Corporate action

U.S. Wireless recently replaced Chairman and CEO Oliver Hilsenrath after an internal audit revealed “irregularities” in distribution of cash, stock and stock options to associates of Hilsenrath and another former executive of the wireless applications developer.

The irregularities skirted company policies and procedures and involved actions of former executives but were not a result of “material weaknesses in the company's internal control policies,” according to a U.S. Wireless statement.

“This is a corporate action by the board of directors,” said Paul Brunato, director of corporate communications and investor relations for U.S. Wireless. “Hilsenrath's position as CEO was part of the business of U.S. Wireless, and replacing him was a business decision.”

The majority of irregularities occurred prior to January 2000, Brunato said. U.S. Wireless experienced significant growth in its stock price during this time (see figure).

Independent consultant Louis Golm was named chairman; board of directors member Dennis Francis was named CEO.

Hilsenrath, a founder of the company, issued a statement supporting Golm and Francis but disagreeing with the audit committee's findings about “compensation paid to a number of bankers, agents and consultants.”

These individual recipients “supported U.S. Wireless by facilitating financing and creating important relationships for the company at a stage in its existence when other financing and sources of support were not available,” he said.

Hilsenrath is still a board member and continues to hold a stake in the company.

Caroline Allison, consultant for The Strategis Group, said Hilsenrath jeopardized his future in a desperate attempt to keep the company going.

“He has lost his credibility, so his involvement in the company in the future is questionable,” she said.

U.S. Wireless has not determined if the payments have affected past financial statements materially, but Allison said there are consequences for the company.

The Nasdaq halted trading of U.S. Wireless' shares last Tuesday. Nasdaq said trading would resume when the company satisfies its request for additional information, which stems from U.S. Wireless' change in upper management, Brunato said. The stock last traded at $2.91 per share.

U.S. Wireless did not name any parties who received payments. The internal audit has yet to find other employees, officers or directors involved.