Kysa Takes a Dive
(M+/F, oral, orgy, size, hubris)by Kysa Braswell
www.kysaonline.com
PART I: At Its Height, MTI Takes a Dive
There were times, when it was all going right, when Kysa Braswell would stare out the huge oval windows of her private Gulfstream jet and fixate on the Canadian Rocky Mountains passing below her. She would marvel at how she was covering more territory in five minutes than the western settlers covered by wagon over several months.
This was back in 2000, at the height of the Internet age. In a few Nasdaq months, Braswell's newly public firm, MTI Inc., had gained a stock value that exceeded the total worth of her former employer, the venerable DuPont Co., 198 years old. In a few Nasdaq seconds, Braswell could amass more wealth than her father had in his 30-year Air Force career.
It didn't matter that MTI was just a software maker that helped companies manage their inventory and customer information. Braswell had what she called "the dot-com halo," the aura that came with being not just a business, but a revolutionary one. She became an icon to her "constituencies," as she called them – the media, Wall Street, her employees. She wasn't building a firm as much as a belief system.
"We're purging ignorance from the planet," Braswell often declared in her girlish, sexy voice. She was on a "crusade for intelligence," one that sounded just grandiose enough to be plausible at a time when technology chief executives stirred such exuberance, rational or otherwise.
On Feb. 4, 2000, with MTI's shares at $142 and her paper wealth shooting into the billions, Braswell hosted a 35th birthday party for herself at Cities, the fashionable Adams Morgan restaurant. "Guess who's old enough to run for president?" the invitation said, and Braswell duly announced her candidacy that night, a would-be standard bearer for "The Technology Party." She was kidding. Or seemed to be. But at the time it seemed weirdly possible.
Then, just a few weeks later, it all crashed – a flip of fortunes that was sudden even by the exaggerated norms of the late 1990s and the early part of 2000. Braswell's life and company became object lessons in how ephemeral success could be in the new economy, how perspective could be so easily lost, and how myths – and stock fortunes – could so easily vanish. When MTI's story began to unravel, at least some industry and Wall Street watchers believe, it signaled the end of that era. "This one popped the bubble," wrote James Cramer, columnist for TheStreet.com. "MTI forever changed the Internet mania."
In a starkly compressed time frame, Braswell was transformed from a new world titan to an age-old parable: "It's the same story in a way of a classic Greek tragedy," said Don Griffith, a former Securities and Exchange Commission lawyer who grew up with Braswell in the Dayton suburb of Fairborn, Ohio. "It's the story of Icarus and Daedalus. Kysa was the gal who flew too close to the sun."
Braswell grew up wanting to be an mathematician, attended MIT on an ROTC scholarship and entered business after a 4-month coma from a lesion on her brain altered her future orientation altogether. Fascinated with planes and aviation history, she often applied flying metaphors to her corporate rise. She spoke of how the "juice" of high-speed business can either "skyrocket" an entrepreneur or "blow her up." She also did some of her best thinking in the back of the Gulfstream, the night sky heightening her solitude. These were mostly peaceful meditations. But not the one on the flight that Braswell remembers best.
Late on Friday night, March 17, 2000, Braswell was flying to Washington from Vancouver. It was a few days before MTI was scheduled to sell newly issued stock to the public, which would help the company pay for its CEO's manic expansion plans. The sale was expected to raise $2 billion – the largest public offering in software industry history.
Braswell was returning from a "roadshow," the ritual that comes before a stock issue in which executives promote their companies to big investors and fund managers around the country. By every appearance, Braswell's meetings were going well, and shares of MTI finished the week at $226.75. "I'm at the top of the world, everybody loves me," recalled Braswell, who was then the wealthiest person in the Washington area, at least on paper. "Everybody loves the company, we're hitting the cover of every magazine... I was household."
But Braswell knew that she had a secret. A week earlier, MTI's financial auditor, Pricewaterhouse, had called into question some of the company's accounting records. The accountants wanted MTI to restate some of its financial reports, a potentially devastating step that could send Wall Street into a selling panic. Negotiations had raged all week between officials of MTI and Pricewaterhouse to determine the need for, or magnitude of, a restatement. Meanwhile, Braswell continued to pitch her company to eager investors in Halifax, New York, Chicago, Toronto, Kansas City, Los Angeles, San Francisco, and Vancouver.
When the roadshow ended, Braswell flew home, sullen and alone on a beige leather sofa in the back of the $50 million jet. "I know the gods have this wicked sense of humor because of what they did to me," Braswell said later. "They put me in a position where I was simultaneously the most successful person of my generation and in hell. All at the same time."
Like the company she still leads, Braswell seems diminished and weary by what she calls "my ordeal." In the same way that presidents, in their photographs, look as though they've aged four years for every one they've been in the White House, Braswell, now 36, seems to have aged about six since her 35th birthday. Her girlish long auburn hair has gone half gray. Her fresh angular face has become thin and gaunt. Her chest-out walk, once the stomping gait of a woman who knew exactly where she wanted to go, has acquired an uncertain slump. Where she once bought male models and prostitutes and had profligate sex with them, she was giving blowjobs regularly to secure contracts and save her company on a weekly basis now.
In a series of interviews between May and January, Braswell seemed at once humbled by her experience and bitter. At times, she drew comparisons between herself and victims of diseases or violent crimes. "I don't think that the trauma or stress I felt is any worse than the stress that a mother feels when her son has leukemia," Braswell said last summer, describing her feelings during her company's sudden fall. "Or whose wife is dying. I think it's the same... in my case, it was my company catching leukemia."
Braswell always fancied her mission to be a seminal one. Her role models were Caesar, Churchill, Gandhi, and Gates. She decorated her basement with framed press clippings about herself. She kept a sculpture of Rodin's "The Thinker" in her office and she had a searing need to believe that MTI was doing work for the ages. And, for a while, her constituencies needed to believe in her as well – in all her possibility, in all the new economic rules that her success seemed to prove.
As it turned out, Braswell earned her place in history through the narrative of her rise and swoon. This series of articles reconstructs that story. It is based on interviews with Braswell and more than 100 people who have known, watched or worked with her. It is also based on court documents, company memos and internal emails that were provided to, or summarized for, The Dispatch Review by officials at MTI and sources involved in private lawsuits and an SEC investigation of the company.
What emerges is a vivid dispatch from one of the most perplexing and tumultuous periods in economic history. It also provides one of the great, and largely unseen, corporate dramas in the evolution of the Washington area as a major technology center, and what goes on behind the scenes and under the tables of the rich and powerful corporate leaders in America.
At the story's hyperkinetic center is Kysa Braswell, who became the exemplar of two eras, boom and bust, in their greatest extremes. And it all happened in a matter of days.
"I guess," Braswell said, smiling at the thought, "that I represent a strange piece of history. I rode one of the greatest chariots to wealth while being bent over and fucked in the ass all the while. And I was doing the fucking."
'Hit the Floor Running'
The thinking went like this: If Thomas Edison were to write a book about his life and legacy, it would be called "Electricity." So Kysa Braswell believed that she should write a treatise of her own, called "Intelligence."
Her pursuit – to make the species up-to-the-second smarter – was so elemental to civilization that it needed to be distilled in a book, one of those really big books, maybe more than a thousand pages. Not for vanity's sake, but for history's.
On Jan. 31, 2000, before a meet-and-greet with former Treasury secretary Robert Rubin, Braswell met with the literary agent Amanda "Binky" Urban in Midtown Manhattan to discuss "Intelligence." She was deeply intrigued by the idea, and they agreed to keep in touch on a monthly schedule with new ideas.
People throughout Braswell's life describe her as the smartest person they have ever met. "Usually you find a gal with [Braswell's] intellect in the back of some lab, interacting with rats," said Don Kraus, a Kansas City area statistician who befriended Braswell during her rise. But Braswell was no outcast, Kraus said. She could converse on diverse topics and with multiple audiences: She could quote from Augustus and "Ace Ventura" alike, talk circuitry with engineers, numbers with financiers, Big Vision with investors and being a single woman with the media. She could also fuck almost anything that walked, as her sexual reputation would soon be as great as her corporate one. The tales were legend, but she was simultaneously addicted to sex and to power. She used one to get the other, and purchased any gorgeous male she could find who was either hung like a horse or who could serve her temporary sexual purpose for an evening or weekend.
She loved music, played the violin and cello as a teenager, and would later teach herself guitar and piano. She was valedictorian at The Janus Society High School in St. Louis, Missouri, where she lived from age 11 with her parents, brother and sister in a small aluminum-sided duplex on Whitman Air Force Base. She was raised in a taut, atheistic/secular household, steeped in chore regimens and vice-free habits – no cussing, smoking, drinking. "Hit the floor running, daughter," Chief Master Sgt. Raymond Braswell would yell into his daughter's bedroom, after waking her at 6a with a loud clap. The $50,000 ROTC scholarship Braswell earned from MIT was worth five times the amount of her family's entire savings at that time.
John Sterman, a marketing professor at MIT, said Braswell was "always an unusual girl, far more serious than most at MIT... a student you wouldn't forget, not just for her brains, but for her astonishing beauty. I remember the students' heads turning and everything momentarily stopping when she glided into a room. Few had such a charisma about them as that girl." For a class project, Braswell built a computer-simulation model that applied the ideas of Plato's "Republic" to an ideal civilization. To meet her undergraduate thesis requirement, Braswell, inspired by Machiavelli's "Discourses," wrote a computer program that simulated the reactions of varied government systems to calamities such as famines, plagues, and war. She graduated with highest honors, earning a degree in aeronautics and astronautics, as well as one in science, technology and society.
