Atempo buys Lighthouse Global
Greenwich-based Lighthouse Global Technologies Inc., whose launch followed a rocky, ongoing court battle between its founder and his former employer, has been acquired by Atempo Inc., which sells computer-file archive systems.
The companies did not disclose financial terms. Atempo”™s CEO told online publication Byte and Switch the deal was worth less than $10 million. Atempo raised $22 million in funding last September from California-based Intel Capital, Steelpoint Capital Partners of New York City, and Ridgewood Capital of Ridgewood, N.J.
Lighthouse Global sells e-mail archiving systems to help corporations comply with the audit provisions of the Sarbanes-Oxley Act of 2002 and other regulations.
The company was founded by Arthur Riel, who created such a system at Morgan Stanley & Co. Inc. after the U.S. Securities and Exchange Commission fined the investment bank $15 million for using an unreliable system of backup tapes to store old e-mails.
A graduate of Northeastern University in Boston, before joining Morgan Stanley in 2000 Riel worked for Greenwich Capital Markets, which today is owned by Royal Bank of Scotland, Goldman Sachs and Merrill Lynch.
At Morgan Stanley, Riel developed systems to combat money laundering and conduct surveillance on brokers. It was Riel himself, however, who says he found himself under surveillance after he tested an e-mail archive system he created using software from Madrid vendor Galeon Software S.L., which has its main U.S. office in Stamford.
In his lawsuits, Riel stated that after randomly selecting e-mail accounts of two executives to test the system”™s search functionality, he found what he characterized as evidence that one of the executives had solicited sports tickets and other gifts from external vendors, in violation of Morgan Stanley policy.
Riel also said he warned superiors that Morgan Stanley was flouting an SEC directive by “writing over” tapes holding old e-mails, effectively erasing them.
Riel claims that Morgan Stanley placed him on a sham administrative leave after the company discovered old e-mail storage tapes relating to a separate legal proceeding in Florida, on fears any deposition of Riel might reveal the company”™s e-mail archive practices and alleged handling of court requests.
Riel said that after his supervisor Shelley Leibowitz took a leave of absence from her role as chief information officer at Morgan Stanley, the company declined to allow her to return to the company. Leibowitz became chairman of Lighthouse Global”™s advisory board; like Riel, she previously worked at Greenwich Capital Markets, where she was CIO.
Morgan Stanley fired Riel in September 2005; in January 2006 Riel filed a $1 million wrongful termination suit in the U.S. District Court for the Southern District of New York, stating he was made a scapegoat. After Morgan Stanley successfully argued for a dismissal, Riel filed an appeal as well as a second suit against Morgan Stanley, which is ongoing.
Riel said the Morgan Stanley lawsuits had no bearing on the Atempo sale negotiations.
All the while, Riel and several Galeon programmers built a customer base for Lighthouse Global Technologies, including the Spanish Secretary of State Department for the European Union of the Ministry of Foreign Affairs and Cooperation