N-able Technologies Inc. has filed suit against MSP on Demand and its founder, Ramsey Dellinger. The suit alleges financial fraud within one of the managed services industry's best-known hardware as a service (HaaS) players. Here are the preliminary details, which allegedly involve altered invoices and unpaid bills, and perhaps even embezzlement within the halls of MSP on Demand.
According to the Pacer (Public Access to Court Electronic Records) web site, N-able Technologies Inc. filed suit against MSP on Demand and Ramsey Dellinger in North Carolina Western District Court. MSPmentor obtained a copy of the filing, dated May 17 2010, from the Pacer system.
According to documents and exhibits within the filing:
- N-able alleges MSP on Demand committed fraud, deceptive trade practices, and breach of contract, among other items. N-able alleges that it has suffered damages in excess of $325,000.
- The State of North Carolina in March 2010 informed MSP On Demand that the company was not in compliance with the North Carolina Limited Liability Company Act and MSP On Demand was delinquent in filing two annual reports.
- Dellinger, together with his spouse Dawn Dellinger, filed bankruptcy twice in a period of 13 months (in 2008 and 2009). In both bankruptcy cases, the Dellingers listed “MSP On Demand, LLC” as a fictitious name that they use to conduct business, N-able alleges.
The suit arrives as MSP on Demand apparently is being acquired by XnE Inc. MSPmentor reached out to MSP on Demand's Ramsey Dellinger and XnE Chairman and CEO Michael Cummings for comment about the suit. (XnE was not named in the suit.) Neither Dellinger nor Cummings replied to the request for comment by the time this blog was initially posted.
Who Owns MSP on Demand?XnE's agreement to acquire 60 percent ownership in MSP On Demand, dated February 10, 2010, included the following statement:
"SELLER represents that to the best of SELLER’s knowledge, that neither the SELLER nor MSP on Demand, LLC are currently the subject of any lawsuit threatened or filed."Fast forward to the present, and I wonder if the N-able lawsuit against MSP on Demand kills XnE's agreement to acquire MSP on Demand. I'll let you know what Dellinger and Cummings have to say, if I hear from them.
In the meantime, here are details about N-able's filing against MSP on Demand, according to court documents obtained by MSPmentor from the Pacer online legal system.
Questions About MSP On Demand's HaaS DealingsTo understand N-able's lawsuit against MSP on Demand, you need to have a feel for how software providers, financial firms and MSPs work together in the managed services ecosystem.
Within the filing, N-able offers the following overview plus a glimpse at the alleged fraud by MSP on Demand. The filing stated:
"Many of the partners who purchase N-able’s hardware/software and online resources would finance their purchases with the help of a reseller/broker like MSP on Demand through any number of financial leasing companies such as Direct Capital or Great America.
When MSP on Demand acted as a reseller/broker, N-able would invoice MSP on Demand for sales made and MSP on Demand would, in turn, invoice the financial leasing company for amounts owed. Unknown to N-able at the time, MSP on Demand in some cases would submit altered invoices under the N-able name to the financing leasing companies. Proceeds from the sale were then funded by the leasing financial companies directly to MSP on Demand on N-able’s behalf, who would then subtract their commission owed and immediately forward the remaining amounts due onto N-able."
Uncovering Fraud: But Who's Responsible?The legal case includes several exhibits, such as emails between N-able and MSP on Demand's Ramsey Dellinger. In a February 24, 2010 email from Dellinger to N-able VP of Sales Mike Cullen and VP and CFO John Blaine, Dellinger allegedly wrote:
"After reviewing deals and our accounts it has come to my attention that I have had a person in our accounting that has embezzled money now for some time (so far over a year or more). Everything began to come to a halt once I signed the agreement with XNE back in December'09...."In the email, Dellinger said the person who allegedly committed the fraud "is being arrested." But N-able alleges that questionable MSP on Demand dealings continued after the February 24 email from Dellinger.
On March 31, N-able requested that MSP on Demand reimburse it for amounts totaling $298,900.00 on a payment schedule from April to June 2010. In the filing, N-able says MSP On Demand has not made any of those payments.
MSP on Demand's DealingsMeanwhile, numerous MSPs and solutions providers apparently have been working with MSP on Demand.
Within the suit, N-able alleges that "Many of the accounts for which monies are due from MSP on Demand were paid by the leasing companies to MSP on Demand in June, November and December of last year, including funds on behalf of the following purchasers:
- Tomorrow’s Technology Today (funded June 15, 2009);
- Access P.C. Consulting (funded November 20, 2009);
- All Business Systems (funded November 16, 2009);
- ThrottleNet (funded December 7, 2009);
- Brazen Technologies (funded November 11, 2009);
- Plan B Networks (funded November 23,2009).
- Intrinium, Inc. (funded January 11, 2010);
- Managed IT Systems (billed February 15, 2010);
- Hudec’s Computer Consultants (funded Febr 2, 2010);
- Troy Tech a/k/a Cribbs (funded February 25, 2010) and
- Workplace Technology Center, Inc. (funded February 23, 2010)"
To reiterate, I've reached out to MSP on Demand's Ramsey Dellinger and XnE Chairman and CEO Michael Cummings for comment. I'll post an update if/when I hear from them. An N-able spokeswoman declined comment about the lawsuit.
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