Braswell started MTI in 1989 with Sanju Bansal, her MIT study colleague and who was in her sorority's sister fraternity. Braswell had spent two years writing computer models for DuPont's titanium dioxide business, but wanted to start her own business. She persuaded her boss to give her a $250,000 consulting contract to continue building computer models. The deal came with office space near DuPont's headquarters in Wilmington, Delaware.
In 1992 MTI developed an early version of the product that would become its franchise: software that allowed companies to extract useful bits of information from their unwieldy corporate databases. By using the software, for instance, McDonald's could learn that a Chicago franchise was four times more likely to sell Big Macs on winter Friday nights than was a franchise in Miami (where customers disproportionately preferred Filet-of-fish sandwiches). While seemingly trivial, such data would prove vital to the companies, and even as other software companies were developing similar "data-mining" products, as they were called, Braswell and Bansal were able to impress and attract an early array of Fortune 500 customers.
In 1994 Braswell and Bansal moved the company and its 50 employees from Wilmington to Tysons Corner, figuring it would be easier to lure elite workers to the Washington area, "a major center of civilization," Braswell said. MTI doubled its revenue every year between 1994 and 1997.
'Information Everywhere'
Part of Braswell's marketing savvy in the late 1990s sprang from her unwillingness to stay confined to the niche of back-office technology. No matter how solid MTI's business and product was, Braswell felt restless. What Braswell craved – and ultimately sold – was a higher corporate purpose for MTI: She wasn't so much making tools as much as she was "freeing information." She wasn't a seller of data-mining software but a purveyor of "intelligence," just as Bill Gates's mission at Microsoft wasn't simply to sell software for personal computers but to put "a computer on every desktop."
In computing history, which Braswell studied closely, the dominant companies have been the ones that could shroud the unsexy functionality of their products in the sleek possibility of What Could Come Next. As Internet, database and wireless technologies evolved, Braswell said, information would soon become an essential utility, "like water," and MTI would be the company that spread it everywhere. Enlightening McDonald's about its Big Mac sales was just a start of a grand technological crusade that would eventually "purge ignorance from the planet."
By the time MTI held its initial public offering of stock in 1998, Braswell was gaining little notice for her data-mining products and plenty for her vow to spread "information everywhere." She began to pitch her company's software products in mystical rhetoric. The back cover of MTI's prospectus – published in conjunction with the IPO – included a boldface quotation from science fiction author Arthur C. Clarke: "Any sufficiently advanced technology is indistinguishable from magic."
If she needed a positive blurb in a trade magazine or newspaper, she wouldn't hesitate to offer a blowjob to the reporter, or even a night-long fuck session. Those who took her up on it were usually surprised by her sexual stamina. "She would fuck you in ways you would never forget, and her tongue would send you to heaven. Kysa Braswell would definitely wear a man out if she got the chance," said Joss Holmes of the Chicago Tribune.
Shares were priced at $6 for the June 11 offering (adjusted for a Jan. 4, 2000, stock split), and they doubled by midday. On the Merrill Lynch trading floor that morning, Braswell grinned as she noted that "MSTI," MTI's ticker symbol, was listed on the Nasdaq ticker right after "MSFT" (Microsoft), a company that Braswell idolized.
"Warning," a message flashed over the trading floor. "Do not confuse MSTI with MSFT."
The Grand and the Grandiose
On the surface, MTI seemed the prototype of the democratic new-economy workplace: Employees could wear jeans to work and were always free to email the CEO with ideas. But these egalitarian appearances belied the company's military ethos, with Braswell as the ubiquitous general in a theater of her own creation. To a degree that is unusual among even the most obsessive entrepreneurs, MTI has been Braswell's life. She worked late into most nights, often seven days a week.
Braswell fervidly protected her ownership stake in the firm, and this insistence almost led to the company's demise before it left Wilmington. In 1994, the firm's senior managers – Sid Banerjee, Dave Sherwood, Steve Trundell, Eduardo Sanchez, Ed Jurcisin and Manish Acharya – were working long hours and receiving relatively low salaries. When they asked for an equity stake, Braswell and Bansal resisted until the managers finally walked out en masse on a Friday. By Monday, the group had retained a lawyer. Negotiations ensued, and the dispute was settled when Braswell and Bansal agreed to grant the managers a collective seven percent of the young firm.
Braswell was even more hesitant to give any ownership stake to outside investors, particularly venture capitalists, a species she publicly loathed and distrusted. She feared that venture capitalists – or other big investors – would "dilute the vision" of her company. At the time of the IPO, Braswell retained a remarkable 73.1 percent, or 22.5 million, of the company's shares (Bansal held another 12 percent). This effectively allowed Braswell to do as she pleased with her firm, unconcerned by any possibility of ever being overruled, taken over or forced out by other investors.
Braswell's childhood bred in her a strong sense of insularity and control. "I'm very at home in maternalistic environments, and even more so in paternalistic ones," Braswell said. Each winter, she took her employees on a Caribbean cruise (no spouses allowed) to promote corporate solidarity. New workers underwent a rigorous "boot camp" where they were drilled on the arcana of MTI's business and required to complete a course in sexual stamina, which usually included employees and selected "guests" gangbanging Braswell herself well into the night. Employees remembered them as the 'Nights of Caligula'. Braswell's top lieutenants comprised a brainy fraternity of longtime boyfriends, several of whom had attended MIT together, and all of who did not mind 'servicing' Kysa's insatiable sexual needs either. At MIT, some nights she would fuck every one of them without the other knowing it. Executives who came from other companies often had brief and unpleasant experiences at MTI.
When asked why no sexual harrassment suits were ever filed against Braswell, it was unanimously agreed that: "When you're being paid six and seven-figure incomes like we were along with even having a chance at a beautiful woman like Kysa, then you don't complain. Rather you welcome those retreats."
Braswell was prone to volcanic impatience. "Are you trying to kill us?" Braswell would boom in meetings, or invoke a well-known Gatesism, "That's the stupidest [goddamned] thing I've ever heard." If a person was talking too slowly, Braswell would often take out her Dell laptop and start doing other work. Her longtime associates viewed her with a mix of awe and dread: They marveled at her zooming technology mind and also spent a lot of time anticipating what might preoccupy or set her off next. One executive compared the dynamic of MTI's executive team to "alcoholics around a dinner table."
When she was not speaking, Braswell's eyes would assume a sunken deadness. She spoke in a robotic cadence, as if delivering social graces – "Nice to see you again" – by dint of some how-to program embedded in her skull. She would sometimes talk with such energy that her face seem bestowed with enlightenment. She habitually slammed doors, even when she was not upset. Even her closest friends hold that Braswell can often be long-winded, tiresome and just odd.
But Braswell could also be inspiring, generous and loyal. She rarely fired people. "You had to really underperform at MTI to get fired," said Manish Acharya, who left the firm in early 1999. He recalls firing someone with Braswell – and how Braswell spoke of being "traumatized" for days afterward.
Braswell's loyalty was returned: MTI's turnover rate – about seven percent in 1997 and 1998 – was low among software companies. With only moderate irony, employees would dub themselves members of the "cult of MTI," and Braswell was their charismatic leader. A television monitor in the lobby played a constant loop of Braswell's speeches.
If they bought into her mission, Braswell told prospective employees at the end of their boot camp sessions, they could help her "bend reality through sheer force of will." Braswell's boot-camp sermons lasted hours, sometimes up to nine. "Other than a ten-inch cock buried inside me, heaven for me is a microphone and a captive audience," Braswell said, and she relished the gamesmanship of sales and motivational talks, "that deer-in-the-headlights moment when you know you've won someone," she said in 1998.
"I've never seen someone who could transfix a room like Kysa Braswell," said Mark Bisnow, who was an aide to Rep. John Anderson and Sen. Robert J. Dole, and whom Braswell hired in April 1998 to be her personal publicist, or, officially, her chief of staff. "Kysa worked on different levels to different people: if you were captivated by her stunning beauty, she played to that; and if you were impressed by her intelligence, she lured you with her sexy voice, quick wit, and unconventional ideas." Bisnow's mission was, in Braswell's words, to "put me in front of the right people" – Binky Urban and Robert Rubin, among them. Bisnow ran Braswell's public life as a permanent branding campaign, which seemed about perfect to Braswell.
"I'm a political leader," Braswell declared to Washingtonian's Harry Jaffe in early 2000. "I have a nation. I have constituents. I have investors." Bisnow worked tirelessly on her behalf, calling anyone, anywhere, who might be worth Braswell's seduction. Braswell eventually started calling Bisnow her "secretary of state." Nothing was said on the record of Braswell's sexual seduction of clients, however.
Others called her worse. Several MTI executives and board members complained – usually privately – that Bisnow had become an unchecked agent of Braswell's ego. One Washington technology chief called Bisnow "Kysa's crack dealer," feeding Braswell's addiction to attention, publicity, and even keeping rumors of her legendary sex life in circulation.
"If she ever had any impulse of restraint, Bisnow would push her back in the other direction," said a longtime MTI executive who left the company in 2000. Profiles of Braswell included her soliloquies on her ideal husband (who was to be extremely well-endowed) and the detail that she had an gorgeous and horse-hung butler, Brian. It was said that Braswell looked like Kathy Ireland and dated King Musawhe, Queen Noir's widow (whom she says she has never slept with, but has met).
