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New Sonicblue CEO defends loans

The consumer-electronics maker's newly appointed chief, L. Gregory Ballard, says that loans made to executives and board members were straightforward.

Loans made to Sonicblue executives and board members were aboveboard, the company's newly appointed CEO said Friday.

"There is nothing about these loans that is hidden or is illegal," interim CEO L. Gregory Ballard said on a conference call with analysts, reporters and investors.

The consumer-electronics maker announced late Thursday that it had fired CEO and Chairman Ken Potashner and replaced him with Ballard, the company's top marketing executive. The termination was effective immediately.

Ballard also categorically denied that the dismissal was related to the loans.

"His termination was not the consequence of certain allegations Mr. Potashner made regarding certain loans made to board members or members of the executive team," he said.

Potashner was not immediately available for comment. But his dismissal comes after an apparent disagreement between Potashner and other members of Sonicblue's board over the loans, which were made in conjunction with the company's RioPort spinoff.

In December 1999, the company made loans of more than $250,000 to Potashner and more than $75,000 to another executive to allow them to purchase shares of the RioPort subsidiary. These interest-bearing loans come due this December.

Separately, in June 2000, the company lent three of its current directors and one of its former directors more than $175,000 to buy RioPort shares, with those loans coming due in June 2003.

The loans were disclosed in Securities and Exchange Commission filings that included the company's most recent proxy statement.

Still, Ballard said that the board is investigating Potashner's allegations.

"The allegations made by Mr. Potashner were made yesterday, so the board is in the process of looking at that. But everything about these loans has been disclosed fully in filings with the SEC," he said.

Ballard added that the publicity surrounding the dismissal had "obscured" the fact that the decision comes at a "turning point" for the company, as it has moved away from its graphics chip heritage into consumer electronics.

Ballard also said he will take a hard look at expenses.

The company "probably correctly" has been focused more on increasing revenue than on trimming expenses, he said. Any change "isn't going to be through cost-cutting and the classic sense of just lopping off costs. It's going to be through looking at operating efficiencies," for instance, seeing if goods can be shipped earlier by sea, rather than last-minute by air.

Though Ballard's new title is interim CEO, he said the board is not currently conducting a search for a new chief executive.

"I hope to prove to the board and shareholders that I'm the right person to head this company for the next 10 years," he said.

Ballard joined Sonicblue in April as its executive vice president for marketing and product management. Ballard was former CEO of graphics chipmaker 3dfx.

Potashner's firing is the latest in a series of executive shuffles at the company. In April, Chief Operating Officer John Todd left the company. That same month, Chief Financial Officer David Sugishita departed after less than two months at the company.

Potashner had led Sonicblue since October 1998, when the company was known as S3, overseeing its transition from graphics chipmaker to a company known for the Rio MP3 players and ReplayTV digital video recorders.

Sonicblue changed its name in November 2000, when it finished splitting off its graphics chip unit.