Technology

Allegations Fly at Registerfly


Claims of embezzlement and complaints from irate customers threaten to derail the small domain-name registrar

Registerfly.com may not be a very big company, but an extremely ugly falling out between the owners of the registrar of Web site domain names is causing a major headache for 200,000 site owners who registered their sites through it. That roster of customers includes registrants as varied as the government of Thailand, the Easter Seals charity, and pop star Michael Jackson.

The company's problems have also brought a hail of criticism down on the International Corporation for Assigned Names & Numbers, the organization that accredits domain name registrars. Customers of New Jersey-based Registerfly.com complain in online forums that ICANN waited too long to intervene in a dispute that has left the company's status—and some domain names—in flux.

A Sordid Scandal Erupts

After months of customer-service complaints and internal friction, Registerfly.com's Web site shut down abruptly on Mar. 6. It was back online late on Mar. 7. A hearing that could resolve the matter was scheduled for Mar. 8 at U.S. District Court in Newark.

Before the court are claims and counterclaims by two men who have been running the company since 2000. In a suit filed Feb. 12, current Chief Executive John Naruszewicz alleges that the former chief executive, Kevin Medina, has been stealing money from the company since the middle of last year to pay for two Cadillac Escalades, a penthouse apartment in Miami's South Beach, an escort service, and liposuction. Medina's response, filed Mar. 7, accuses Naruszewicz of using fraud to take control of the company. Naruszewicz and another director of the company fired Medina on Feb. 12.

Naruszewicz, reached by phone, says Medina used his company checking account and charge card to pay for loads of private expenses. Also, he says, Medina was taking customers' money in online transactions and then failing to register the domain names they had paid for. "He was committing so many crimes and stealing every penny from the company's bank account," Naruszewicz says. He says the company is almost out of money, but he's trying to raise $500,000 from his own real estate holdings to keep it going.

Longstanding Customer Complaints

Medina could not be reached for comment. His attorney, Eugenie Temmler, of the Upper Montclair (N.J.) firm of Rabner, Allcorn, Baumgart & Ben-Asher, calls the case "unfortunate" but wouldn't comment on the particulars. In documents she filed with the court, she claims that Naruszewicz is not a shareholder in the company and had no right to fire Medina and take control. Asked about that, Naruszewicz says he started the company and owns 50%—and has the stock certificates to prove it.

ICANN first became aware of problems at Registerfly.com a year ago, when customers began complaining about poor service. But it wasn't until Feb. 21 that ICANN filed notice with Registerfly.com that it would remove accreditation if it didn't straighten out accounts. The company has until Mar. 14 to comply. Paul Levins, ICANN's vice-president for corporate affairs, says the organization has no authority to regulate a registrar's customer-service performance, but could act only when it learned three months ago that accounts were being deleted. "If they continue to behave this way, and don't cure the breaches, we'll take the accreditation away," he says.

Customers have been flooding online forums with complaints about Registerfly.com and ICANN. The comments are especially irate on a site called Registerflies.com, which was set up last year by a former customer to call attention to the company's failings. "The losses are in the millions and ICANN sat knowing and watching. It's crazy," says Justin Kulhawick, who runs the site. "It's like losing businessweek.com—while ICANN sits and watches."

ICANN convinced four companies that have overall control of the majority of domain names not to let Registerfly.com's customers' domain names expire. If that happened, other individuals or companies could claim the names. Already, about 75,000 Registerfly.com customers have lost access to their own Web sites.

Hamm is a senior writer for BusinessWeek in New York and author of the Globespotting blog.

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