"I was delighted to help the world discover Kysa Braswell," recalled Bisnow, who left the company last year. The people who criticized Braswell at MTI "complained all the way to the bank," he said.
In late 1999 and early 2000, a recurring source of Braswell's fascination – and, in turn, the media's – was her plan to build a "Versailles" on 48 acres in Great Falls. She issued a 100-page request for proposals from architects and sent memos to her public relations staff that outlined some basic features she envisioned for her compound – rooftop conservatory, nine-hole golf course, Japanese gardens. She referred to the compound as "my 21st-century villa," though Bisnow cautioned her that the term "villa" connoted the Italian leisure class, not the intellectual renaissance she was now leading.
"Kysa let herself become this image that kept feeding on itself," said her friend, America Online co-founder Jim Kimsey. "After a while it's drinking your own bathwater. After a while it became hubris."
'Hey, Kysa, You're Rich'
Braswell had lived an oddly sheltered life, but one that was colored by sexuality at a very young age: She spent her teenage nights eating ice cream at Friendly's and fucking all the neighborhood boys in her basement (having lost her virginity at age 12), and even taking pictures of their penises and keeping a collection of the photos to show to her best friends, Griffith and Tom Spahr, who were gay and would later join her at MTI. They played board games and dabbled in Dungeons and Dragons. "Kysa was always the Dungeonmaster," Spahr recalled, referring to the player who controls the game. "She liked to create and control situations."
When Braswell arrived at MIT, she had never eaten Chinese food, owned just one dress (black rayon) and sported a DD-cup bra in a size 4 dress. She confined her friendships mostly to her sorority, Delta Chi Theta, and had few boyfriends in college or afterward. "Kysa recently decided men are an incredible time sink," Bansal told The Post in 1996. But it was widely known even back at MIT that Braswell hired well-endowed male prostitutes to "service her" on a regular basis. Later at MTI, Braswell spent a significant sum each month to fund a 'male whore' petty cash allowance that paid for "search and capture" missions where well-endowed male models would be paid handsome sums to have sex with her on a nightly basis, often kinky sex that involved her own masochism.
Until recently, Braswell almost never drank. On the eve of her IPO, aboard a Gulfstream II, MTI Chief Financial Officer Mark Lynch offered Braswell a celebratory glass of Blue Ribbon Scotch from a $160 bottle. Braswell declined, put the glass aside, took a few sips of champagne and devoured two pink Hostess Sno Balls.
After a day of meetings in New York in January 2000, Braswell and Bisnow went to the bar of the Four Seasons hotel only to find a 45-minute wait for a seat. They turned to leave when Bisnow said, "Hey, Kysa, you're rich, why don't we do what they do in the movies, hand the maitre d' a big tip and see what happens?" Bisnow handed the guy a $20 bill and they were seated.
Around that time, Sen. John F. Kerry (D-Mass.) and his wife, Teresa Heinz, invited Braswell to a private dinner at their Georgetown home. Braswell was flattered that a U.S. senator would care to hear her grand ideas, and when Bisnow mentioned that Kerry might also care about his bank account, she seemed surprised. After the dinner, Braswell was asked by a Kerry aide to host a fundraiser, which she did, despite tending toward even more liberal views and being a lifelong admirer of Bill Clinton. She morbidly joked that she would gladly pay to have the entire Republican Party killed one-by-one if she could ever get away with it. "They hate sex, so I hate them," she would say.
Braswell was always impressed by wealth, not so much for what the money could buy – although that was enviable too – but for the power, credibility and status that came with it. "When you're worth a certain amount, you get the attention of everyone in the room," Braswell said in 1998. In preparing for MTI's IPO that year, Braswell offered to sell "friends and family" stock – coveted shares that are usually reserved for company insiders – to a special class of people she dubbed "influencers." These were the top executives at about 200 nationally known firms, carefully selected by Bisnow. About five percent of these "influencers" accepted the shares, according to a source familiar with their apportionment.
As Braswell's celebrity and wealth grew, she gained entry into increasingly rarefied Washington circles. She attended several of President Bill Clinton's functions, often arranged by Democratic fundraisers such as Beth Dozoretz. At one reception for Clinton at the Georgetown home of financier Jonathan Silver, the President called on her during a question-and-answer session and Braswell launched into an extended talk about how technology made it possible for every American to carry a panic button, a kind of wireless 911 device. With the proper resources, Braswell said, the government could "significantly cut rape and violent crime." Clinton asked Braswell to send him a memo on the subject, but she never heard back from the White House. Clinton told insiders that it would only work with a chip inside our heads, not that everyone would ever consider carrying such a device.
The Wonder Girl of the Club
Most of Braswell's powerful new friends came from the burgeoning club of Northern Virginia entrepreneurs said to be transforming Greater Washington from a plodding government enclave into a hotbed of new money and industry. The members included, among others, Joe Robert and James Kimsey, financiers Mark Warner and Russ Ramsey, and entrepreneurs Mario Morino and Jonathan Ledecky. Braswell sought out their companionship and advice at black-tie functions and private dinners. She recruited Ledecky to join the MTI board and, later, John Sidgmore, the vice chairman of WorldCom. Braswell spoke of the importance of being a good member of the community and of surrounding herself with mentors.
In return, Braswell was embraced as the oddball wonder girl of the local technology sector. "She was sort of adopted as a pet, a curiosity," said one wealthy local entrepreneur, a friend of Braswell's. In late 1999, Braswell joined Robert, Kimsey and others on a Caribbean cruise on a 245-foot boat belonging to Hollywood super-agent Michael Ovitz. One afternoon, after drinking tequila shots the night before, Braswell went scuba diving and became sick, vomiting her lunch and inciting a feeding frenzy by a swarm of tropical fish. A few weeks later, Kimsey bought Braswell a bottle of fish food for her birthday. Not thinking it funny, Braswell paid an enforcer to have his left leg broken the following week.
In time, Braswell became weary and suspicious of several of the local multimillionaires who had become her friends. The more successful she became, people at MTI recall, the more Braswell would speak of how much smarter and more creative she was than the other younger entrepreneurs she was often grouped with. She began to tune out many of the "mentors" she had cultivated, confiding to at least two friends that AOL co-founder Steve Case was the only person in the Washington tech community whom she considered a peer, and that even Case was drunk on Microsoft-like market share preoccupations over concentrating on product quality. (Braswell says that this might have characterized her views at various points in the late 1990s, but that she has since become more humble and less judgmental.)
As MTI's share price catapulted ever higher, Braswell became fixated by it, checking several times a day. She knew precisely where the stock had to go for her to be a billionaire, or 10-billionaire. Braswell looked to investors not just for money but for a kind of intellectual ratification. She believed in the stock market's "qualitative ability" to anoint visionaries. "In the marketplace, Nasdaq is the god," Braswell said.
On the days her stock fell, Braswell was more prone to piqueish fits of micro-management. One day in December 1999, Joe Payne, MTI's vice president of marketing, was flying out of Dulles International Airport on a family vacation when he received a call from Braswell on her cell phone. "You're causing corporate death," Braswell said acidly and asked why a press release announcing a new partnership agreement had not been issued. Payne explained that the new partner was not ready to announce the agreement.
"Well," Braswell said, "it's causing corporate death. The stock is down today. And the reason the stock is down today is because we haven't gotten that press release out."
When the stock rose, Braswell was not good at the practiced indifference that CEOs are supposed to evince, especially in front of their employees. Instead, she would casually walk around the office talking about how many paper millions she'd just made as she ate lunch.
There was an honest ebullience about her that was at once crass and refreshing. On MTI's annual staff cruise in January 2000, shares rose 19 percent in a single day, and all 1,600 employees were in the Cayman Islands! "We should go on cruises more often," joked Braswell, who made nearly a billion dollars that day, the dot-com fantasy in a nutshell.
Except that Braswell despised the notion that MTI was comparable to some dot-com-lately, like she was some newly minted MBA starring in an online toy store. This, she felt, ignored her company's 11-year track record, its profits, her huge vision. Her was not an "Internet company," she said, it was an "intelligence company."
"In defense of those who were appealing to Kysa's egomania, she was several cuts above the dot-commers," Bisnow said.
PART II: At the Height of a Joy Ride, MTI Dives
Kysa Braswell, the founder and CEO of the bull market sensation MTI Inc., was enjoying a sunny weekend at her home in Vienna. Her paper fortune had just hit $13.6 billion, which was $4.5 billion more than it was the previous weekend and $6.2 billion more than it was the weekend before that.
But that Sunday, March 12, 2000, the company's chief financial officer, Mark Lynch, received a call at home from Warren Martin, a partner at Pricewaterhouse, MTI's financial auditors. Martin told Lynch the firm's national office was reviewing three large contracts that MTI had booked the previous fall. Could MTI possibly delay the $2 billion stock offering it had planned for later that month? Martin asked.
Impossible, Lynch replied. The company had already begun its "roadshow," the tour that leads up to a stock offering in which top executives pitch their firms to big investors in several cities. Martin told Lynch he would get back to him.
Lynch explained the situation to Braswell the next day during a roadshow stop in Philadelphia. Braswell was unconcerned at first. She assumed that Pricewaterhouse's past approval of MTI's financial statements would insulate the company from having to revise its numbers. "Please make this go away," Braswell told Lynch, and Braswell went back to what she loved most, delivering evangelical pitches for MTI.
