoothly, Christian said. He knew nothing of FAI's problems with delivering computers, he said in the interview, until the state sued the company in July 2007. FAI shut its doors in early October, around the time that a circuit court judge agreed to freeze its assets and appoint a receiver to run the company.

In the interview, the first time that Christian has responded to media questions about FAI's problems, he said he never had trouble with customers receiving their computers before he gave Shrader control. "If you paid me, you got a computer," he said. "That was my promise. And when I found out that wasn't happening, I was crushed."

Documents from the Federal Trade Commission and other sources, however, indicate that consumers complained about the company well before Christian said he left, as far back as 2000. Those complaints reflect the same problems that continued after the new management took over - failure to receive the computers in the time promised, misinformation about when the products would ship and why shipments were delayed, among others.

In the interview, Christian acknowledged that he ultimately bore some responsibility for FAI's actions. He said he should have watched Shrader and his team more closely.

"I don't have any money to give these people," he said of former customers.

In 2006 and 2007, Christian collected almost $1.5 million from FAI, according to the state's suit. On Friday, when he first brought the paperwork to Chesapeake Circuit Court, Christian tried to pay the $283 filing fee with a credit card in his wife's name, but the court wouldn't accept it. He said he didn't have enough money with him then, but he returned Monday with his revised filing and paid the adjusted $247 cost.

Christian said he has no current employment and has sold his Porsche sports car. His new company, Green Frog Funding, has a Web site touting a payment program for computers similar to what FAI offered but isn't operating now, Christian said.

"I don't have a plan for it right now."

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com