“I want to build a damn empire,” Barry Bellue declared matter-of-factly to Business Report in May 2006.
And build an empire he did.
He brought tech to the Capital Region long before tech had any discernible presence here, and his firm, Thinkstream, accomplished what others across the country before and since have tried and failed: It built a network that allowed criminal justice agencies to instantly access information from one another’s databases—arrest warrants, criminal histories, mugshots, fingerprints, aliases and more—from laptops and mobile devices.
The company’s apps are now at work in nearly every law enforcement agency in Louisiana. The ATF, the FBI, the Drug Enforcement Administration, the U.S. Marshal, the Coast Guard—they all use Thinkstream. So do banks checking IDs. It’s now in six states.
Investors—many of Baton Rouge’s most affluent professionals are among the nearly 500 shareholders—have backed Bellue’s vision with more than $40 million in the past decade. For just as long, prominent Louisiana law enforcement officials have been its best evangelists, singing the praises of Thinkstream at pitches and in news releases—and in some cases, investing in the company, too.
But signs are showing that Bellue’s empire may be in serious trouble.
Creditors have dragged Thinkstream into bankruptcy court not once, but twice in two years. Their filings paint a disturbing picture: millions in outstanding debt, missed payrolls, delinquent taxes, generous salaries for Bellue and his family, and allegations of mismanagement.
On Tuesday, U.S. Bankruptcy Judge Douglas Dodd ordered the appointment of an interim trustee to oversee Thinkstream. His order, which came after creditors filed an emergency motion seeking a trustee to manage the company’s affairs, also bars Thinkstream from transferring any of its property or paying officers, directors or managers without court approval.
Adding to concerns: The U.S. Department of Labor cracked down on top executives for neglecting to invest more than $126,000 in employee contributions into their 401(k)s. Thinkstream was fined $25,326, and Bellue was required to attend fiduciary responsibility training and permanently barred from managing any other employee benefit plan.
Then there was the March 20 resignation letter of the chairman of the board of directors, Freeport LNG Development LP CEO Michael Smith. In it, the Houston energy executive tells Bellue he was “shocked … to find out how seriously I have been misled and had information hidden from me,” and that he doesn’t want anyone to “believe that I am still associated with the leadership of the company.”
He isn’t the only top executive to go. Chief Financial Officer Morris Alexander is no longer with Thinkstream, and Paul San Soucie, vice president for customer relations, is said to be “on sabbatical for personal reasons” and “available as needed during this time,” according to Thinkstream spokeswoman Kim Bergeron.
Even Thinkstream’s own bankruptcy attorney, Edward Gonzales III, is trying to make an exit. He filed a motion June 29 to withdraw from the case, contending he and Thinkstream are “in fundamental disagreement over matters that are related to this case,” which “has among other things complicated efforts to respond to discovery requests.”
So how is it that a company that once prevailed on multimillion-dollar government contracts and remains widely viewed as a champion among rank-and-file law enforcement is suddenly struggling with debt and allegations of keeping its shareholders and its own executives in the dark?
Court filings by creditors imply the buck stops with Bellue. Particularly if, as they allege, Thinkstream’s board of directors has not had much of a hand in guiding the company.
Bellue is both circumspect and bellicose: He knows he has made mistakes, but he is prepared to fight against what he perceives to be a hostile takeover.
“I’ve given my whole life to this,” he says. “I hope we end up being a successful story and not a tragic story.”
MEET BARRY BELLUE
Barry Bellue grew up in a north Baton Rouge working class family. His brother, Wirt, was a police officer and now runs an eatery on Scenic Highway, but Barry always felt a strong affinity for business.
After college, Bellue started working in public accounting, dabbling in technology on the side. He left that life behind, though, when a religious calling took him to Kentucky. He earned a master of divinity degree from Southern Seminary in Louisville and pastored a church in nearby Frankfort, according to media accounts. A year into his doctorate studies, he realized being a pastor just wasn’t his thing.
In 1986, Bellue and his partners—accountant Tommy Frazer and Drs. Charles Afeman and Kirk Patrick—bought a company initially founded by three software engineers called Fifth Generation.
Bellue became the face of Fifth Generation, which developed several high-profile software products in its time, including FastBack, which formatted floppy disks and backed up files on PCs and Macs; the hardware compression software known as DiskDoubler; Suitcase, a popular font management utility for Macs; and Search&Destroy, a virus scanner for DOS and Windows.