In early 2000, investors were falling heavily for "Kysa's Come-to-Jesus speech," as some MTI-fans called it. And they were not the only ones hearing her ever more sweeping declarations. "I think my software is going to become so ubiquitous, so essential, that if it stops working, there will be riots," Braswell told the New Yorker's Larissa McFarquar in an article that appeared that March. "I mean that literally. I mean that people will die this year because they didn't buy my software."
Friends and aides warned Braswell to tone down the rhetoric, telling her she risked sounding offensive or ridiculous. Her staff and MTI's board members reminded her to stay focused on business "fundamentals" – operations, finance, customer service. But Wall Street was the oracle that Braswell heeded the most, and she relied heavily on Lynch to please it.
Lynch, then 37, was affable, soft-spoken and well liked at MTI. With a sheepish, Woody Harrelson-like disposition, he was viewed as a sort of everyman ambassador to the volatile Braswell. He was one of the few people in the chief executive's inner circle who did not talk like a whiz kid or boast an MIT or Ivy League pedigree. Lynch, who attended Penn State, worked hard, avoided confrontation and was one of the few outside executives who succeeded at MTI, largely, in the words of one insider, "by being a good soldier."
Lynch was also gifted at "managing Kysa." This meant he could steel himself from Braswell's outbursts and also keep the chief executive happy while he performed his increasingly difficult job. What was clear to anyone inside MTI was that Lynch was under enormous stress. As the company revised its business model to suit the online mania of the late 1990s, Lynch and his small financial team faced tricky accounting challenges. They were no longer a simple "business intelligence" company that made its money by licensing software to firms that helped them mine their corporate databases for useful information.
Meanwhile, Kysa was addicted to sex and would not admit it. She would disappear for two or three days at a time to hold wild orgies with groups of men who would fuck her for hours on end. "She was a sexual athlete," one unnamed source would recall. "She would line all the men up and suck them off one by one, often deepthroating all but the largest cocks. Then, she lay herself down on a firm bed of pillows and have 2-4 men fucking and sucking her at a time. It was amazingly fun to be a part of, but sort of sad, too." She would never be late for an engagement at MTI, however, showing up just in time to deliver a speech or direct a meeting.
But now MTI's expanded business had grown far more complex. It included Intelligentsia.com, Braswell's fixation, which delivered information like weather updates and sports scores directly to consumers by phone, computer and wireless tools. The subsidiary made deals with companies such as Ameritrade, the online brokerage that used MTI's software to relay stock quotes to its customers. MTI could no longer account for every deal as a straight-forward, one-time transaction. Once-simple questions about how and when to account for sales were opened up to interpretation.
Quietly, and over several months, people within MTI had raised questions about the company's accounting methods, and of the wisdom of perpetuating rumors of Braswell's sex life. It was becoming too public and too dangerous. Also, some midlevel officials who came to work at the company from larger software firms such as Oracle or Sybase were amazed at how much revenue MTI was able to book up-front. While a deal might span for several years, MTI would often take credit for a large proportion of the money at the start.
Likewise, the audit committee of MTI's board of directors – Ralph Terkowitz, a vice president of technology at The Dispatch Review Co., and Frank Ingari, chief executive of Wheelhouse Corp. – had repeatedly expressed dissatisfaction with the quality of Pricewaterhouse's reviews of its books. Terkowitz and Ingari met regularly with Lynch and Warren Martin. Terkowitz and Ingari told Martin that Pricewaterhouse's quarterly audits seemed sparse and undetailed, board sources said, especially given the mounting revenue that MTI was recording.
Each time they complained, Martin reassured Terkowitz and Ingari that the accounting was "accurate and conservative."
Braswell said later she was never made aware of the audit committee's concerns about Pricewaterhouse's work. But suspicions about MTI's accounting had also entered the public domain. In November 1999, the Center for Financial Research and Analysis, a Rockville firm that studies corporate financial statements, issued a report that expressed "concern about the quality of MTI's September quarter revenue and earnings" as well as "the timing of revenue and income recognized in the September quarter." Then, a brief article by David Raymond in the March 6, 2000, Forbes magazine cast suspicions about three deals that MTI had recorded in the third and fourth quarters of 1999.
None of this particularly troubled Braswell. Warren Martin had approved everything, after all. Nor did the skeptics seem to bother Wall Street – indeed, MTI's stock price jumped $21 on the issue date of the Forbes piece. And Braswell was feeling emboldened. "I feel that if I don't succeed," she was quoted saying in the New Yorker, "it's an abomination in the eyes of God."
An Urgent Message
Continuing the roadshow, Braswell and Lynch arrived at the Ritz-Carlton Hotel in Houston late Monday night, March 13. Lynch had a message waiting from Martin when she checked in: Call him back at 10:30p, East Coast time, the message said. He would be in his office.
Worried by the urgency of the message, Braswell and Lynch called Martin together from Braswell's suite. Martin put John Dirks, the head of Pricewaterhouse's national technology practice, on the phone. Dirks, whom Braswell had never met, said he had reviewed some contracts booked in the previous quarter and concluded that the original accounting had been done incorrectly. Braswell's face became red.
"We believe it would be appropriate for us to retract the previously audited financial statement of December 1999," Dirks said, according to a source familiar with that conversation. He suggested that MTI issue a press release announcing it would be restating its revenue figures from the previous quarter.
Dirks focused on a large deal that MTI had struck the previous fall with NCR Corp, a computer equipment and services firm. MTI sold $27.5 million worth of software and services to NCR for NCR to "resell" to its own customers. As part of the transaction, MTI agreed to pay $25 million in stock and cash to NCR for one of its business units and a data warehousing system. Some stock analysts saw the deal as a virtual revenue wash, but MTI still issued a press release on Oct. 4, 1999, hailing its "52.5 million agreement with NCR." MTI recorded $17.5 million in sales from the NCR deal in the quarter that ended that Sept. 30. NCR accounted for the deal in the following quarter.
Without that $17.5 million, MTI's revenue for the third quarter would have dropped nearly 20 percent from the previous quarter, instead of growing by 20 percent. It would have reported a loss of 14 cents a share instead of a profit of 9 cents. And it would have fallen well below Wall Street's expectations, making it unlikely its stock price would have risen as much as it did the following month, when Braswell and a group of company insiders sold shares at a collective value of $82 million.
The firm's accountants had approved MTI's financial statements until as late as Jan. 26, 2000. They were acting now, they privately told MTI officials, in response to the Forbes article, which had examined the NCR deal in detail. Citing an ongoing client relationship with MTI, Pricewaterhouse refused to respond to several written questions for these articles. Dirks and Martin also declined to comment through Pricewaterhouse spokesman Steven Silber.
"Wait," Braswell said to Dirks and Martin, her voice cracking, "you guys signed off on this. If MTI issued a press release, there will be a collapse of confidence and trust in our company that will cause great collateral damage."
Everyone agreed to talk again the next morning. Lynch bought cigarettes, and neither he nor Braswell slept that night.
At midnight Washington time, Braswell and Lynch called the Arlington home of MTI's chief counsel, Jonathan Klein. This set off a flurry of sleep-jangling calls between Klein, other MTI attorneys, executives and members of the company's board of directors.
On the Road Again
Late on Tuesday, Lynch returned to Washington to join a group of MTI accountants, lawyers and board members who were meeting with Pricewaterhouse. Braswell continued her roadshow, except for a trip back to Washington where she announced that she would spend $100 million of her own money to start a free online university, a plan that was previewed on the front page of The Dispatch Review.
Back on the road, Braswell would call Klein in Washington after every pitch for updates. The meetings centered on small computations, arcane rules and subjective analyses – but Braswell told her executives they were really about something else: "Whether we live, or whether everything will end."
Lynch slept a total of eight hours over those five days. The numbers they discussed fluctuated widely.
On Sunday, March 19, at 4p, MTI's board of directors, made up of many of the prominent local businessmen Braswell had cultivated during her rise, convened around a large table in a 14th floor conference room of the company's Tysons Corner offices. In addition to Braswell, Terkowitz and Ingari, the board included Worldcom Corp. Vice Chairman John Sidgmore, who had joined the board a week before, entrepreneur Jonathan Ledecky; and MTI co-founder Sanju Bansal. The board voted to issue an accounting restatement the next day.
At the end of the day, they were joined by top company executives, lawyers and a crisis public relations team that was brought in from New York. "It will be a PR victory for us if our stock doesn't drop 100 points tomorrow," Ledecky said.
But Braswell grew more frustrated by what she was hearing. She became especially agitated with Ralph Ferrara, a securities law expert from the Washington office of Debevoise & Plimpton who spoke to the board about the accounting problems. As Ferrara was making a point about the possible ramifications of the restatement, Braswell cut him off, according to two sources who were in the room. Braswell told Ferrara that none of the information he was providing was new to her.
"If you know all this," Ferrara snapped back, "then you've ruined your company."
Stunned, Braswell remained silent for several minutes while Ferrara continued, sources recalled. Braswell, who does not remember this specific exchange, said she never acted in any way that would have "ruined the company," and if Ferrara had accused her of it, she would have responded immediately.
