ComputerLand’s Founder Gives Up Control of Firm

SAN FRANCISCO — William Millard, founder of the ComputerLand retail chain, surrendered control of the company Thursday and agreed to a public offering of its stock within two years as part of a partial settlement of a lawsuit brought by a group of investors known as Micro/Vest.

But dissension within the Micro/Vest group--including opposition to the partial settlement from Micro/Vest’s founder, John Martin-Musumechi--threatened to unravel the deal even as Millard’s daughter, Barbara, and a Micro/Vest attorney held a news conference here to announce it.

The dissidents are upset because the partial settlement permits Millard to appeal, without posting a $25-million bond, a state court’s jury verdict awarding Micro/Vest a 20% stake in ComputerLand, the world’s largest computer store franchiser.

Under the partial settlement, ComputerLand also was released from all claims against the company, including $10 million in punitive damages that the jury had levied against the company.

In exchange for that, the Millards had to post a 35% stake in ComputerLand with a court-appointed trustee for the duration of the appeal. The Millards, who in October relinquished management roles at ComputerLand, also gave up the voting rights to their stock along with forfeiting their board seats and agreeing to take the company public.

A member of Micro/Vest’s 12-person advisory board called the settlement “despicable and appalling” and charged that it had been “railroaded through” by Micro/Vest lawyer Herbert Hafif of Claremont. Hafif, in arguing for the settlement, cited Millard’s threat to put his private holding company into bankruptcy proceedings, according to this source.

The dissidents said that they are trying to convince their fellow investors in Micro/Vest to withhold approval of the partial settlement and that they may challenge it in court.

Other Micro/Vest board members said they supported the deal because it removes Millard and his daughter from the board of ComputerLand and might allow the company to restore its frayed relationship with its franchisees.

“Our paramount interest was in maintaining ComputerLand as a healthy company,” said Daniel Searby, a Micro/Vest board member and venture capitalist. “Eventually, we are going to end up with a percentage in that company. When we get that percentage, we want it to be worth something.”

He acknowledged, however, that “we could end up with nothing” in the event that Millard prevails fully on appeal. Legal experts believe that Millard will succeed in reducing the $115 million in punitive damages levied against him but will have trouble overturning the stock award.

The Micro/Vest litigation stems from a $250,000 loan to a Millard family holding company in 1976 from a Boston venture capitalist. The loan, which was convertible into a 20% stake in ComputerLand and other Millard enterprises, was purchased by Martin-Musumechi, a disgruntled former employee of ComputerLand.

Martin-Musumechi financed the litigation by selling off interests in his claim against ComputerLand. Millard is appealing Micro/Vest’s award on the grounds that the conversion right could not be legally transferred from the venture capitalist to Micro/Vest.