MOD Systems Places Two Top Execs on Leave After Fraud Allegations

Seattle-based MOD Systems, a maker of music and video downloading technology for retail stores, placed its chief executive, Mark Phillips, and chief operating officer, Kenneth Gordon, on administrative leave Friday. I heard a rumor about this move over the weekend, and TechFlash confirmed the news yesterday, adding some important details. A phone message left with a MOD Systems spokesperson has not been returned.

The move comes on the heels of a lawsuit filed by MOD investor Robert Arnold in February against Phillips, Gordon, and MOD vice chairman Anthony Bay, alleging blatant misuse of funds, embezzlement, and misrepresentation. Bay is now the acting CEO of MOD Systems, according to TechFlash. Phillips and Gordon remain employed by the company, which isn’t giving any reasons for the latest move.

MOD Systems was co-founded by Phillips and Bay in 2005. Last September, the firm scored a $35 million equity investment from Toshiba, NCR, and others. The money was supposed to be used to develop MOD’s media software for use with touch-screen kiosks and secure digital memory cards. In the meantime, the company has been demonstrating its product at IT shows, and Bay is still scheduled to speak on May 7 at the Digital Hollywood conference in Santa Monica, CA.

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