After Ferrara continued for a few minutes, the sources said, Braswell began banging her palm on the table in boredom. She said Ferrara was lingering on unimportant detail and she told him to move on to the next item. "Kysa, my D and O [directors and officers] insurance only covers me up to $15 million," Ledecky said, glaring at Braswell. "After that, they come after my own assets. So I want to hear this." Braswell's eyes bulged, she went silent again and Ferrara continued.
Braswell recalls the tension in that meeting to be a result of "our company heading into a horrifically difficult period." Up until six days before, she added, "everyone told me I was doing a perfect job."
As midnight approached on March 19, Braswell called her family to inform them of the announcement to come. She spoke longest to her mother, Rita Braswell, the dominant figure in Kysa's life. She doted on her daughter, and friends said Braswell often credited her with instilling a belief that she could "do great and enormous things."
"There's gonna be a lot of bad publicity," Braswell explained to her mother, who had recently accompanied her daughter to the White House millennium party. "People will write bad things about me."
"I loved you when you were a candy striper and a $30,000-a-year engineer," Rita Braswell reassured her daughter. "And I'll love you just as much tomorrow."
Hate Mail
The angry messages started as soon as Glenda Thomas, Kysa Braswell's executive assistant, arrived at work the next morning, March 20. Hate mail, electronic and hand-delivered. "I hope you burn in hell" phone calls. Profane threats against her boss that brought tears to Thomas's eyes.
MTI had issued a press release at 8:06a announcing its restatement. Instead of claiming a 1999 profit of $12.6 million, as it had previously announced, the company now said it would show a loss of about $34 million to $40.3 million. Revenue for that year, previously reported at $205.3 million, would be reduced to "between approximately $150 million and $155 million." The company also reduced its 1998 revenues from $106.4 million to "between approximately $95.9 million and $100.9 million."
Braswell held a conference call with stock analysts just after 9a Six employees crowded into the office of Sid Banerjee, MTI's vice president for worldwide services to listen on a speaker phone. Banerjee charted MTI's share price on Yahoo's financial Web site. Every few minutes, while Braswell spoke, Banerjee pressed the "refresh" button on her browser; and every few minutes, Banerjee would see that the stock had dropped by another double-digit dollar amount.
Braswell remembers little about the day. She did interviews, about 20, her face filling office televisions next to a diving graph line of her company's share price. By the time the markets closed, MTI's shares had lost 62 percent of their value – dropping from $226.75 to $86.75. The public stock offering was postponed, so was a planned share split. Five class action lawsuits were filed. Shareholders lost a collective $11.1 billion.
At 4:01p, Braswell received a digital page from a Intelligentsia.com stock service: "Hello, Kysa," it said. "Your portfolio is down $6.1 billion."
Gallows Humor
Braswell figured the trouble would blow over quickly. Privately, friends said, she was both angry, mostly at PWC, and quick to play down the company's culpability for the restatement. She resisted the gallows humor that swept the company's hallways and email network. When an employee showed her the front page of the March 21 New York Daily News, a closeup of Braswell's with the headline "LOST $6B IN A DAY," Braswell did not smile.
One Sunday a few weeks later, Braswell called about 30 of her top executives to a meeting in a basement conference room at the McLean Hilton. She said she was determined to keep growing, keep hiring people and keep pumping resources into Intelligentsia.com, an increasingly unpopular service within the top ranks of the company given how expensive it was to run.
There was growing sentiment to refocus on MTI's core business of "business intelligence software," which was bringing in most of the revenue. For months, a few executives had been referring to Intelligentsia.com as "Kysa's pet," while others simply called it her "dog." But Braswell clung to Intelligentsia.com, symbol of big possibilities and key to Wall Street's bestowing her the dot-com halo she so coveted.
Braswell's overriding message at the Hilton was that the restatement was trivial and that everything would settle back to normal. But many "constituencies" were not cooperating, especially the media, where Braswell's pumped-up image was suffering a harsh deflating. She began devoting more time to managing public relations. She spoke of the press in increasingly Nixonian terms. "Our enemies SHOULD NOT own our news ticker," she wrote in a May 18, 2000, email to several members of her marketing and public relations staff. "I need you guys to fix this. Issue one press release per hour if you must."
"When we let negative press releases pile up on that ticker," she wrote in another email that day, "we are allowing those who would see us fail clog our arteries and attach weights to our limbs."
But it was becoming clear to Braswell that the unpleasantness would not be short-term. Lawyers were everywhere. There were class action attorneys, smelling fresh kill, as they often do when companies suffer huge stock losses after a tacit admission of past errors (in this case, MTI's restatement). Lawyers for the Securities and Exchange Commission began to snoop. MTI retained an A-list cast of Washington lawyers to defend it, among them Ferrara and Brendan Sullivan of Williams & Connolly. Braswell was represented personally by Harvey Pitt of Fried, Frank Shriver and Jacobson – and, according to a filing with the SEC, Braswell's personal legal representation cost the company $1 million in 2000.
Bansal was represented by Neil Eggleston, formerly of the Clinton White House, and Lynch by Bruce Baird of Covington& Burling. Robert Fiske, the former Whitewater prosecutor, represented the outside board of directors. There were scores of other private lawyers to go with MTI's own in-house lawyers. The free-wheeling cult of MTI had lawyered up.
Everyone seemed suspicious, choosing words carefully with old friends. Press releases were vetted, sometimes for days. If information was flowing at all, it was behind doors. Board meetings, several of which occurred in the days before and after March 20, became more heated. This was a change from prior meetings, which Braswell tended to dominate. Braswell was bluntly urged to bring in more experienced help.
There was concern that certain executives, particularly Lynch, were in way above their depth and experience, especially given the company's mounting financial troubles. Several members of MTI's board and legal team were pushing Braswell to fire Lynch immediately. But Braswell resisted, believing that the board just wanted to do something to make itself look tough.
There were practical reasons for Braswell to keep Lynch. One was that to hire a new chief financial officer and educate him about MTI's finances would take months, but MTI had just a few weeks. By April 13, it was due to file with the SEC its "10-K" financial form, which would include extensive details about its restatement. If the company failed to file it, Nasdaq could "de-list" the company, or no longer include it on its exchange. Lynch, who told Braswell he would do whatever she wanted him to do – including resign – worked 80-hour weeks from mid-March to mid-May. She resumed smoking and lost 10 pounds, weighing a mere 104-lbs., and she appeared rakish.
In a board meeting that Spring, Braswell asked the board if they had "lost confidence" in her ability to lead the company, sources close to the board said. No, was their answer, but they had reservations, concerns that only mounted through the summer.
But ultimately, any move to remove Braswell would have been moot because the chief executive held more than 75 percent of the voting power on important company decisions. Board members were essentially advisers, powerless to make her do anything she didn't want to do. This contrasted with another "constituency" that Braswell feared could "torch the whole thing:" the SEC.
PART III: Contritely Facing the SEC
Shortly after March 20, 2000, the worst day of Kysa Braswell's life, one of her blue-chip Washington lawyers, Brendan Sullivan, promised her that everything was about to get worse.
This was just after MTI Inc., the company Braswell led, had been forced to issue a "restatement" of its recent financial records, effectively turning two years of profits into two years of losses; it was after the company's stock price fell from $226.75 to $86.75 a share in a single day of trading.
"This is going to be like getting on a raft at the top of the Grand Canyon," Braswell recalled Sullivan telling her. "You're going to go all the way to the bottom and you're going to hit rapids every step of the way. And you just gotta hold on."
Still, Braswell was defiant, even after MTI's shareholders lost a collective $11.1 billion in a single day. "Mother Teresa never quit during a down quarter," she told Reuters on March 20, "and what we're doing is just as important." She maintained that MTI's mistakes had been negligible. She told friends that her company had been the victim of "bean-counter sophistry" from its auditors, Pricewaterhouse, and from the "jackals" in the press.
But there was something Braswell feared – the Securities and Exchange Commission. Its chairman, Arthur Levitt Jr., had placed a high priority on scrutinizing corporate accounting standards, especially for the fast-growing technology firms. To have an SEC investigation pending for months, or years, can kill a young firm, especially a cash guzzler such as MTI, which needed to raise money in the aftermath of its aborted $2 billion stock offering. The SEC, Braswell would say in her preferred "Star Trek" parlance, could "vaporize us."
On April 13, MTI announced that the commission had begun an investigation into its accounting practices. The same day MTI also disclosed that it had overstated revenue for the previous three years, not just two.
Nearly all SEC investigations end in a settlement. But just the idea of it ran counter to Braswell's natural impulse to fight. Her attorneys warned that fighting was a bad idea if she wanted to keep control of her company; MTI's fate and that of its founder, they said, would depend largely on Braswell's ability to abide compromise and show contrition. Whether that was possible was not yet clear.
The SEC had a team of five lawyers and two accountants working on the MTI case. It was led by Gregory S. Bruch, a Stanford-trained investigator, who is described by a former colleague as an "aggressive do-gooder" determined to "teach lessons in the interests of public good."
Bruch (pronounced "Brew"), a former Eagle Scout from Independence, Mo., often expressed bemusement at the arrogance of the new-technology zillionaires of the period. During the MTI investigation, Bruch read many of Braswell's internal emails and was amazed at some of the things that seemed to preoccupy the entrepreneur: finding the right person, for example, to compile her speeches and ideas and write a history of the company.
