MOD Systems Co-Founder Sentenced to 4 Years18 Jul, 2011 By: Chris Tribbey
Mark Phillips, co-founder and former CEO of MOD Systems, was sentenced July 15 to four years in federal prison, after being convicted in March of several counts of wire and mail fraud and money laundering.
Federal prosecutors said Phillips had money transferred from MOD to a bank account controlled by his then-girlfriend. He then used that money for luxury items, including an expensive watch and investments into another start-up company. Prosecutors also said Phillips transferred $1.5 million from MOD to his personal account in April 2008 and used that money as a down payment for a $2.3 million penthouse.
MOD Systems, which specialized in retail kiosks that can download movies and music to SD cards, shut its business down earlier in July.
“It is despicable for a CEO to violate his position of trust by looting corporate money for personal gain,” said Marcus Williams, the IRS special agent in charge of the Pacific Northwest, when Phillips was convicted. “Federal law enforcement will not sit on its hands and allow that to happen.”
Phillips’ attorney asked the court for leniency, arguing Phillips had learned his lesson.
“Mark Phillips almost single handedly created the technologies and raised the capital to finance MOD which at its pinnacle was worth $120 million with $35 million in cash, and he, as its majority shareholder, [he] was owed millions by MOD, only to be removed from the company shortly thereafter,” a letter submitted defending Phillips read. “His fall was swift and deep.”
While his attorney had asked the court for a prison term of 28 months, the government had been seeking a prison term of more than eight years.
“Phillips abused his position of trust and responsibility by looting the very company that he helped create, and by betraying the employees and shareholders by tearing apart the company that he promised to build,” a letter to the court reads. “Without regard for his responsibilities as a director and officer, in willful contempt and disregard of the oft-repeated advice of more experienced colleagues, mentors, and lawyers, and in total self-aggrandizement, Phillips stole from MOD to satisfy his personal appetite for luxuries beyond his means.”