The Life and Near Death of Drkoop.com

Hackett recruited a number of colleagues from his days at PCN (which filed for bankruptcy last year) and TradeWave (which was sold for $350,000 a few months after Hackett left). He also tapped Koop's connections. Tom Ferguson, a well-known health care industry figure, joined as a consultant in the company's early days. "I'd been impressed by the passion and the vision and the enthusiasm of Don. I didn't know or ever maintained that one could make money doing this. But he seemed to think you could," Ferguson says. "It was a couple of guys and a bunch of computers in a big, empty office. We were really making it up as we went along."

By the spring of 1998, the company changed its name from Personal Medical Records to Empower Health to reflect Koop's philosophy of empowering patients. The company also expanded its Internet focus with the goal of becoming a health portal. The move seemed less a result of a carefully constructed business plan than a desire to jump on the latest trend. "At that time it was, 'Jeez, everyone else is getting on the Internet. Why don't we actually go full force as an Internet company, launch a Web site, and then we can distribute the [personal medical record] through that,'" recalled Ian Bagnall, who was hired in 1998 to develop the Drkoop site, in a deposition.

The new idea was to create "Dr. Koop's Community," a collection of chat rooms, support groups and health information that would make money through advertising and e-commerce. While the company deployed marketing staff to drum up media interest in the upcoming July 1998 launch of Drkoop.com, it still was struggling to develop a solid business plan for how the site would make money. Consultant Agrawal reviewed the company's business plan before meeting with potential investors. "Don wanted a business plan prepared basically as a marketing document," Agrawal testified in his fraud suit against Drkoop. "The version of the business plan that existed ... wasn't well drafted. It was cut and pasted. A lot of things were wrong. So basically, [we] spent the entire weekend rewriting a major business plan, again, over our objections that it wasn't a very good way to do it." Zaccaro also was not pleased with the document. "I felt [it] was too fragmented, not focused," he said in his deposition.

Meanwhile some senior executives began to grumble about the competence of Robert Hackett, the CEO's 48-year-old brother. Robert Hackett had been installed as executive VP for business development and worked from an office near his home in suburban Philadelphia. "We often complained that he was in the wrong position. He was in too instrumental of a position in an Internet company, specifically a Web-based company, and didn't understand the fundamentals of how Web companies operated," Bagnall testified. When pressed, Zaccaro testified that he was "not completely" happy with the job Robert Hackett was doing in negotiating content deals for Drkoop. Robert Hackett declined to comment on his colleague's characterization of him, as did Donald Hackett.

A deal Donald Hackett negotiated with a Michigan health care consulting firm, Superior Consultant Holdings (SUPC), also caused some friction in the executive ranks. The company became Drkoop's biggest outside shareholder in April 1998 when it agreed to invest $6 million. But in return, Drkoop was bound to purchase $3 million in consulting services from the company and give Superior a seat on its board. Such quid pro quo deals often are the cost of doing business in the Internet Economy, but the arrangement rubbed some the wrong way. "In the beginning, I don't think we got as much as we should," Zaccaro said. "But, you know, that's what it is when you look for startup capital."

Drkoop's relationship with another consultant, brought in during the summer of 1998 to help get the company's house in order, would prove to be more problematic. Andy Agrawal was a South Carolina attorney and health care executive who Donald Hackett had met in 1996 through mutual friends in the medical industry. The two hit it off and Hackett asked Agrawal to help develop the business plan for Personal Medical Records. In the company's April 1997 business plan, Agrawal is listed as a director.

Agrawal never joined Personal Medical Records, and he went on to form a consulting firm. But in June 1998 Hackett brought him back to Austin to work on legal and business matters for the company's latest incarnation, Empower Health. Hackett asked Agrawal to join the company as COO, offering him options on 31,000 shares of stock. In an August 1998 e-mail, Hackett offered Agrawal an additional 40,000 stock options as further incentive.

Hackett then withdrew the job. Instead, he signed another consulting agreement with Agrawal, giving him 30,000 stock options, court records show.

Hackett subsequently accused Agrawal's company of overbilling Drkoop and terminated the consulting agreement. Hackett's handling of the Agrawal dispute would soon come back to haunt him in a fraud lawsuit. But as the year came to a close, more pressing problems were on the horizon.