The self-described Scotch-Irishman known for being rough around the edges was somewhat of an anomaly among tech executives. A column written by PC Magazine Editor Jake Kirchner in October 1995 waxed poetic about the days of blood-rivalries in the software business, recalling that “Fifth Generation’s lectern-thumping Barry Bellue would publicly spew out epithets about his competitors.”
Former Fifth Generation employees contacted for this story—including Pete Stewart of cybersecurity firm Trace Security—declined to be interviewed.
By 1989, Bellue told The Advocate, Fifth Generation boasted $39 million in sales. By 1993, buyers came calling. In September of that year, Symantec Corp. of Cupertino, California, acquired the Baton Rouge firm in a stock-swap deal valued at $53.8 million. Now a Fortune 500 firm, Symantec produces security, storage and backup software and is best known for its Norton anti-virus software.
Bellue landed a job as vice president of operations at Symantec and spent two years in California, reporting for a time to then-President and CEO Gordon Eubanks Jr. In 2006, Bellue told Business Report that after selling their Symantec stock, Fifth Generation investors came out of the deal with about $100 million in liquid assets, not counting the money they made previously with Fifth Generation.
It was that initial professional and financial success that would give Bellue tremendous credibility with investors and potential clients when, in 1997, he started Thinkstream.
With his financial success from the sale of Fifth Generation, Bellue could have retired from professional life. He didn’t.
Instead, he brought together six of his best engineers based in Portland to answer a straightforward question. “I had a simple idea: With the explosion of information and the Internet becoming a reality, how would we organize and structure the world of information? It would definitely take a new technology.”
Initially, the concept had nothing to do with law enforcement specifically or even government. Thinkstream was one of 48 companies brought in to partner with Microsoft on new enterprise products for the private sector. He also collaborated with Sun Micro to build the first distributive supply chain application. The companies were ready to go to market—the news releases had been written and a tour scheduled in mid-August 2001.
Then 9/11 happened. Everyone was talking about a whole new sector: interconnectivity for law enforcement.
Thinkstream took on the challenge. It found success in creating a program that allowed agencies across geographic lines to connect with their counterparts while maintaining their existing database systems—regardless of how obsolete they might be.
East Baton Rouge Parish was the beta testing ground for Thinkstream’s technology. Seven agencies in the parish—including the District Attorney’s Office, the Sheriff’s Office and city police agencies including Baker and Zachary—were connected via the software. From there, the app spread across the state and is now used in more than 300 state and local agencies in Louisiana.
Bellue’s end game has always been to replicate the Louisiana model in other states. So he took on projects in San Mateo, California and Pinellas County, Florida.
“I thought we’d have the same viral effect in other states that we had in Louisiana, because once people started to connect to it and saw the value of having access to your neighbor’s records and state records and federal records all together, you couldn’t keep up with the requests and the demand for connectivity,” Bellue says. “My big vision was … I’m thinking this is going to go viral.”
But it didn’t quite turn out as he’d hoped.
In 2004, for example, Thinkstream was awarded a contract to implement its system statewide for the Integrated Criminal Justice Information System. But when a competitor complained about the process, the decision was overturned. He sued then-Louisiana Supreme Court Justice Catherine “Kitty” Kimball and McGlinchey Stafford law firm, alleging both engaged in a smear campaign that damaged his business. He lost the cases.
That same year, the Justice Department investigated former U.S. Sen. Ben Nighthorse Campbell, R-Colo., after Thinkstream was awarded a no-bid, $1.5 million federal contract to provide services to an anti-drug task force in that state. Thinkstream employees and lobbyists were top contributors to Campbell, who blamed his top aide for the federal probe.
In April of this year, the Florida Department of Law Enforcement ended exclusive negotiations with Thinkstream after a competing company pointed out that the taxpayer-funded work went to a business that failed to report the involuntary bankruptcy motion filed against it in 2014.
According to a report in the Naples Daily News, Computer Projects of Illinois alleged Thinkstream was in violation of a state requirement that a company bidding on a state contract be a “responsible vendor,” defined in state law as one that “has the capability … to fully perform the contract requirements and the integrity and reliability that will assure good faith performance.”
