Deal Gone Bad: Call Center Buyer Alleges Snow Job

Now Diamond Castle Holdings claims it was swindled by the seller -- Barry Diller's IAC/InterActiveCorp. Diamond Castle entities last week sued IAC for about $135 million in damages in New York Supreme Court.

The suit comes about two months after PRC, which provides outsourced customer support for companies, emerged from bankruptcy under new ownership. PRC, which isn't named as a defendant, declined to comment through a spokesperson.

Total Bust

Diamond Castle claims it lost its entire investment in PRC, about $105 million.

Diamond Castle says in its suit it would never have bought PRC had it been privy to information about a major contract awarded to PRC by Verizon Wireless just before the purchase.

IAC touted the Verizon Wireless contract to Diamond Castle, saying it would vault PRC from "a second tier to the top tier of call center providers," the suit alleges.

IAC told Diamond Castle the Verizon Wireless contract would add $48 million to PRC's 2007 revenue and increase earning before taxes, interest and other items by nearly $8 million, the suit says.

Not So Much

In reality, Diamond Castle says, PRC lost about $18 million on the contract in 2007 and, with further losses projected for 2008, PRC had to file for bankruptcy in January.

Diamond Castle claims in the suit that IAC and PRC hid "information of a highly damaging nature" about the contract. Namely, that labor costs at an Austin, Texas, call center that handled Verizon Wireless were inaccurate and that PRC had trouble retaining staff to service the contract.

A spokesperson for IAC, parent company for such companies as Ask.com, Citysearch and Match.com, said it does not comment on litigation. Diamond Castle representatives also didn't return calls.

About a month before the sale, the suit says, PRC executive Joseph Livingston directed his team in e-mails not to discuss "serious and substantial problems with PRC's financial projections" on the Verizon Wireless contract. Livingston's lawyer hadn't seen the suit and declined to comment.

Failure to Disclose

Diamond Castle alleges that Verizon Wireless expressed its "extreme displeasure with PRC's performance." Verizon Wireless even threatened to reduce or terminate its business with PRC, the suit alleges. A Verizon Wireless spokesperson had no comment.

"Had IAC or PRC disclosed the true circumstances surrounding the Verizon Wireless contract..., as they were contractually obligated to do, Diamond Castle would not have proceeded with the PRC acquisition," the investor says.

PRC is one of South Florida's big employers, with about 2,700 workers. That's down from about 5,000 before its reorganization. It has call centers in North Miami, Opa-locka, Cutler Ridge and Sunrise, as well as its corporate office in Plantation.