Walt Anderson Planning Cloud Computing Service

MirCorp founder Walt Anderson is working on a cloud computing start-up as he approaches the end of a nearly 8-year prison term for tax evasion, according to a message posted on the Justice for Walt website.

I am now back in the real world. I am currently on “home detention” at my parent’s homne [sic] in Virginia. I will be completely done with this ordeal on December 29, 2012. Unil [sic] December 29, 2012 I will not be able to travel outside the Washington DC area, but I have lots of things to work on here for now.

I am going to be actively pursuing the VCaaS business which I have been planning and researching for a few years(Virtual Computer as a Service). While there are many “cloud” offerings, no company has a service which allows a user to fully customize their own desktop and then store it in the cloud for access from any device, anytime, anywhere, and to offer high level encryption to assure complete privacy. I expect to have beta product available for customer to try by March of 2013, but ther [sic] are still lots of challenges.

Anderson was a high-flying telecommunications entrepreneur whose company, MirCorp, leased the Russian space station Mir in 1999 for space tourism and other commercial purposes. The company booked Dennis Tito as its first space tourist.

After sponsoring one manned mission to Mir, the effort fell apart due to opposition from the U.S. government, which wanted the Russians to concentrate on the International Space Station, and financial difficulties at MirCorp.The company also experienced delays in exporting an electromagnetic tether for use in boosting Mir’s orbit to Russia.

The Russian government subsequently de-orbited the station into the Pacific Ocean. Tito flew to the International Space Station aboard a Soyuz vehicle. And MirCorp went out of business.

In February 2005, Anderson was arrested in what government officials called the largest individual case of tax evasion in American history. The government charged that Anderson had evaded $200 million in taxes. He plead guilty and served his sentence in a federal prison in New Jersey before being released for house arrest in July.

Anderson is set to appear on The Space Show on Friday. He will discuss his plans for the cloud computing start-up as well as for the “entrepreneurial space industry.”

It will interesting to see if his plans include the EarthLight Institute, a space non-profit founded by Rick Tumlinson earlier this year. I’ve long held the suspicion that this new group was created in anticipation of Anderson being released from prison and having money to fund it.

Tumlinson worked with Anderson on MirCorp. He also served as executive director of a now-defunct grants-giving organization called the Foundation for the International Non-Governmental Development of Space (FINDS), which was funded by Anderson.

Tumlinson has publicly mentioned FINDS as a model of how the EarthLight Institute should operate. He wants a rich benefactor (or benefactors) to set aside a large amount of money to fund the institute. During a talk at the NewSpace 2012 conference in July, he praised Anderson and looked forward to his release from prison.

FINDS, however, is a cautionary tale. Like its benefactor, the foundation flew high for several years before crashing and burning. Anderson’s business dealings were the main cause of the collapse.

FINDS gave out grants to various organizations working on space technologies, including a company building the electromagnetic tether for use in boosting Mir’s orbit. According to a cached version of the FINDS website dated Oct. 21, 2004, the foundation awarded grants over five years:

Total for 2001 – (approx.) $ 275,000.00
Total for 2000 – (approx.) $ 522,500.00
Total for 1999 – (approx.) $ 772,500.00
Total for 1998 – (approx.) $ 446,000.00
Total for 1997 – (approx.) $ 323,500.00

Includes $300,000.00 deposited for CATS [Cheap Access to Space] Prize. Amounts shown include direct grants and contracted studies. Amounts do not include operations or associated overhead.

FINDS was funded through grants of telecommunications stock from Andersons companies that were worth $25 million. The foundation would use the interest accrued on the holdings to fund its grants program.

If Anderson had set aside assets for FINDS and had managed them conservatively, the foundation might well be functioning today. However, FINDS was deeply enmeshed in Anderson’s financial dealings. One deal in particular proved to be the foundation’s downfall.

The chain of events began in 1998 when Anderson and his British Virgin Island-based company, Gold and Appel, attempted a hostile takeover of Total-Tel USA Communications Inc., a long-distance company based in New Jersey. Chairman and CEO Warren H. Feldman initially fought the takeover before agreeing to sell. A Washington Post article describes what happened [emphasis mine]:

According to SEC filings, Anderson later struck a deal for Feldman to resign as chairman, offering Feldman and his father a way to liquidate hundreds of thousands of Total-Tel shares at far more than the going price. The deal, signed on a day the stock closed at $12.25 a share, obligated Anderson or one of his companies to buy stock from the Feldmans for $16 a share. But before long, the deal was amended to involve another party: the Foundation for the International Non-Governmental Development of Space, a tax-exempt charitable foundation that Anderson created and presided over.

