John H. Kang, a once prominent entrepreneur in Tampa's technology community, is slated to face a federal jury next week on charges that he fraudulently inflated revenues while leading the software company Medical Manager Corp. in the late 1990s.
The allegations stem from a government indictment in late 2005 naming Kang and nine other company executives, saying they conspired to manipulate the company's financial results by more than $16 million in reports to investors.
Only Kang, Medical Manager's former president, and John P. Sessions, former chief operating officer, will head to trial next week in Charleston, S.C., where the government's lead witness lives.
Two defendants, Charlie Hutchinson and Franklyn Krieger, had their cases moved to Tampa for trial at a later date.
In a surprise move this week, the government agreed to drop charges against defendant Michael A. "Mickey" Singer, Medical Manager's former chairman and chief executive. Singer, a Gainesville resident, will pay $2.5 million to settle the government's forfeiture claims. According to the deferred prosecution agreement, charges will be dismissed after six months unless Singer commits a federal crime. Singer's attorney, Randall Turk of Baker Botts in Washington, said the agreement does not require Singer to testify at the remaining defendants' trials.
"This case never should have been brought in the first place," Turk said.
John Fitzgibbons, attorney for defendant David A. Ward of Tampa, whose charges were dropped just before Christmas, said: "My client was under indictment for 41/2 years, and it's horrific to put human beings through this then dismiss them on the eve of trial. We've always maintained that David (Medical Manager's former director of national account sales) was innocent, and finally the government agreed."
Other defendants who had charges dismissed were Maxie Juzang of California, Rick Karl of Gainesville and Ted Dorman of Tampa. Defendant Lee A. Robbins, Medical Manager's former chief financial officer, died in 2008.
The federal indictment against Medical Manager was a blow to what had been a high-flying Tampa company at the height of the tech boom. Though Singer started developing software for doctors' offices in 1982, it was his partnership with Kang, a Harvard graduate, in 1996 that sparked Medical Manager's rapid growth. In 1997, the company went public and grew through the acquisition of independent dealers. In September 2000, it was acquired by WebMD. The company was later acquired by Sage Software.
According to federal prosecutors, from 1997 through 2003, Medical Manager's executives manipulated more than 100 acquisition deals to create fictitious revenue and earnings, thereby enhancing the value of its stock.
But Kang's lawyer, Tampa's John Lauro, said his client was only following accepted accounting practices at the time.
"Back in the late 1990s, the issues relating to how you recognize software revenue were very complicated, and there were a lot of judgment calls to be made," he said. "In our view, this is not a criminal case because disagreements among accountants happen all the time."
Lauro criticized the prosecution's key witness, Robert Davids, Medical Manager's former vice president of mergers and acquisitions. Davids, who lives in Hilton Head, pleaded guilty in 2005 to receiving $5.4 million in kickbacks in the merger deals.
Three other Medical Manager associates have also pleaded guilty to various charges.
"Bobby Davids stole over $6 million from the company and was about to be reported to the FBI when he decided it was in his interest to go to South Carolina and strike a deal," Lauro said.
Kang and Sessions' trial is scheduled to last two to three months. The federal conspiracy charge carries a maximum sentence of five years in prison and a $250,000 fine.
Kris Hundley can be reached at [email protected] or (727) 892-2996.