The first public signs that Thinkstream might be experiencing financial troubles emerged in January 2003. For two years, according to the U.S. Department of Labor, Bellue and Thinkstream withheld 401(k) contributions from the company’s employees but failed to invest the money in the plan in a timely fashion. The feds took note—and took Thinkstream to federal court, seeking repayment and fines.
In June 2005, as Thinkstream’s previous attorney, John Seago, outlines in court filings, Bellue was approached by Walter Morales of Commonwealth Advisors Inc. about a $4 million equity investment in Thinkstream. In exchange for the investment, Thinkstream issued debentures, which it now argues were used to inflate the value of Commonwealth’s hedge funds that are now the subject of a Securities and Exchange Commission complaint in Baton Rouge federal court.
According to a statement of uncontested material facts in Thinkstream’s current bankruptcy case, Commonwealth Advisors in December 2007 transferred the debentures to TSB Ventures, a Folsom private equity capital investment firm run by mergers and acquisitions attorney Jose Canseco and Louis Freeman Jr., a former tech entrepreneur and equity fund manager based in Hong Kong.
Although Bellue alleges in court papers that he expressed concern about the transfer, he went on to secure a $2.5 million loan from TSB Ventures that same month. Two years later, TSB Ventures and Thinkstream upped the loan to more than $2.6 million.
When Thinkstream was unable to make payments on the loan and the debentures that year, it signed off on a forbearance agreement in January 2010, reaffirming the debentures and loan, issuing to TSB Ventures another promissory note for $331,213 and agreeing to a new payment schedule.
Another series of missed payments and another forbearance agreement would follow. But when Thinkstream defaulted a third time, the investment firm took the tech firm to court to enforce the debentures and notes, as well as its security interest in Thinkstream’s property. It was in that case that TSB Ventures discovered it wasn’t alone as a creditor—a group of Texas investors also owed money allegedly had not been disclosed by Thinkstream, according to court filings.
The investment firm’s next stop was federal bankruptcy court, where it filed the first of two involuntary Chapter 11 petitions.
By October 2014, though, all parties had agreed to a speedy settlement and dismissal. The reason: Thinkstream was said to be in the running for a $17 million contract with the state of Florida to replace its computerized criminal history database.
The tech company convinced its creditors that if it obtained the Florida contract, it would be in an “enviable and preferred position” to secure similar contracts in 23 other states.
“The continuation of the bankruptcy case, whether in its present involuntary state or as a voluntary case, will be a death knell for Thinkstream’s efforts to obtain the Florida contract,” Thinkstream attorney William Patrick III and TSB attorney Brandon Brown wrote in a joint motion for dismissal. “Thinkstream has no illusion that Florida, or any state, will enter a multimillion [dollar] contract with a vendor to provide multiyear computer software and critical consulting and training support if Thinkstream is a debtor in a bankruptcy case.”
Eager to put the bankruptcy behind him as quickly as possible, Bellue signed consent judgments with the Texas creditors and TSB Ventures, acknowledging its debts and agreeing not to contest them down the road. But he continues to insist that the debentures belong to the original 112 people who loaned him the money, and not TSB Ventures. “It’s not a question of whether I have an obligation,” he says. “It’s a question of who owns that obligation.”
After the incident that ended the state’s exclusive negotiations with Thinkstream, Florida is now starting the process over. Bellue, who is confident that Thinkstream’s technology will be part of the project, says he is now contemplating a different approach, possibly partnering with a larger firm like Unisys or SAIC.
“The one thing about an entrepreneur is that he dreams bigger than he probably should,” Bellue says. “I probably should have gotten a big brother. Looking back, I’d have won it, and these stories, I don’t guess, would be written right now. But I really had a plan. That one contract would have given my company an enormous boost in overall valuation. We were going to go out and do either a public offering, or go out and raise $25 million in capital, wipe the slate clean, clean up our balance sheet, have zero debt. That was the mission, dream and what we were working on. When we got all seven votes [from Florida’s selection committee], we felt like we had died and gone to heaven. And then all the sudden it got snatched away from us.”
Snatched away, indeed. One month after it was clear the Florida windfall was not going to materialize, TSB Ventures took Thinkstream back to bankruptcy court. But this time, the case has taken on greater urgency: An emergency motion asks U.S. Bankruptcy Judge Douglas Dodd to appoint an interim Chapter 11 trustee to manage the company’s affairs, insisting creditors fear Thinkstream “has or is at risk of missing ongoing and past payrolls and is behind on payroll tax payments.”
