How to Lose a Ton of Money in the Market

The master of the high dive is-without a doubt-George Shaheen. In the summer of 1999, Shaheen had the sort of high-octane job that merits a stippled portrait in The Wall Street Journal; he was the chief executive officer of Andersen Consulting (now called Accenture), the largest, most prestigious information technology consulting firm in the world. At 55, Shaheen was a 30-year veteran earning $4 million a year with 65,000 people working for him. Shaheen's 10-year run at the top was an immensely successful period when the company grew from $1.1 billion to $8 billion in revenues. Andersen Consulting was in the midst of getting its legal separation from the accounting firm Arthur Andersen, which was widely expected to be followed by an IPO that would be highly lucrative for the partners. All he really had to do was sit tight for a couple of years and wait for his gilded parachute to open.

Then some wired-in Silicon Valley venture capitalists with more money than God came calling to pitch a new concept in online grocery retailing called Webvan. With the right business model, blue-chip backers, and a strong management team, Webvan had it all. Except for one thing: a starquality CEO to succeed its aging founder and visionary, Louis Borders. At first Shaheen wasn't interested. But in the end, it was an offer he could not pass up. Shaheen left behind not only his $4 million salary, but also the estimated $50 million he would have received when Andersen Consulting went public (as Accenture in September 2001).

On September 21, 1999, virtually on the eve of its initial public offering, Webvan announced Shaheen was joining the company as CEO with a compensation package that included options to buy 15 million shares of stock at $8 per share. Webvan thus had all the earmarks of a winner-tons of business press, Internet buzz, impeccable timing, and an Old Economy CEO who lent the whole thing gravitas. After the IPO was priced at $15 and closed the first day at $24.88, Shaheen's options were worth $253 million. If the stock price reached $75 a share, he would be a billionaire on paper.

Alas, paper profits are aptly named, and Internet grocery stores turn out to have margins even lower than regular grocery stores. Webvan floundered as it rapidly expanded into one unprofitable market after another. On April 13, 2001, 18 months after taking the job, with the stock trading at less than a dollar, Shaheen resigned. As part of his retirement package, Shaheen was to receive $375,000 per year for the rest of his life. On July 9, 2001, Webvan-which raised and burned through the staggering sum of $800 million in two years and never made a nickel-filed for Chapter 11 bankruptcy protection. Shaheen may not even get his retirement pay. He is now one of the largest unsecured creditors of Webvan.