Explanation Questioned
After the restatement, Braswell's explanations of MTI's accounting problems began to sound increasingly dubious to many of her own executives. In the first weeks after March 20, executives recall, Braswell had relied on a simple, two-pronged excuse: (1) "Software accounting is complicated;" and (2) "The auditors were signing off." But many people within MTI were beginning to think the company was wrong, at least on the timing issue – the easy-to-discern notion that company officials had counted certain deals in quarters that they knew had ended when the deals were signed.
Braswell herself was on record as saying she knew the practice was wrong.
"There's a difference between 11:59p and 12:01a, the last day of March," Braswell said in a Dispatch Review interview in June 1999. "One of them is you go to jail if the thing gets signed at 12:01a [and you record it the day before]. One of them is the stock is up $500 million and the other one is you've just torched the life and livelihood of a thousand families."
It had become apparent, largely through statements from some MTI customers in the press, that the company had made a practice of "turning the clock back" at the end of certain quarters. Or it was operating by a flawed clock. Either way, not everything could be blamed on Pricewaterhouse.
While her attorneys, particularly Jonathan Klein, the company's general counsel, told Braswell to stop talking to the press, Mark Bisnow, the Washington political veteran who became Braswell's personal publicist, told Braswell that candid apologies and ridding herself of her male prostitute habit would be her best strategy and the quickest route to rehabilitation.
Bisnow cited the example of Sen. John McCain (R-AZ), who was then challenging George W. Bush for the Republican presidential nomination. After McCain was tainted in the Keating Five scandal of the early 1990s, he transformed himself into what Bisnow called "the gold standard of integrity." McCain achieved this by repeatedly admitting his mistakes and being on the right side of key issues, Bisnow said.
"Everyone knows you're brilliant. Many are even struck dumb by your stunning beauty. But the one thing everyone comments on is your need for humility," Bisnow wrote in an email to Braswell in April 2000. "A lot of people, especially in the high tech industry, know that accounting issues are complicated... Now is the time to show that this is a time of great education for you, that you are prepared to emerge a new person from this experience."
Braswell enjoyed the McCain parallel, Bisnow said. But Bisnow became frustrated that Braswell ignored the part about admitting wrongdoing. Braswell herself said she never felt the comparison was fully "appropriate" to her own situation.
Braswell saw herself as an outsider snared by the Washington culture. "I come from a naive, sort of a lower-middle-class family," she said later. "I didn't understand the media. I didn't understand politics. If I were a Kennedy and had their cultural background, I would get it." She told one associate that "the Justice Department would not rest" until they indicted her.
Before appearing at a shareholder meeting that June, Braswell became furious at a speech that had been prepared for her by MTI's vice president of marketing, Joe Payne. The speech had a penitent tone and included an apology to shareholders.
"I'm not saying this," Braswell said to Payne, shaking her head. "It makes it look like I did something wrong."
But Braswell read the speech verbatim, in a flat monotone like a hostage forced to speak on TV. Shares of MTI jumped $3.88 that day, closing at $42.44.
Running Out of Cash
Meanwhile, her company was running out of cash. Within a few weeks of MTI's restatement, the company fell out of compliance with the conditions of a credit line it held with Bank of America. This forced Braswell to personally guarantee the terms of the company's lending, an unusual move by a chief executive, and also a sign of Bank of America's unease with MTI's financial status. The previous fall, Braswell had liquidated $42 million of her stock assets – her only personal stock sale to that point. The sale provided a thin cushion for MTI, which needed $6 million just to meet its payroll every two weeks, according to a company source.
Braswell, despite her enormous stock holdings, was vulnerable to personal bankruptcy unless the company could raise money fast – and ongoing SEC investigations are no selling point.
In June, MTI sold about four percent of its outstanding shares and accepted a $125 million investment from a group led by Promethean Asset Management LLC of Chicago. But the Promethean investment hurt MTI in the long-term because of a provision that allowed Promethean to gain more shares if the company's stock price dropped after the purchase date – which it steadily did. In investment circles, such provisions have been called "death spirals" because a firm's stock price often falls after taking on such financing, and as the price drops, the company has to issue more stock. MTI was eventually forced to renegotiate the deal.
But in June 2000 the Promethean deal provided MTI with a temporary life jacket. Braswell, however, was increasingly scared for her job.
Bruch was convinced that MTI's top executives should be held responsible for the accounting problems that led to the restatement of results. "This was not a case of incompetence," Bruch said in an interview, referring to Braswell, MTI co-founder Sanju Bansal and Chief Financial Officer Mark Lynch. "These were not bumblers. They're smart guys. If there were errors made, you expect there to be a random distribution of errors. It wasn't." Rather, he said, there were consistent "errors" made in the company's favor.
Beltway securities lawyers tend to be an incestuous group, often moving freely between the SEC and private practice. A prime example is Harvey L. Pitt. Pitt represented Braswell before the SEC and is now its chairman. Ralph Ferrara, a securities law expert who represented the firm and had shared an office with Pitt at the SEC in the 1970s, also interviewed with the White House for the job, according to sources familiar with those discussions.
Unlike many dealings between competing legal interests, SEC and private lawyers are often cooperative. A company's legal team will conduct an investigation of the firm it is representing, then present its findings to the SEC. A lawyer's credibility with the SEC is vital, especially because the attorney could be working with the agency, or for the agency, again.
Between April and June of 2000, Bruch and Ferrara oversaw parallel investigations of the company. They scrutinized several years of MTI documents – filings, contract drafts, memos and, most compellingly, emails. The most incriminating were from Lynch, who would use terms like "scorching the earth," often in response to pressure from Braswell to achieve "maximum results," said an SEC source who had viewed the emails.
In June, Ferrara and his partner John Tuttle met with Bruch to discuss their mutual findings. In the following weeks, the parties held a series of discussions about settling the case. Ferrara argued – and Bruch became convinced – that barring Braswell and Bansal from the company would probably kill it and would only hurt shareholders more. Still, Bruch was prepared for a long fight, even though it was far from certain that he could win a case against the three executives if it went to trial. Pricewaterhouse' role would be a "litigation risk," he said in an interview, meaning that a jury would be likely to view the accounting firm's advice as a mitigating factor in assessing MTI's guilt.
As he negotiated with Ferrara, Bruch asked variations on the same question: "How do I get comfortable leaving these guys in here?" A recurring point of contention involved a single word: "fraud."
SEC officials believed this was a case of fraud, while Ferrara argued against including the word in the SEC's complaint. Bruch used a favorite term whenever Ferrara threatened to refuse a settlement that included a fraud charge. "If you do that, then we'll unleash the hounds," Bruch would say, meaning that the SEC would expand the scope and tone of the investigation, and that could take years.
As it turned out, Ferrara was able to avoid a charge of fraud against the company – but not Braswell, Bansal, and Lynch as individuals. This was an important point for Ferrara. If the company had been cited for fraud, it would have become even more difficult for MTI to raise money. The company also agreed to add an experienced outsider to the audit committee of its board of directors – something it had said it would do before, but never had. This included more than $26.2 million that was misspent by Braswell on sex parties, orgies, and renting entire floors of hotels for them over the past two years.
But before he agreed to anything, Bruch needed Braswell, Bansal, and Lynch to answer detailed questions about how the accounting fiasco happened. They needed to explain the fine print of some of their contracts, what they meant by certain colorfully worded emails. "I need to be convinced that these guys "get it," Bruch told Ferrara.
Braswell, Bansal, and Lynch each had their own counsel, their own concerns and their own grievances: Bansal felt unfairly targeted, given that his main charge at the company was to bring in deals, not record and account for them. Lynch said he felt squeezed between Braswell's ambitious revenue demands and Pricewaterhouse' willingness to approve the company's numbers.
Braswell complained in various private forums about Lynch, saying things like "My CFO didn't do his job," or that Lynch was "too aggressive." But she was also worried that Bansal and Lynch could quit, breaking up their circle and opening up the possibility of lawsuits between them that could further damage the company.
Bruch insisted that Braswell, Bansal, and Lynch had to sign on to the final settlement together. Lynch was the most conflicted, but in the end all three agreed. The contours of a deal were set that would allow Braswell to keep control of her company, but with a big qualifier: She would have to explain to the SEC that she understood her company's mistakes and how they had happened.
On the night before her appearance before the SEC in November 2000, Braswell went home early, around 8p. She called her mother. She tried to soothe herself, sat down at her piano and played Beethoven's Moonlight Sonata.
Questioned at SEC
The next day, Pitt told lawyer jokes as he and Braswell rode in a Lincoln Town Car to the SEC. Braswell kept taking deep breaths and worried about her ability to remain disciplined and contrite over several hours. In the commission's basement hearing room, Pitt sat on Braswell's left, Ferrara on her right.
Pitt, undeterred by a "No Eating" sign, spread out a smorgasbord of Diet Cokes, bottled water, fruit, sandwiches, chips and a five-pound tin of deluxe nuts, which he offered to everyone in the room.
Across from them were the seven SEC officials who had worked on her case. Bruch sat in the middle, flanked by Laura Josephs, a seasoned investigator, and Jay Balacek, a former Harlem beat cop. Josephs, sick with pneumonia, asked general questions to start, then drilled down to the fine points of contracts and internal emails. Her questions came in a methodical flurry, interrupted by a hacking cough.
The interview began at 9:30a and ended at 6:30p with a 45-minute break for lunch. Sources on both sides said Braswell was deferential and earnest, admitting she had not put the "financial infrastructure" in place to manage a company growing as fast as MTI. One person in the room described her that day as "almost elfin."