Noting the loss of at least one key executive, the motion also claims that the company is trying to sell off its assets—including the “actual product or software itself.”
“It is critically important to the possibility of a successful reorganization that key employees of Thinkstream be retained,” attorney Ryan Richmond writes in the motion, “and … that Thinkstream’s assets not be sold at fire sale prices without court overview and creditor involvement.”
Canseco of TSB Ventures declined to comment for this story, citing the pending litigation.
Bellue acknowledges Thinkstream’s finances are strapped. “I have been able to meet payroll for the most part,” Bellue says. “Our cash flow is obviously challenged right now. But I have a good bank that’s working with me.”
He says he was not aware that taxes were not being paid or he would have addressed it immediately. “Our main thing right now is to get reorganized and get structured and doing everything we can to stay out of this bankruptcy thing. We don’t feel like we deserve to go there. We don’t want to have that stigma on us.”
In an April letter submitted to Thinkstream’s liability insurer, Great American Insurance Companies, a group of shareholders in Texas known as Grossman Group makes some stinging allegations against Bellue.
Noting the debt that Thinkstream has incurred and the possibility that Bellue managed the company without requesting authority from and without supervision of the board of directors, they allege that “in so managing [he] has violated federal and state securities laws.”
Thinkstream’s financial statements to creditors, equity security owners and other parties, the letter alleges, also fail to report known judgments and claims in various jurisdictions or unpaid payroll taxes as required by law—an allegation Bellue says is not true.
The letter, signed by Cary Grossman, also alleges Bellue has paid himself and family members more than $820,000 a year “while the company has been insolvent.” Bellue’s son, Barry Bellue Jr., is vice president of operations; his daughter, Kim Bergeron, is vice president of marketing.
“The salaries of Mr. Bellue and his family members are not in keeping with the customary salaries for similarly situated officers and employees of similarly situated companies,” Grossman writes.
“The employment of himself and family members at excessive salary levels has caused enormous strain on cash flow and the ability of Thinkstream to pay its obligations. … For years, Thinkstream has operated at a loss necessitating further cash infusions.”
This group of creditors—which has a court judgment in its favor for $531,762—notes that Bellue has incurred “significant new debt,” including a $6.9 million loan from First National Bank of Commerce in New Orleans. The Thinkstream executive “reimbursed himself without board approval or input, while ignoring debt obligations to other creditors with UCC liens and positions greater than himself.”
Grossman also notes that at the time the letter was drafted, Bellue was “actively soliciting additional debt and/or equity investments without making adequate financial disclosures in contravention of state and federal laws.”
At press time, a hearing in Baton Rouge federal bankruptcy court was scheduled for July 6.
Thinkstream’s future will be determined in the coming months, played out in a Baton Rouge federal bankruptcy courtroom. Although all declined to comment publicly, creditors say privately their hope is to preserve Thinkstream and its software, which is widely viewed as the best in its market. But the company, they privately confide, must have new leadership.
Bellue acknowledges that selling the company and its software is a possible outcome. “I’m doing everything I can to fight to have a future for my company,” he says. “We’ve got great technology. The worst would be that we would sell the company and the technology.”
In the meantime, he and his team are exploring ways to avoid the issues associated with government contracts and transfer the technology to the private sector. “We’re looking at some other areas,” Bellue says, “that are nonpolitical.”
Lost in all the investor intrigue and courtroom battles are those who will be most affected by any disruption in Thinkstream: the police departments and federal agencies that use the company’s apps—day in and day out—to patrol their communities.
All 64 sheriffs’ offices in Louisiana, for example, utilize Thinkstream. Mike Renatza, who has been a longtime advocate for Thinkstream and is now the executive director of the Louisiana Sheriff’s Association, did not return an email request for an interview, nor did East Baton Rouge Parish Sheriff’s Office spokeswoman Casey Rayborn Hicks or the FBI’s Washington, D.C. media office.
Louisiana Association of Chiefs of Police President Scott Ford, whose own department in St. Francisville has used the company’s software for years, says officers across Louisiana will feel the effects of any change.
“I hate to hear that they’re having trouble,” he says. “If anything happens to Thinkstream, it would toughen the jobs of a lot of municipalities. This will really hamper their day-to-day activities. That’s the story of our lives in Louisiana. You get something that works really, really well for you, and something else ends up taking it down.”