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FusionStorm Institutes Changes, Prepares To Pay Damages In TIG Lawsuit

FusionStorm has changed some of its hiring practices in the wake of the lawsuit filed against it three years ago by TIG, and said it has the financial base to handle the jury-mandated damages.

FusionStorm, which was successfully sued by TIG over alleged illegal hiring and business practices, has changed some of those practices and is now focused on day-to-day business and on paying the jury-mandated damages.

Dan Serpico, president of FusionStorm, said the San Francisco-based solution provider would have done things differently in the setting up a couple of years ago of a branch office in Tampa, Fla. and the hiring of some of the staff of rival TIG.

Serpico also said that FusionStorm is making arrangements to pay damages, and did not rule out selling part of the company.

TIG, a San Diego-based solution provider, sued FusionStorm over methods FusionStorm used to allegedly take TIG employees and business secrets in setting up that branch office.

The legal dispute between San Diego-based TIG and San Francisco-based FusionStorm closed on Wednesday with the official filing of a stipulated judgment that lays out the monetary awards TIG will receive from FusionStorm and six individuals.

In the settlement, the two solution providers agreed FusionStorm and the six individuals will pay TIG a total of $11,065,000.

The lawsuit stems TIG's accusations in early 2007 that FusionStorm, several of its top executives, and some of TIG's own former employees engaged in unethical business practices related to FusionStorm's decision to set up a Tampa, Fla. branch office.

The drama between the two solution providers started with a decision in 2006 by FusionStorm to hire Michael Dragoni, who at that time ran TIG's Tampa branch office and to set up a Tampa branch office to compete with TIG.

Dragoni, while remaining on the TIG payroll, went on to hire a number of his TIG colleagues, some of whom then passed TIG confidential information to FusionStorm and spread misinformation about TIG to customers and vendors, the suit alleged.

In looking over the history of the case, Serpico said there were things done at the time that FusionStorm would do differently now.

"There were a lot of factors we didn't know at the time," Serpico said. "We would have done some things different if we could."

The management of FusionStorm on a day-to-day basis has changed since the lawsuit was filed in early 2007. "We have built into our hiring practices new processes that will help us avoid things employees did vis-a-vis the TIG case," he said. "The company has a different approach. We made mistakes, and the jury hit us over the head."

Next: Prepping Financially For The Settlement

For FusionStorm, the settlement is an opportunity to get focused on the business of serving customers, Serpico said. "This is clearly a setback for us," he said. "Naturally, our vendor partners are concerned. But the fact that we made an amicable deal with TIG is important to us and to our vendor partners."

FusionStorm has a number of options for paying what it owes to TIG, and Serpico declined to talk about specific options.

One of those options, according to several channel sources, is for FusionStorm to sell Jeskell, an IBM-centric solution provider with a strong government focus which FusionStorm acquired in late 2006.

Serpico said that FusionStorm has received inquiries about the possibility of purchasing Jeskell, but that it is in no hurry to sell Jeskell or any other asset. Despite the trial and the bad press, Serpico said FusionStorm's sales are up 35 percent over those of last year.

"Jeskell has a lot of value," he said. "We're seeing a lot of interest in it. But there's no reason to let anything go in a fire sale. We have more than one option."

In any case, Serpico said, he has been in personal contact with TIG President and CEO Bruce Geier. "And I think he's comfortable he will get paid," he said. "I don't think the jury awarded the right numbers. But guess what? We lost. We'll find a way to move on."

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