Dot-com survivor eUniverse facing scrutiny from regulators, associates. (Up Front).

While still in his 20s, Brad Greenspan managed to assemble a curious collection of Internet assets and turn it into a thriving publicly held company with big-name investors like Lehman Brothers and Sony Corp.

In surviving the dot-coin bust, Greenspan also played up the profitability and "explosive" revenue growth at L.A.-based eUniverse Inc.

Now, the veracity of those reported figures is in question - as well as the business practices of Greenspan.

EUniverse stock hasn't traded since May 5, when it closed at $3.62 a share. On that day, the company replaced its auditors, Merdinger Fruchter Rosen & Co., and a day later announced it would restate $39 million in previously reported revenues. EUniverse also said its controller, Michael Carrigan, had left the company in April. Three weeks later came word that results for the year ended March 31 would be delayed until the accounting issues could be resolved.

"Its earnings were very good and growing. At least that's what they reported. Now it looks like they gave out erroneous information. That's truly disappointing," said O. Thomas Barry, chief investment officer of L.A. money manager Bjurman, Barry & Associates, which owns a 1.7 percent stake in eUnivese.

Reached last week, Greenspan, now 30, at first promised to speak to the Business Journal. But later Lisa Doiron, a spokeswoman for the company, sent an e-mail asking that a story be postponed.

"It looks as though eUniverse might be able to announce the findings from the accounting procedures investigation next week," Doiron wrote. "As you know, Brad can not comment on the situation (for legal reasons) until the investigation is complete."

Sony, which now owns 13.4 percent of the company and holds a seat on the board, declined comment.

E-commerce roll-ups

But some investors and business associates have been speaking up, mostly in litigation.

Jody Henderson, a Lexington, Ky. animator, said he sold his online greetings card site, Funnygreetings.com, to eUniverse in 2000 for a package that included a salary, options and $2 million to be paid over two years.

But Henderson said he only received $86,000 by July 2001, when eUniverse demanded that he renegotiate the deal -- cutting the price to $1.2 million -- in order for the company to obtain a $5 million investment from Sony.

Henderson claims eUniverse only paid him another $212,000 -- enough to cover the back taxes Henderson had from the deal. He also says eUniverse then began promoting its other greeting-card sites on his site, and offended customers with e-mailed pitches for breast enlargement and Viagra.

The two sides are dueling in federal district court in Kentucky over the contract, and eUniverse sued Henderson last October in Los Angeles Superior Court, demanding that the court declare the renegotiated deal "a valid, binding contract." Henderson countersued in May, after eUniverse failed to sign a settlement he'd thought the two sides had reached -- citing its troubles with its Nasdaq stock listing.

"They're just a bunch of lying thieves," said Henderson.

Neither eUniverse's in-house counsel nor its outside attorney returned calls.

In its amended complaint in L.A. Superior Court, eUniverse said Henderson filed suit in order to claim sales not covered in the contract.

'Intelligent and smart'

An early investor was Joseph Abrams, a consultant who first met Greenspan through another deal. A year later, the two met again, both as investors in a publication called Wine Business Monthly. Greenspan then pitched Abrams on his plans to build eUniverse and Abrams helped him on some of the early deals.

"It was more interesting than just raising a bunch of money for ideas," said Abrams. "We could get real businesses and real money. And Brad was intelligent and smart."

Eschewing startups and venture capitalists, Greenspan rolled up a series of profitable or near-profitable e-commerce firms, greeting-card sites and video-game portals.

With the help of private investors, including Lehman Brothers and New York investment bank Gerard Klauer Mattison, the acquisitions included gaming company Cases Ladder and retailer CD Universe. Greenspan then took the company public by merging into a shell company called Motorcycle Centers of America.

"He was buying the companies, keeping the managers and developing synergies between them. He wasn't going to fire anyone," Abrams said.

Nor was he about to turn down stock promoters, even those with a questionable past.

In April 2002, the Securities and Exchange Commission went to federal court in Los Angeles seeking to order stock promoter Rafi Khan's wife to testify about alleged manipulation of the share prices of eUniverse and three other public companies.

Greenspan admitted he knew of Khan' s reputation, but defended his hiring. "If he was so controversial, why did he have relationships with so many institutional investors?" he told the Business Journal at the time.

As of last week, Nasdaq trading in eUniverse was still halted as it awaited "additional information" on the company's financial status. The company has said the SEC has launched an "informal" probe, and SEC spokesman John Britt declined to comment further.

Some investors have filed suits against the company -- eUniverse now faces a rack of shareholder lawsuits filed by plaintiffs' attorneys such as L.A.-based Glancy & Binkow. But most are sitting on their hands, unable to trade their shares and waiting to see what the outcome will be.

"I've got two money managers on the other line discussing what's happening with eUniverse," said John Lewis, chief investment officer of Chadds Ford, Pa. money manager Gardner Lewis Asset Management, which holds a 4 percent stake. The firm's micro-cap fund had just added another 10,400 eUniverse shares three months ago.

"It's an awkward position," Lewis said.

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