Firstwave's Lost Pay

DWDM equipment startup has shut its HQ after complaints from employees who say they weren't paid

February 12, 2003

3 Min Read
Firstwave's Lost Pay

Firstwave Secure Intelligent Optical Networks Inc. appears to have run into a rough patch. The company's Reston, Va., headquarters has closed, and several of its former employees are complaining they were never fully paid for their work.

First, some background: Firstwave was founded in February 2000 by two engineers from the Naval Research Laboratory (NRL). The startup was funded by Raza Foundries, but it's not clear how much Raza has put up to back the company.

According to Firstwave's Website, the company was building an "all-optical Dense Wavelength Division Multiplexing (DWDM) switching technology for next generation optical networks." The gear Firstwave was building was meant to be "deployed as a cost-effective... overlay network capable of attaining 2.5, 10, and 40 Gbit/s Ethernet networks over existing fiber optic lines."

In August 2002, the startup announced a five-year, $29 million research and development contract with (surprise!) the Naval Research Laboratory (see Firstwave Follows the Feds). At that time, the company said products had been at the NRL since September 2001 and had been carrying live traffic on the Advanced Technology Demonstration Network (ATDNet), a research network connecting NRL with other government offices, for six months.

A few months afterward, the plans began to unravel. Sometime in October, Firstwave ran low on funds, but apparently it never stopped its workers from punching the clock. "The board of directors allowed people to work for weeks without telling anyone that they didn't have the money to make payroll," says one former employee. "Folks weren't told until the end of the pay period that there would be no checks."

Sometime later, employees were furloughed without pay, though Firstwave kept paying their health benefits until the end of January.

The Virginia Department of Labor says it has received 22 claims against Firstwave for "non-payment of wages." Most of the cases are going to arbitration. Nine cases are currently open; eight of those are in the process of being closed because the claimants have agreed to work with Firstwave to settle their claims, the Labor Department says.

"The Firstwave offices in Reston, Va., are closed," a Labor Department spokesperson says.

According to the company's Web site, Firstwave's board includes John C. W. Taylor, the company's chairman and CEO; Atiq Raza, CEO of Raza Foundries; Gerald J. Butters, the former president of Lucent Technologies Inc.'s (NYSE: LU) Optical Networking Group; and Donald G. Basile, Firstwave's president and chief operating officer, who is also a managing director at Raza Foundries.

"FirstWave is a portfolio company in which RFI has an investment... RFI as a policy does not disclose information about the business or finances of any of the private companies in which it holds investments," writes Atiq Raza, in an email response to an inquiry about Firstwave.

Basile did not immediately return calls from Light Reading on Wednesday morning.

Emails and calls to employees at Firstwave's headquarters in Reston were not answered.

Light Reading has filed a Freedom of Information Act (FOIA) request with the Naval Research Laboratory in an attempt to shed light on details of the NRL's dealings with Firstwave. Per FOIA, the NRL has 20 business days (excluding Saturdays, Sundays, and legal holidays) to make its reply.

— Phil Harvey, Senior Editor, Light Reading

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