The revised deal shifted to the foundation responsibility for buying much of the Feldmans’ stock. In early 2000, the foundation spent more than $7.3 million making good on the deal, according to records filed with the SEC…..

The foundation became involved in other aspects of Anderson’s affairs. In 1998, it lent $1 million to Gold & Appel, and in late 1999 and early 2000, it made grants of more than $1.2 million for research on technology to keep Mir from falling back to Earth — research that could support Anderson’s plans to turn the Mir into a for-profit business — according to foundation tax returns. (Russia eventually destroyed the space station by plunging it into the Pacific Ocean.)

In March 2000, a company called U.S. Wats Inc. made arrangements to borrow up to $1 million from Gold & Appel and up to $500,000 from the foundation, SEC records show. Anderson served on the U.S. Wats board, and Gold & Appel was its majority shareholder as of several months earlier, according to an SEC filing.

In August 2000, Anderson and Gold & Appel borrowed $13 million from former colleague Donald A. Burns at an interest rate of 18 percent, according to SEC records, and the foundation put up as collateral more than 700,000 shares of Total-Tel, since renamed Covista Communications Inc. Gold & Appel agreed to pay the foundation tens of thousands of dollars for putting its assets at risk, according to an SEC filing.

Burns subsequently declared the loan in default, and in 2002, he seized the collateral.

Anderson said in an interview that the holdings he managed had declined sharply in value.

“Gold & Appel was in a very severe cash squeeze because of the market decline, and we needed cash,” Andersen testified in litigation over the Burns debt. “We needed desperately to get some cash to pay our obligations.”

FINDS’ tax filings show a precipitous decline in the foundation’s fortunes during this period. Tax records indicate that for the fiscal year that ended on June 30, 2003, the foundation’s total assets dropped from $19.8 million to $3.6 million. Fair market value of these assets was only $672,328, a steep drop from the $5 million reported at the end of the previous fiscal year.

The October 2004 cached version of the FINDS website shows no grants given out after the 2001 fiscal year. The Foundation Center has no FINDS tax returns on file for 2003-2004. Anderson was arrested in February 2005, and by April of that year the FINDS website was permanently off-line.

Tumlinson, who had been serving as FINDS’ part-time executive director, took a major financial hit as the foundation collapsed. According to the organization’s tax returns, his pay was:

July 1, 2000 – June 30, 2001: $90,000
July 1, 2001 – June 30, 2002: $83,333
July 1, 2002 – June 30, 2003: $0

During his appearance at the NewSpace conference, Tumlinson attributed FINDS’ collapse to the bursting of the dot.com bubble in 2000. He declined to discuss the role that Total-Tel played. After Anderson’s arrest in 2005, he told The Washington Post, he said he knew little about Anderson’s financial dealings.

The foundation’s former executive director, Rick N. Tumlinson, said he focused on grant-making and left other foundation matters to Anderson. “All of the financial transactions that Walt was doing on the investment side I just don’t recall much about,” Tumlinson said.

Anderson has claimed that he is broke, which would rule out any large short-term support for non-profits such as the EarthLight Institute. However, not everyone believes that claim. There are suspicions that Anderson has money socked away.

Government officials have said they found Anderson’s finances to be a labyrinth of off-shore shell companies that they never fully unraveled. Anderson was also spared the need to pay $100 to $175 million in restitution to the federal government due to a typographical error the government made in his plea agreement. The government could still sue Anderson in civil court for the money.

Anderson is unrepentant. He has spent nearly 8 years declaring himself innocent, claiming he was coerced into pleading guilty by the government, and that his stint in jail was payback for his efforts to commercialize Mir. Michael Potter’s documentary, “Orphans of Apollo,” which chronicled MirCorp’s efforts, largely endorses that view.

Not everyone buys that explanation. There are folks who knew Anderson back before he became a federal convict who are convinced he is guilty as charged. There’s also the guilty plea.

Since Anderson doesn’t believe he did anything wrong, there’s a real question as to whether he will operate much differently than before he went to jail. That should raise a caution flag for any organization in which he invests or with whom he partners.

It should be interesting to see what Anderson says about his future plans.