In The Shadows: The Rise And Fall Of Torrey Point


SEEING THE RED FLAGS

While many Torrey Point engineers and salespeople joined FishNet, Fazio and Young were not among them. Young is currently listed as CEO of Kore-Tek, a solution provider based in Minneapolis that specializes in optical network architecture; Fazio, who is listed as a managing partner of Kore-Tek on the company's website, is also CEO of Atlantic IT Group, a New York-based consultancy. In addition, Atlantic IT Group and Kore-Tek appear to be part of a network of other companies owned by and associated with Young and Fazio, including PHW and PreOwned Hardware.

CRN attempted to contact Young for comment and discovered that Young's extension and voice-mail greeting are the same at all four companies. In fact, the general voice-mail greeting for Kore-Tek's phone number identifies the company as Torrey Point Group.

CRN also learned that in addition to Baker, several other former Torrey Point employees sued the company, accusing Young and Fazio of refusing to pay their bonuses or commissions and/or honor their contracts. Some of these lawsuits, such as Baker's, were settled.

Many former Torrey Point employees say they were unaware of the Cisco sales and the affiliated companies until after the company was de-authorized by Juniper. One former executive at the company said most employees, including himself, had no idea what was going on and were spending all of their time driving legitimate Juniper sales. "From my perspective, everything was on the up and up," he said.

But former employees also said there were some "red flags" at Torrey Point and describe a sometimes chaotic environment in which, despite the company's impressive revenue, it was often difficult to obtain contractual bonuses, commissions and even small travel and expense reimbursements. A tipping point occurred in 2011 when Torrey Point actually missed its payroll, leaving more than 50 employees without a paycheck for that period.

One former network engineer, who would only speak with CRN on the condition of anonymity, said Fazio and Young told the staff Torrey Point missed payroll because of a paperwork error. Everyone eventually received their paychecks, but employees were skeptical.

"The revenues were great. There was no reason why they couldn't pay the bills," the former employee said. "So where was the money going?"

According to documents obtained by CRN, Torrey Point was also moving vast amounts of money to and from the affiliated companies. In Baker's lawsuit, the complaint claims that in addition to deceiving Juniper, Arista and others, Fazio and Young "appear to have defrauded their lender, GE Financial, by diverting more than $4 million of revenue away from Torrey Point to PHW International."

GE, however, said it was unaware of any fraud on the part of Torrey Point. "We did have a financing relationship with Torrey Point Group, and it concluded within the last six months and we were paid in full," said Mike Marcolina, senior managing director for GE Capital Distribution Finance's Technology, 
Electronics, and Appliances division. GE could not say whether the balance had been paid by Torrey Point or by FishNet following its acquisition of the company last November.

An audit of Torrey Point's 2010 financials performed by accounting firm Gentile Pismey & Brengel, which was entered into evidence as part of Baker's lawsuit, showed the solution provider was generating tens of millions of dollars in legitimate revenue, as well as a strong profit. But the audit shows a number of financial transactions between Torrey Point and PHW and other affiliated companies such as Atlantic IT Group. According to the audit, Torrey Point purchased $100,532 worth of computer equipment and parts from Atlantic IT Group, while PHW reimbursed Torrey Point for computer equipment and parts totaling $1.7 million for the year.

CRN contacted many former employees and executives for this article, and nearly all requested anonymity. Several people declined to comment at all and asked not to be named in the article. A few former employees have even gone so far as to eliminate any references to Torrey Point from their LinkedIn profiles.

The documents obtained by CRN give a limited view of Torrey Point's activities. It's unclear how much money Torrey Point made off selling its vendor partners' products to the competition, and how much was being moved between the solution provider and its affiliated companies, but invoices and purchase orders viewed by CRN show that Cisco alone paid at least $3.3 million to PHW over the course of two years.

But that activity apparently led to the downfall of a prominent, solution provider. Not only was Torrey Point one of Juniper's most valuable channel partners, it also was a rising star in Silicon Valley. When Torrey Point said in November 2010 that it was expanding its headquarters in Sunnyvale, former mayor Melinda Hamilton said, "They are a great company with wonderful employees, and we look forward to seeing them grow even more successful in the future."

Michael Simmons, a former sales director with the company who left in 2011, agreed. "It was a great company. It was growing," he said. "There were a lot of talented folks there on both sides, sales and engineering. They had a tremendous pool of talent and unbelievable potential. To this day, I've never understood why this happened. It was a shame."