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loss of more than $17 million in 1999, a reverse stock split, and the resignation of PricewaterhouseCoopers as the company's auditor. The most intriguing bit was buried in a footnote to the financial statements. It showed that the Series A Junior shares had been sold three times, in March, April, and October of 1996, at prices “ranging from 0.8 cents to 7.5 cents”—a spread of more than 800 percent. John Coffee, one of the most widely cited securities-law experts and a professor at Columbia University Law School, said such sales are legal as long as they are disclosed. “Antifraud rules might be violated if you fail to provide material information,” Coffee said. “It may be material to investors buying at $5 that it was available to another investor at $2 a week ago.”

ValiCert's Series A sales occurred before Amram joined the company. But he was the one who took the heat for them from angry investors. ValiCert angel investor and entrepreneur Gary Kremen confronted Amram, even threatening to sue over the variable pricing, but Amram told him he'd regret it: “Maybe you're right. Maybe I'm right. But if you sue, none of the venture capitalists in the Valley you want to talk to will ever do business with you again.” Kremen backed off.

Even with full disclosure, selling the same class of shares at different prices, as ValiCert and Fanning did, is outside of the norm. Steve Humphreys, a CEO at three companies, an associate of Amram's, and an angel investor in Interwoven and other firms, said he steered away from that sort of hustle. “I wouldn't do it that way. But that's why I wasn't enough of a hypester for the environment,” said Humphreys, who now heads the firm ActivCard SA. “It's weird, and it's not the right way to do it.” Humphreys wasn't involved at Napster, but he said the company's payments for stock transfers, salary for John Fanning, and other questionable practices weren't atypical for start-ups in their earliest stages. “Traditionally, it happens in the first two or three years of a company's life, and it gets cleaned up in the next four years, before you go public.”

During the bubble, that kind of evolution was so telescoped that the cleanup phase often disappeared.

FANNING AND RICHARDSON ARGUED often during his visits and board meetings in which he participated by phone. After Richardson stopped

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