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Starting over is nothing new for David Hagen. He’s doing it again after a fight with its only supplier wiped out Southern Pines-based Prime TV LLC, a seller of satellite-television systems that he expected to generate $70 million in revenue this year. But he has come back from tougher spots — bankruptcy and prison, for example — with lesser prospects.

In a boardroom in a building that once was a Winn-Dixie, it’s hard to tell whether anything is bothering him. He’s wearing brown leather Italian loafers. The top three buttons of his royal-blue shirt are open. He raises to his lips a bottle of water imported from the Fiji Islands. His thick, dark-brown hair is perfect. He’s fit. He and his wife, Annette, wake up early every day to work out in Pinehurst.

The glowing white letters on the sign outside announce Hagen’s future: Gatelinx. The company makes software, called Gatelinx Communicator, that links computers in a way that allows them to swap high-quality video, audio, text and other data at top speed. It’s what he is here to talk about. Gatelinx is the type of thing that people in the computer industry have said for years is theoretically possible. But none have accomplished it. Hagen says he has, and he says he can make Gatelinx a billion-dollar company by next year.

But then, Hagen has said a lot of things. Some have even happened.

That was when he was talking to the press. He doesn’t talk much anymore, particularly about his past. Hagen says he was born in Virginia. Just Virginia. Neither he nor his attorney, Richard “Trey” Yelverton III of Southern Pines, will reveal much about the Hagens’ backgrounds or even their ages. “Only an ass would print a lady’s age,” Yelverton says, adding: “They are both over 21.”

This story was based on earlier interviews with Hagen and Yelverton, El Segundo, Calif.-based DirecTV Inc. spokesman Bob Marsocci, former employees and installers of Prime TV and documents from Gatelinx, Prime TV, the N.C. Secretary of State’s office, the Better Business Bureau and the N.C. Attorney General’s office. It begins in the late 1980s, another time the Hagens were the subjects of media coverage.

Their last name then was DeFusco. Or Hagen. Or Haggin. Or Brown. Or DuFusco. But usually DeFusco. They were the subjects of criminal investigations in Texas and Virginia. Articles published in The Washington Post in 1989 and 1990 detail how the couple, who filed for bankruptcy in Alexandria, Va., in 1987 after previous filings in Seattle and California, fled to San Diego with furs, a $50,000 wine collection, jewels, $1,500 neckties, a Rolls-Royce and a Mercedes-Benz, leaving creditors on the hook for $2.5 million.

Arrested by the FBI in 1989, they pleaded guilty in Virginia to bankruptcy fraud and money laundering. David DeFusco also pleaded guilty in Beaumont, Texas, to mail fraud and conspiracy in connection with his mail-order time-share company, which lured prospective buyers with offers of gold bullion and BMWs but delivered dime-store prizes such as bathtub-bubble machines.

He was sentenced in 1990 to two consecutive five-year terms at Sheridan Federal Prison Camp, outside Portland, Ore. Annette DeFusco was sentenced to 35 months at Geiger Correction Center in Spokane, Wash. They were 35 and 29 years old, respectively.

Hagen won’t comment on whether he is DeFusco, but he says that he spent seven years in Sheridan for bankruptcy fraud and mail fraud — he blames it on business partners — and that Annette spent nearly three years at Geiger. N.C. Attorney General Roy Cooper’s office says the Hagens and the DeFuscos are the same people.

After his early release from Sheridan in 1997, Hagen went to San Diego to help his brother, Mark, start a company with money fronted by their father, a retired airline pilot. The company, now named Professional Satellite, sold what was then a new product: a small, high-quality satellite dish that received television signals. DirecTV made the dish and put together the packages of TV channels. It was an alternative to cable television.

Business was good, Hagen says, but the partnership wasn’t. The brothers argued over money, and soon he and Annette headed East. They settled in Southern Pines, where her mother lives. Prime TV started in 1998 in a building it shared with a dentist’s office. Prime TV signed a contract with DirecTV to sell and install its systems exclusively.

Besides having a popular product, Prime TV offered rebates of up to $140 –- basically the cost of the dish. A national Yellow Pages ad campaign generated calls from potential customers. It was successful enough that company officials insist that employees never made cold calls. The company contracted businesses across the nation to install the systems. It was aver- aging 10,000 calls a day, and top sellers made up to $3,000 a week in commissions, Yelverton says. New sports cars and motorcycles started showing up in the Prime TV parking lot, which soon had to be expanded.

Complaints arose almost immediately about the rebates Prime TV offered. The company opened a customer-service branch to field the calls. Sales reps told customers that they would receive payments in six to eight weeks, but for some, the checks never arrived. Sometimes the form was too confusing, but sometimes the pay- ments were just stalled. According to an interoffice memo, complaints weren’t to be a priority unless they invoked the Better Business Bureau, the attorney general’s office or DirecTV. Still, the company thrived, becoming the nation’s top seller of DirecTV systems. DirecTV sent it a plaque of thanks and congratulations every year.

Representatives of Fort Worth, Texas-based Radio Shack Corp. called one day in early 2000. The electronics retailer was interested in buying Prime TV. Radio Shack wasn’t selling as many DirecTV systems as it would have liked and thought the problem might be that its salespeople, who also had to push other products, didn’t know enough about the dishes to peddle them.

