It seemed so simple: using the Internet to sell cars. The idea could be promoted nationwide in shopping malls, and AutoMall Online would direct customers to automobile dealerships and receive a referral fee. A handful of investors were sold on the idea, which was formulated in February 1999 by Michael Field — a Fairfax County entrepreneur who operated an Alexandria car dealership at 499 South Pickett St.
Court records show that AutoMall was incorporated in April 1998, just as the world of online shopping was emerging as the future of business. Field would be at the forefront of using the new technology, acting as a middleman between buyers and sellers.
On March 17, 2006, a jury awarded $1.4 million to eight former investors of AutoMall. The jurors ruled that Field breached his fiduciary duty in a number of ways: secretly merging AutoMall with another company he controlled, using his position as chairman of the board of directors to win a lawsuit and diluting the value of the shares of eight plaintiffs.
In a five-day trial, evidence presented to jurors unveiled a shadowy world of double-dealing and deception. The jurors’ verdict validated the case made by plaintiffs that Field initiated numerous schemes to swindle investors out of money. For the eight plaintiffs, the last straw was when Field secretly merged AutoMall with Financial Solutions, Inc. — a second-chance loan operation that Field formed with a fraternity brother from the College of William and Mary.
“Field breached (his) fiduciary duties owned to AutoMall’s shareholders through a series of egregious, self-dealing transactions,” the plaintiffs’ May 25, 2005 motion for judgment read. “Field concocted schemes to use AutoMall to line his own pockets, without regard to the injuries inflicted upon the company and its shareholders.”
<b>AUTOMALL WAS LAUNCHED</b> in early 1999, a time when dot-com startups were skyrocketing on Wall Street. The Internet was changing the way that people thought about everything — including shopping for cars. AutoMall sought to offer a convenient way for a customer to find the right car, and the right dealer. A steady stream of revenue would come from an inexpensive web site that would direct Internet surfers to specific car dealerships.
“AutoMall Online is a new retail concept, which enables customers to shop at their local mall for virtually all vehicle makes and models,” read a press release from Jan. 25, 1999. “Within a few weeks, AutoMall Online's website will also enable customers to shop from the convenience of their home or office.”
Court records show that AutoMall began operations in February 1999, and the referral fees came rolling in. The Internet was booming, and AutoMall was an immediate success. The investors saw a profit, and Michael Field saw opportunity.
Evidence presented during the trial demonstrated to jurors that Field abused his position as chairman of the board of directors for personal gain by engaging in a number of secret transactions. In November 2001, for example, AutoMall filed suit against American Express in the Eastern District of Virginia with little or no input from the board of directors. The money was never accounted for at any AutoMall board meeting.
“Field did not consult with any other company officer or director in taking the settlement funds from said suit,” the motion for judgment charged.
<b>ENTER ALLEN OUTLAW</b>, a fraternity brother from the late 1980s at William and Mary. In early 2002, Outlaw and Field created Financial Solutions, a second-chance-loan operation for people with bad credit. The business offered credit-repair services and high interest loans to “subprime” purchasers.
But the second-chance lender had a hidden agenda. Court documents show that Field and Outlaw secretly merged AutoMall and Financial Solutions on Feb. 14, 2002. Although the merger was never authorized by a vote of the board of directors, Field was able to distribute millions of shares to himself and control the distribution of profits, according to testimony and court documents.
One of the investors became suspicious when Outlaw approached him about creating a marketing campaign for second-chance loans — a far cry from the mission of AutoMall. Members of the board of directors began clamoring for a meeting, but Field sent evasive e-mails in an attempt to prevent the board from meeting, according to court documents.
After numerous attempts by members of the board to call a meeting, Field finally relented. In early 2003, he announced a “telephonic conference” where board members could phone into a conference call. But the meeting was canceled when Field failed to dial in. Two board members promptly resigned and decided to make a surprise visit to 499 South Pickett St. — home of Field Auto City, AutoMall and Financial Solutions.
“These were people who invested a lot of money in AutoMall,” said Sandy Thomas, one of the attorneys who represented the eight plaintiffs in the case. “They felt like getting straight answers from Field. And what they discovered that day led to more questions.”
Thomas said that his clients found several critical documents that they had never seen. Their interest was piqued, and they wanted to know more. So they retained the services of Reed Smith — a Falls Church law firm that successfully tried the case in Alexandria Circuit Court.
<B>OUTLAW EVENTUALLY SETTLED</B> in an undisclosed agreement with the plaintiffs, but Field maintained his innocence. Throughout the five-day trial, he continued to assert his innocence, but apparently the jury did not find him credible.
Jury members calculated the amount to award the investors by adding the award from the secret American Express settlement with the value of AutoMall on Feb. 14, 2002 — a grand total of $1,432,581 plus interest.
Field’s attorney did not answer several calls to be interviewed for this article.
“This was a little more complicated than your typical case,” said Thomas, adding that civil suits rarely take five days. “But, inherently, this was a case about conduct.”