Sep. 14--Prepare the coffin. PurchasePro.com is dying. 

The software firm founded by Lexington native Charles "Junior" Johnson went belly-up Thursday evening; it filed for Chapter 11 bankruptcy protection, cutting a deal with federal regulators investigating its accounting practices and agreeing to sell its assets. 

Although the Las Vegas-based company never turned a profit, the greenbacks PurchasePro brought to Lexington left lasting legacies. 

A baseball stadium got built. A high school gymnasium rose from the ground. A video rental chain expanded. A venture capital fund came to town. 

"Had I not been involved in PurchasePro and sold that stock I don't think this stadium would have ever been completed," said Brad Redmon, Johnson's cousin and majority owner of the Lexington Legends. "I'm thankful that it all worked out like it did." 

In all, more than $200 million flowed into the Bluegrass State from sales of PurchasePro stock. The benefactors were, for the most part, wealthy businessmen who had invested in Johnson's company when it was little more than an idea. 

After PurchasePro went public in September 1999, Johnson donated $2 million for a gymnasium at Lexington Catholic High School. 

Later, two executives would return to Lexington, one starting a venture capital fund and another expanding his chain of video rental stores. 

And Frankfort businessman Jerry Ragland would sell PurchasePro stock worth more than $16 million, presumably to help finance his son's defense in a high-profile murder case. Shane Ragland was accused of killing former University of Kentucky football player Trent DiGiuro. 

Also making millions from PurchasePro stock were people such as developer Ernest Hanna, the family company of former mayoral candidate Jim Gray and former C&H Rauch Jewelry owner Harry Cohen. 

They got out in plenty of time, back when PurchasePro stock brought nearly $400 a share and the company was worth more than $1 billion. 

Others weren't as savvy. 

Lexington resident Joe Hayden still held shares of PurchasePro (PPROE: Nasdaq) yesterday, when it traded for 8 cents and the company had a total value of $1.4 million. 

"I've got a lot of worthless paper, let's put it that way," Hayden said. "I told my realtor this morning that I'm going to have to change my lifestyle and quite smoking and drinking because I've got tax write-offs until I'm 132." 

Hayden was a believer, in times both good and bad. 

He read closely the glowing reports from financial analysts about PurchasePro and other companies in the so-called B2B industry (short for business-to-business). 

B2B software companies were supposed to provide businesses with the technology to buy and sell with one another via Internet "marketplaces." 

In February of 2000, just six months after Johnson took PurchasePro public, analysts with Robertson Stephens projected that businesses would buy and sell $1.8 trillion in goods online by 2003. 

They were wrong, as Redmon found out firsthand as he peddled PurchasePro's wares in Lexington. 

"Even though businesses thought it was a great thing, they just could not get it incorporated into their standard business practices," he said. "The people that worked for them had always used the phone and the fax to buy things, and they were very recalcitrant to change." 

"PurchasePro tried to change the way business operated, and that is very difficult to do," Redmon said. 

Reality aside, analysts kept pushing the stock of PurchasePro and other B2B companies. In October 2000, Lehman Brothers analyst Patrick Walravens rated PurchasePro a strong buy and predicted the company would earn profits of 63 cents a share in 2001. 

"For those who haven't noticed, the B2B sector is rapidly moving to profitability," Walravens wrote. 

In fact, things started going from bad to worse for PurchasePro only four months later, in February 2001. A scathing article in Barron's, a financial magazine, questioned the company's future and quoted Johnson as saying PurchasePro used "cutting edge" accounting practices. 

After a series of financial snafus, Johnson was shoved from the company in May 2001 by accountants at Arthur Andersen. Soon the company shed more than half its workers and later moved into its former and much smaller technology center. 

By early August, PurchasePro confirmed that federal regulators were investigating the company's accounting practices, including a deal Johnson struck with America Online in March 2000. When the three-year agreement was first announced, AOL said it would use PurchasePro to provide electronic commerce capabilities to its business customers. 

The Nasdaq stock market took steps to delist PurchasePro a few weeks later, citing the company's failure to file a quarterly financial statement with the Securities and Exchange Commission. 

PurchasePro Chairman and CEO Richard Clemmer vowed at the time to fight the delisting, but announced late Thursday that he would instead sell the company to Perfect Commerce, a private firm in Palo Alto, Calif. Financial details of the proposed sale were not disclosed, but must be approved by the U.S. Bankruptcy Court in Nevada. 

In its bankruptcy filing, PurchasePro claimed assets of $41,943,000 and debts of $20,058,000. Its largest creditor was company landlord Cheyenne Investments Inc., which is owed $4.6 million. 

Other creditors owed more than $100,000 each include Compaq, Advanstar Communications, Computer Associates, Arrow Electronics, Alta Vista Co., ADP Investor Communication, Aces International and Wilson, Sonsini, Goodrich & Rosati. 

PurchasePro said it has the option of obtaining up to $750,000 debtor-in-possession financing and will continue to operate during its reorganization. The firm now has fewer than 50 workers, down from more than 600 at its peak, according to Hayden. 

The company said it also reached "an agreement in principle" with the SEC's enforcement division on Thursday to settle allegations that have been under investigation since the spring of 2001. 

Johnson, who took several months off after leaving PurchasePro to play golf, is now running a multi-level marketing company called NEXX, which sells local and long-distance phone service. Similar in structure to Amway, the company's business practices are questioned by some consumer advocates. A secretary at NEXX said Johnson was traveling yesterday and could not be reached for comment. 

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(c) 2002, Lexington Herald-Leader, Ky. Distributed by Knight Ridder/Tribune Business News. PPRO, LEH, AOL, HPQ, CA, ARW, CMGI,