The talks fell through, but they gave Hagen the idea for Gatelinx. As he envisioned it, a customer could enter any major electronics retailer, go to a computerized kiosk, activate it by touching its screen and connect to a salesperson at Prime TV headquarters in Southern Pines. They could discuss DirecTV almost as if they were face to face. And, of course, each kiosk would have a credit-card slot to wrap up the sale. It could work for any business, particularly when technical expertise was necessary to make a sale.

The problem was that it couldn’t be done. While video phones, Web cameras and conferencing had been around, no one had figured out how to improve the quality enough to make them a good substitute for face-to-face sales. Hagen hired 40 software developers in July 2000 and put them on the task, using profits generated by Prime TV for the new Gatelinx Corp.

Over the next three years, the BBB logged 1,896 complaints about Prime TV. Cooper’s office worked with the company in 2001 to simplify the rebate form and notify all customers who would have been eligible for a rebate that they would have a second chance to claim it. Prime TV paid more than $300,000 to 2,278 customers nationwide.

It also hired Coppell, Texas-based marketing and rebate specialists Parago Inc. to handle rebate claims. The relationship lasted only about half a year. Neither side will say why it ended.

Still, the satellite systems kept selling. In June 2003, Prime TV moved to the 49,000-square-foot former grocery store. A startup joined it. Called Dish TV Now, it sells Dish Network satellite systems — DirecTV’s top competitor. Dish TV Now doesn’t offer rebates or install systems. Hagen and Yelverton claim that Dish TV Now and Prime TV have nothing to do with one another. But employees say the companies shared resources — such as the employees themselves. Like Prime TV, Dish TV Now expanded rapidly.

Marsocci won’t say how his company found out about Dish TV Now, but many in Southern Pines believe that a customer who ordered DirecTV received Dish Network and called DirecTV to complain. DirecTV told Prime TV in March to shut down Dish TV Now. Hagen, saying it was an unrelated business, refused.

So, DirecTV abruptly ended the six-year relationship, claiming that Prime TV breached its contract, which prohibited it from selling Dish Network. It also cited the thousands of complaints from customers. DirecTV withheld the weekly commissions it had been paying Prime TV. Prime TV tried to get a temporary restraining order to require DirecTV to continue making payments, but Superior Court Judge James Webb ruled against it. Yelverton says DirecTV owes Prime TV more than $1 million. Some employees say it’s closer to $30 million. Prime TV closed March 26, dismissing about 200 employees. Many, though no one will say how many, are working for Dish TV Now.

After the split, Yelverton filed for arbitration in a California court. That case has yet to be decided, but in early August, two DirecTV investigators were in Southern Pines searching for people who had worked for Prime TV and Dish TV Now.

Prime TV exists only as an entity to sue or be sued and deal with the attorney general’s office. At the time of its demise, Prime TV had sold more than 750,000 DirecTV systems. The top company that sells DirecTV is now Professional Satellite — Hagen’s brother’s company.

In a press release distributed after Prime TV closed, Hagen railed at DirecTV and claimed that it forced his company out of business to steal its business plan and open its own call center. Dealers in Los Angeles have sued DirecTV for that reason, he says. DirecTV required reports specifying how much was spent for marketing and when and where advertisements ran, Hagen says. “They made us show them how to set up and manage a successful call center, where and when to buy media, and now we are expendable.”

Another problem arose in April. A group of installers sued Prime TV, Gatelinx, Dish TV Now and the Hagens, contending that they hadn’t been paid for installing DirecTV systems. The suit is pending.

As he had before, Hagen moved on. The entire sales floor that had been Prime TV’s was converted to selling Dish Network. Hagen won’t disclose revenue, but Dish TV Now doesn’t sell as well as Prime TV.

Hagen suffered another blow June 15 when Cooper announced a new settlement with Prime TV. Customers have another chance to pursue their rebates. Prime TV has to notify eligible customers by mail. The Hagens and any companies they work for or own are barred for three years from offering rebates to customers. The Hagens also agreed to pay the state $50,000.

Hagen’s hopes now rest with the Gatelinx software that the company unveiled in May at the Best of Interop competition in Las Vegas. With it, up to eight people can conference with video and audio through a standard broadband Internet connection. The software even works with 56k modem connections by cutting the quality of the transmissions. When Gatelinx Communicator is activated, a window, not unlike an instant messenger, pops up. The video is blurry at first but adjusts quickly to the highest level of quality the computer’s processor and monitor will allow. The software doesn’t have competitors, spokesman Jack Irving says, and doesn’t require additional hardware.

The software was a finalist for best in show in the convergence category of the Las Vegas competition. It is being offered only to businesses. Irving and Hagen doubt that it ever will be sold to home consumers, but they believe the software will become standard in home computers, cell phones and store kiosks.

If not, Hagen, as usual, has at least one more card to play. The same technology that improves the transmission of video conferences speeds up Internet downloads. A full-length, high-definition feature film, for example, can be downloaded in seconds, Irving says. And Hagen has formed a company called PerfecTV Inc. to explore its business prospects. At least, that’s what he’s saying.



Matthew Moriarty is a reporter for The Pilot in Southern Pines.