A recent case has popped up in the Southern California Superior Court of Riverside and is bound to turn a few heads in the lead generation industry. Accusations of fraud, stealing and diverting of leads are at the top of the list for this case.

The complaints set by LG Technologies of California on 04/02/09 are against Edward Shin, former VP of Business Development of LG, Karen Shin, Christopher Smith, Iris Sunwoo, LeadPoint Inc, Marc Diana, Breakwater Ventures and Breakwater Ventures II.

The information I am about to discuss is public information and can be found by accessing the public access portal for the Riverside Court. At this point in the case the defendants remain innocent of any allegations and have not received their full due process.

Here is a synopsis of the complaint and this does get a little tricky, so try to follow:

LG complains that Edward Shin, hired as VP of Business Development Feb. 2008, formed a company, LPS, so that he could direct leads from the LG lead exchange into LPS at a significant discount and then resell the leads to currnet LG clients, including LeadPoint and others. The creation of LPS, according to LG, is a violation of trust because of its alleged direct competition. Shins statement claims that there is no competition because LPS works with radio advertisements, not TV, which LG specializes in. Shin states that he came to LG CEO, Grey, numerous times encouraging LG to get involved with Radio and was turned down after a 1 month test. Shin claims after the test failed he created LPS.

According the the complaint, Shin had hired Chris Smith, a former LeadPoint employee, who had a current non-compete in place with LeadPoint, and that on the same day of Smiths hire at LG was terminated by LeadPoint. The complaint questions the intent of LeadPoint and good friend, Marc Diana, to allow Smith to work as a consultant for a direct competitor. Smith, who was hired at LG by Shin, was also hired by Shin through LPS at the same time, which allegedly broke Smiths consulting agreement with LG. According to the complaint Shin paid Smith $13k to $14k per month at LPS, while he also was consulting for LG. Smith also was given 40% stake in LPS.

Again, according to the complaint, LPS acquired leads from the LG exchange at a significant discount and then resold them at a profit. By Selling the leads to current LG client, LeadPoint, LPS was allegedly stealing profits from LG and committing fraud. LG states that Shin alone or in collusion with Smith, Diana and LeadPoint arranged to have LG receivables paid directly into Shins personal bank account to the tune of $1 million. Shins states that payments were made to him by mistake, due to similar usernames and passwords and were paid back immediately via cashiers checks. Shins banking records and LeadPoint spreadsheets show deposits equaling to more then $300k in a single month from LeadPoint and were never disclosed to LG.

Complaints were made by LG that prior to Smiths hire at LG and while still working at LeadPoint, Smith set up accounts for LPS in LeadPoints lead exchange platform to be able to sell leads. LG complains that rather then an LPS account it should have been an LG account. LG also claims that Shin and Smith were managing radio campaigns and diverting leads to LeadPoint and others while they should have been performing the same duties for LG.

According the complaint by November 2008 Shin and Diana were negotiating a deal that would give Diana a $200k or 5% stake in LPS. Shin and Smith also allegedly used LG owned radio spots for their own benefit by swapping out web addresses that were placed within the aired spots. Shin denied any involvement with LeadPoint, Diana, Smith and LPS.

Shin claims no wrong doing and states that their were no conflicts of interest.

The questions that will be answered is if this was a money swindling scheme to boost profits, acquire cheap leads and get rich quick or is this an upset employer who passed up on a money making opportunity to only be upset of the success of its employee? The timing of employment, whether or not companies are in direct competition and if monies were paid to the right company are in question. It is left for the courts to decide that and I will be following.

More to come.