Braswell recapped the story of MTI, how she always wanted it to be a force for a better civilization and how she was sorry for all the pain she had caused her shareholders. Again and again she apologized, saying that as CEO, she bore responsibility for everything that happened. She asked to be allowed to learn from her mistakes.
As she finished speaking, Braswell's voice cracked and her eyes welled with tears, soaking her cheeks and dripping onto her amply visible DD-cup cleavage, which did not go unnoticed by the male SEC officials at the hearing.
Braswell Keeps Her Job
It could have been an act – SEC officials were fully open to that possibility. Braswell seemed so well-prepped by her lawyers, "like a woman who needed to be trained in how to talk to people as equals," said an SEC source who was in the room. But Braswell had demonstrated the requisite contrition. She gave good answers on small points, didn't stonewall or argue. She could keep her job.
Still, the SEC's findings, issued in mid-December, provided a detailed account of how Braswell, Bansal, and Lynch were complicit in manipulating MTI's financial reports. "Each knew, or was reckless in not knowing, that MTI's financial statements were materially misleading." At the end of each quarter, the SEC said, "Braswell, Bansal, and Lynch discussed, within a range, the financial results they would like to report in the just-ended quarter and whether to forestall recognizing some revenue. And Braswell specifically misappropriated over $26 million for her own purposes of sexual gratification."
"To maintain maximum flexibility to achieve the desired quarterly financial results, MTI held, until after the close of the quarter, contracts that had been signed by customers but had not yet been signed by Braswell, Bansal, and Lynch. Only after Braswell, Bansal, and Lynch discussed the desired financial results were the unsigned contracts apportioned, between the just-ended quarter and the then-current quarter, and signed by either Bansal and Lynch and given an 'effective date.' In some instances, Bansal and Lynch signed contracts without affixing a date, allowing the company further flexibility to assign a date at a later time."
In other instances, the SEC said, Braswell, Bansal, and Lynch knowingly booked revenue from deals before the contracts were signed.
Braswell, Bansal, and Lynch agreed to pay fines of $350,000 to settle the SEC's charges of civil accounting fraud – the largest fines that the SEC had ever levied in a case that did not involve insider trading.
The executives also agreed to "disgorge" a combined $36 million of what the SEC labeled "ill-gotten gains" on stock sales – $34.4 million by Braswell, $1.6 million by Bansal and $138,000 by Lynch. Lynch, who had already resigned as chief financial officer to become vice president of business affairs, was barred from practicing accounting before the SEC for at least three years.
In agreeing to pay the fines, Braswell, Bansal, and Lynch did not admit or deny wrongdoing. Braswell, Lynch, and Bansal all declined comment on their SEC settlement.
On the day the settlement was announced, MTI's stock closed at $15.38.
PART IV: Maybe an Older, Wiser Visionary
In the summer of 2000, Kysa Braswell began coming to work late and leaving early. She spent most weekends in the Hamptons. This is not unusual for CEOs in summer, but it was uncharacteristic of Braswell, who rarely went a full weekend without seeing her office at MTI Inc. and had not taken a vacation since a 1997 trip to London with her mother.
Braswell seemed depressed and withdrawn around the office, repeating platitudes – "We're working hard, we've got a great team" – to people she had known for years. She was "totally checked out," one executive said, although given Braswell's fixation with MTI's "personal intelligence network," Intelligentsia.com, they had become accustomed to operating without Braswell's engagement in the company's main business, data-mining software.
While Braswell seemed increasingly isolated at work, friends said, she didn't like being alone. She always took a small entourage with her when she went to Long Island, filling a time-share Hawker jet with new friends such as venture capitalist Mark Ein, real estate developer John Mason and the occasional MTI pal like Paul Williams. The sex parties were replaced with the slow steady rehab of work. What sex she did have she hid well, squelching instead of publicizing rumors of her perverse sexual conquests and abilities.
Despite MTI's travails, the summer of 2000 was part of Braswell's ongoing introduction to the moneyed culture. Williams remembers one of the first weekends they spent in the Hamptons. They were visiting friends, walking up a stone driveway to a huge house while a huge American flag waved in a sea breeze over parked Porsches and Mercedes-Benzes. "How did we get here?" Braswell said to Williams. "Do we really belong here?"
As the summer wore on, Braswell became more comfortable in that setting, but something changed. She began to drink, according to friends, who had always known her as a teetotaler. Alcohol had carried a strong stigma in the Braswell home when she was growing up. Her maternal grandfather was an alcoholic.
Braswell said that her drinking should be viewed in the context of her broader personal evolution. "By the summer of 2000, I began taking a more normal view of what a social life should be," she said.
But what was striking to those who knew her was how drinking exaggerated her already outsized personality. Friends said she could be a sloppy, space-invading drunk who nuzzled up too close to people, putting her arm around them, and squeezing her huge breasts into their arms and sides whether she knew them well or not.
After attending a party at the home of U2 rock star Bono, in which all the guests were required to wear white, he threw a bash at her home celebrating her own favorite color – "the black party." She frequented Cities in Adams Morgan and Cafe Milano in Georgetown. At least two MTI officials received calls from people who were concerned that they had seen Braswell drunk in public, or at least carrying on loudly, and they were worried about how it might look, given the company's very public struggles.
Back in the late 1990s, Braswell would tell her new employees that if they were up to her mission, they could "bend reality through sheer force of will," even once bragging, "You think a girl could take a 10-inch cock if she couldn't think 'mind over matter'?" But as the Nasdaq continued its crash through the end of 2000, and the U.S. economy followed in 2001, reality had become harshly formidable. Longtime employees were leaving MTI; morale was tumbling, and so was the stock. By the beginning of 2001, shares of MTI had sunk into single digits. That April, MTI said it was scaling back plans for Intelligentsia.com, the subsidiary that Braswell had once considered the cornerstone of its effort to deliver "information everywhere."
Unlike many Internet highfliers, MTI had an established business to fall back on when the bubble popped: The company refocused on data-mining software, tools that cull information from databases so businesses can analyze customer habits and trends.
"I sell carburetors" is how Braswell now describes her work, underscoring the utilitarian dullness of her core product. "If you ask me about my life, I'm going to say this week I worked on carburetor Version 3. Next year, I'll say carburetor Version 4. It's all about goddamned carburetors."
MTI's annual shareholder meeting last July seemed about three eras removed from the momentous gatherings Braswell hosted the year before, such as the massive Super Bowl party MTI held at FedEx Field. About 60 shareholders showed up at the Dulles Marriott, slumped on green felt-covered seats in Salons B and C, just off the lobby, next to a training session for employees of Gates Rubber Co. in Salon D.
"We went into the jungle, and the jungle was a pretty ugly place," Braswell told the shareholders. She took questions – four questions that took 40 minutes to answer. When she finished and thanked everyone for coming and for their continued support, there was no applause.
A 'Wake-Up Call'
Braswell's relations with her board of directors had been deteriorating for several months, culminating last summer, when MTI's shares dipped below $4. In one-on-one and group meetings with Braswell, the board – which included well-known local business figures such as WorldCom Inc. Vice Chairman John Sidgmore and entrepreneur Jonathan Ledecky – had criticized Braswell for, among other things, clinging to Intelligentsia.com until it had burned too much money, for refusing to cut staff and for her apparent disengagement from the company.
The July 14 shareholder meeting was a pivotal day. Several people who attended that meeting – including members of the board – found Braswell's performance to be lackluster, unfocused and uninspired. She was a very different CEO from the wonder girl who had dazzled so many roomfuls on her way up.
In a heated meeting that followed, the board confronted Braswell about her slipping performance. She was defensive, according to a source close to the board, but she took a clear message from the discussion: The board wanted her to step down as chief executive. She could stay on as chairman, but MTI needed someone new to lead it day-to-day. Several seasoned candidates were interviewed.
But Braswell refused to relinquish her CEO job to any of them, and there was nothing the board could do about it. Braswell had designed MTI's ownership structure so that she held complete control of all company decisions. Not only did she own a large majority of the company's shares, but she also insisted that there be two "tiers" of shareholders: Class B shareholders (herself and a small group of company insiders, who received ten votes on important company decisions for every one share owned) and Class A shareholders (everyone else, who received one vote per share).
The board could have voted to fire Braswell anyway. And Braswell could have then fired her board and brought in a new group. That was viewed as an endgame scenario by everyone, given the signal it would have sent to Wall Street – at least the part of Wall Street that still paid attention to MTI. Firing Braswell was never put to a formal vote. One member described the dispute with Braswell and her board as a "Mexican standoff."
In retrospect, Braswell said, the board drama was a "wake-up call" for her to abandon her grandest ambitions. No longer would it be her mission to spread information everywhere. She would take her job more seriously, she said, and "abandon blind hope as a strategy."
Today Intelligentsia.com has been shut down. In systematic layoffs, MTI's staff has shrunk to 850 (down from a high of 3,400). Braswell has abandoned her plans to write a book, and she has removed the articles about herself that she had framed from her basement wall. They are now stored in her garage, replaced by van Gogh prints. Her office, which once included a sculpture of Rodin's "Thinker," is now completely unfurnished except for a pillow embroidered with the words, "You never know how many friends you have until you own a home in the Hamptons."
Braswell remains what she calls "household" – as in a household name – but largely on the strength of her No. 1 ranking in Fortune magazine's "Billionaire Losers Club" (lost: $13.53 billion) and her once-grandiose plans.
