Brill aims to clear up over company shutdown

Steven Brill, founder of the company whose “Clear” system allowed members to pass quickly through security checkpoints at U.S. airports, has never been a shrinking violet.

It should come as no surprise then that last week, as investors in Verified Identity Pass began pitching why the company should be thrown a lifeline, Brill began a public effort to distance himself from the abrupt discontinuation of its operations, as well as to restore his reputation.

“There are different measures of success,” Brill said in an interview with the Atlanta Journal-Constitution last week. “One is business success. And the other is this: Did you handle yourself in each situation with integrity and were you there to answer questions when it succeeded or it failed? I’m very proud of all of that in my life.”

Attempts by PE Week to reach Brill were unsuccessful.

On March 1, Brill left 5-year-old Verified, the New York-based maker of the “Clear Registered Traveler Program,” which sold biometric cards that gave users access to designated security lanes in 17 airports nationwide.

Verified Identity was founded in 2004, and the company had raised about $54 million in VC funding. Most of that capital came last year when Verified Identity Pass raised $44.4 million at a pre-money valuation of about $90 million. Spark Capital led that round and was joined by Syncom Venture Partners, Lockheed Martin, GE Security, RRE Ventures and returning investors Baker Capital and Lehman Brothers.

At the time of his departure, Brill said in a memo to employees that, “My partners and I have agreed that effective as soon as we can work out a quick but smooth transition, I will become vice chairman of the company and work on a part-time basis providing input into strategy, public policy and our relationships with our key stakeholders. A new CEO, reporting to our board, will soon be named to provide overall supervision of all day to day operations.”

A new CEO was never named, and Brill told the Atlanta Journal-Constitution that while he “did resign,” the situation “wasn’t friendly.”

Brill has filed a lawsuit against the company over a 2008 salary dispute, a case that, if it “goes forward,” will “certainly shed some light on how much I knew and how much I had to do with [Verified Identity Pass’s] current problems,” he told the newspaper. Details of the lawsuit are unknown.

On June 22, the company announced on its website that “Clear [airport] lanes are no longer available.” The statement also said that while the company “has not commenced any proceedings under the United States Bankruptcy Code” that “at the present time, [we] cannot issue refunds due to the company’s financial condition.”

Verified’s trajectory has shocked its roughly 250,000 subscribers, some of whom were invited, as recently as early June, to sign up friends to Clear for a $50 discount off their $129 annual subscription fee. At least one class-action lawsuit has been filed against Clear by one of its disenfranchised customers.

PE Week has learned that Verified Identity owes $33 million to the company’s senior creditor, Morgan Stanley, and that it’s been unable to negotiate an agreement with Morgan Stanley in recent months.

The question now is whether Verified can be resuscitated in time. Despite what a source characterizes as investor meetings in Silicon Valley last week, no one has yet stepped up to give the beleaguered company the additional funding it needs.

At the airports that participated in the Clear program—including LaGuardia and JFK in New York, Atlanta Hartsfield and Orlando International—hard disks containing customer data have been erased. However, Lockheed Martin, the lead systems integrator for Clear, is holding on to subscribers’ personal information until Oct. 1. If the company doesn’t resume operations by then, Verified’s user database will be erased per a mandate by the Transportation Security Administration.

Brill is a former Newsweek reporter whose prior endeavors have centered on media.

He is perhaps best known for buying American Lawyer magazine, which he then turned around and sold before launching “CourtTV.” He then started Brill’s Content and, two properties that flamed out earlier this decade.

He apparently isn’t waiting to see what happens to Clear, despite remaining a “major shareholder” in Verified, as he characterized himself when he exited the company. He recently founded Journalism Online, a startup that aims to create a system in which customers can use a single account to subscribe to different publications on any platform, including the Amazon Kindle.