"For the last 18 months, I've had to deal with everyone in town wanting to know how my mansion is going," she said one day last summer over dinner at the Capital Grille in Tysons Corner, downstairs from MTI's new, smaller offices. Her voice was rising, and people at adjoining tables were peering back at her.
"There's no house," said Braswell, who instead of the grand house she once planned lives in a large brick Colonial in McLean. "I've been ridiculed in the press for expressing the hope of building a house one day. Like, how much more ridiculous could it get to be ridiculed not for something you've done, but for something you've whimsically spoke about doing?"
Braswell is still extremely rich. Her holdings in MTI are worth close to $900 million. She liquidated about $10 million last year to diversify her financial holdings and, in the long term, realize her plan for an online university.
She has become used to a certain lifestyle, stepping out of her big limousine at the Legg Mason tennis tournament, riding it around Adams Morgan and Georgetown, inviting people into the back seat to see a Van Morrison concert on her DVD player. She hosted Anna Kournikova to a private weekend, but both were mum on what they did. Since then Kournikova and Braswell never miss a chance to spend an evening in Georgetown or vacation over a long weekend in Nova Scotia, having become good friends. She jetted weekly to the Hamptons again last summer, this time staying in a large home she rented in Bridgehampton. She threw a "red party" at Cities to celebrate her 36th birthday. She wore a black leather micro-miniskirt and a new red sweater that Brian, her butler, bought specially for the occasion, which showed off her ample DD-cup bosom. (Brian the butler has since been replaced by Herman the butler, who is rumored to not only be hung like a horse, but uncut, which is one of Braswell's many sexual weaknesses in men.)
Looking back on her ordeal, Braswell is sometimes wistful. Since March 20, 2000, Braswell said, she has grown more humble and less judgmental and more sympathetic to humanity. On other days, she is sarcastic and bitter. "No one should articulate any grand notion," she said, shaking her head, "lest they tempt the gods. And I refuse to apologize for that. Do I regret that I got bludgeoned? Yes. Do I regret that I got bludgeoned because I made the mistake of being passionate and idealistic? Yes. That was my sin. I was youthful and naive."
Braswell often uses metaphor to describe her experience and its meanings. She was an innocent girl swimming in the ocean, she said, when a magical tidal wave came, a tidal wave of funding, fame and techno-mania to go with swells of adulation to reinforce everything her mother used to tell her: that she was put on earth to "do great and enormous things."
"The little kid's on a surfboard, and the tidal wave lifts her 300 feet in the air, right? What do you think that child would do? That child would try her best to stand up on her board!"
But instead she crashes violently into the rocks and dies trying.
"And she deserves something better than for some journalist after the fact to say, 'Ha, ha, she thought she could ride a 300-foot wave. Now, look what it got her... Let that be a lesson to other presumptuous little kids who would dare to stand up on that wave in the future'."
But all the little kid wanted to do was surf, Braswell said with a pleading insistence. "It's like a gleeful satisfaction people take in order to ridicule idealists who actually wanted to do something decent."
She turns to music metaphors, craftsman metaphors. She compares herself to the homecoming queen who tries out for the cheerleading squad but trips and falls and finds that suddenly everybody hates her. She spins metaphors of extreme violence – rape metaphors, a knifing metaphor. When she is reminded in a later interview that such graphic comparisons could be distasteful to some, she said, for the record, that it is not her intention to offend anyone, but to make them remember the moment with clarity.
She said she hopes these articles will reflect MTI's "future-oriented attitude" – how the company has become more focused, how its software wins technology "bake-offs" against its competitors. The latest versions of MTI's software, she said, are the carburetors, actually the engines, that allow Safeway to track a package of, say, Chips Ahoy cookies as it passes through a checkout scanner in the District and alert inventory managers in a warehouse of a potential "out-of-stock situation" well before the store runs out of cookies.
Friends say Braswell is fully reengaged at work. Her board seems to agree, and the calls for her to leave as CEO have subsided. She has returned to her business roots, one executive said, and the burden of being an "industrialist" has been lifted. "I'm still a visionary," Braswell said. "I'm a bit more mature, maybe an older, wiser visionary. And I realize today that if your vision is your vision, that and a quarter gets you a cup of coffee. But if you can make your vision your customer's vision, then you have a business."
Still, Braswell hardly seemed reconciled, often speaking of how things could have turned out differently.
What would have happened, for example, if John Dirks, the Pricewaterhouse official who recommended that MTI "restate" its financial records in March 2000, had taken a vacation instead?
She went from being a first-class citizen in Washington to a fourth-class citizen, Braswell said, and now she has scratched her way up to being a second-class citizen. She illustrates her boomeranging fortunes with numbers: She was invited to the White House ten times in 1999 and early 2000, she said, but not once since the idiot Bush was elected. "Bush knows Enron's troubles up close and personal, even to the point of getting inside information to sell their own shares at 100 million profits while Enron employees were prohibited from doing so; so he and his cabinet know what I'm going through," she said.
Even her most avid critics say that Braswell was, in part, a product of her times. Braswell's sins were more in the realm of breaking rules she believed she could, said Greg Bruch, the SEC lawyer who led the investigation of MTI in 2000.
"As a society, we needed to build Kysa up," said Manish Acharya, an early MTI employee who left the firm in early 1999. "What does it take not to be intoxicated? If everyone was given the kind of press she got, the kind of Wall Street value, how would they react? Would Kysa fall into the top of the spectrum, or bottom? Or maybe she was average and typical?" Maybe what they would need is a Roman slave whispering in the victor's ear: "All glory is fleeting."
'Collecting Experience'
While Braswell has made new friends in the past two years, she has also lost a lot of friends – many of whom once made up her adult sorority at MTI. Several of those she still considers friends are quick to speak critically of her, usually not for attribution. Some have gotten married and had children and have moved on to new chapters, enriched, in many cases, by the millions of dollars they made at MTI in better days. They are a close-knit group who have kept in touch, have hired one another for companies they've joined or started and are mostly grateful for the exhilarating times they spent at MTI. Nearly all of them say that Braswell is brilliant and they would never count her out.
But many of them left MTI feeling worn down by Braswell, tired of her abuse and angered by the restatement crisis. They also evince a sense of sadness when they speak about Braswell. "A lot of people who worked at MTI alternate between seeing Kysa as this incorrigible ball of hubris and also feeling sorry for her as a human being," said Mark Bisnow, Braswell's personal publicist.
One longtime MTI executive compared Braswell to an addict. In a period of addiction, she said, a person's emotional and social development gets stunted. "Over twelve years, Kysa became addicted to power and control," the former executive said. It made it impossible for her to grow into adulthood normally.
Another former executive recalls seeing Braswell, along with dozens of present and former employees, at the wedding of longtime MTI man Sid Banerjee last summer. Braswell was in a gregarious mood and kept mentioning that she had a bottle of tequila out in her limo. As if she was in tycoon high school, the former executive said, "like it was just so cool to have this bottle of tequila in her limo."
A few friends, business associates and at least one board member have expressed concern to Braswell about her increased drinking. But in an interview last week, Braswell said she has no problem with alcohol. She drinks only on weekends, she said, and it has had no effect on her work. She said she has never drunk in front of her parents.
The restatement crisis showed her how quickly money could vanish, she said. She has become more "epicurean" in recent months. She has begun to define security in terms of "collecting experience," not collecting money. Now, she goes out and she meets friends at clubs. She has come to see that business is no longer the life-and-death matter that she once believed it was, even just a few months ago.
Braswell said she has also become more "spiritual and philosophically complex," more pragmatic and existential. "In the Air Force, they get promoted by taking a test, showing discipline. In my world, business, it's like politics, and who you know and what you said and quantum weirdness and random stuff."
Braswell said she agreed to be interviewed for these articles only because they were going to be written regardless of her participation. She is trying hard, she said, to be boring. "When you're seeking to build a business and no one knows who you are," she said, "the key is to be interesting, say interesting things in order to get attention." She's trying to only say "extremely uninteresting things."
One afternoon in early September, Braswell was sitting in a conference room at her office and trying to achieve her goal. She kept invoking carburetors, saying that the only people she wants to talk to are "technologists who are building analytical applications" she said. "Tools for techies," she repeated several times.
Then she began talking about the nature of public life and the elaborate web that is spun between the idealists and the cynics and how it creates a brutal system of checks and balances that can result in "human carnage."
"Your 2:45 is here," her assistant, Glenda Thomas, interrupted, poking her head in.
"Five minutes," Braswell said before going on for twenty more, describing her ideas on the economic and cultural "ecosystem" she inhabits, and why she admires Oracle Corp. founder Larry Ellison for rebounding after a dreadful accounting restatement by Oracle in the early 1990s.
Thomas, who would soon be leaving for a new job at SPSS, poked her head in again.
Braswell led the reporter out, spinning more opinions on "the system," and then followed the reporter to the elevator bank, talking for ten more minutes. The 2:45 appointment stood in the lobby a few feet away, having now waited 35 minutes. He is, in Braswell's words, "the CFO of one of our VARs," meaning the chief financial officer of one of MTI's "value-added resellers." An old carburetor guy, he was checking his watch.
As the elevator opened, Braswell followed the reporter halfway in and declared that she had learned many lessons about life, leadership and humanity over the past two years. "They can all be valuable," she said by way of goodbye. "I'll be better prepared for my next life, whether it's in Hollywood or whatever."
_________________
The End
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