Chapman Capital seeks audit, reiterates demand that eSpeed convert stock, auction company

By Lisa Kerner

Charlotte, N.C., March 21 - eSpeed, Inc. investor Chapman Capital LLC, with a 9.3% stake in the company, demanded that eSpeed's board of directors retain an independent auditor to review the joint services agreement between eSpeed and Cantor Fitzgerald-related entities.

The auditor should be distinct from eSpeed/BGC Partners/Cantor Fitzgerald's shared financial auditor Deloitte & Touche LLP, Chapman Capital said in a news release.

Chapman Capital wants the audit to confirm or invalidate the related parties' claims that the agreement and subsequent transactions were "negotiated and have been executed in an arms-length fashion," according to the release.

Robert L. Chapman, Jr., managing member of Chapman Capital, cited a recent ruling in the U.S. Court of Appeals for the Federal Circuit in Washington that a jury-invalidated patent was unenforceable due to Cantor Fitzgerald's inequitable conduct in the prosecution of the patent. The ruling found that Cantor Fitzgerald's material included misleading statements.

"This ruling fortifies Chapman Capital's apprehension that eSpeed itself may continue to incur significant licensing and other expenses, or may relinquish significant market data and other revenues, unnecessarily or improperly for the benefit of Cantor Fitzgerald," Chapman said in the release.

Chapman Capital also reiterated its demand that eSpeed convert all class B common shares into class A common stock, followed by the full-scale auction of the company.

"Particularly in light of eSpeed's Feb. 13 disclosure regarding its weak 2007 financial outlook and incongruous granting of free stock options representing nearly 3% of the outstanding class A common shares to the executive most responsible for such operating underperformance, Mr. Howard W. Lutnick, the company's ownership base has conveyed a nearly uniform desire for eSpeed's class A shares to be maximized through a change-of-control transaction," Chapman added.

Earlier this month, Chapman Capital and Chap-Cap Activist Partners Master Fund, Ltd. said Lutnick demonstrated "failure to perform in his capacity as CEO" and requested a full-scale auction of eSpeed in a schedule 13D filing with the Securities and Exchange Commission.

Chap-Cap beneficially owns 1,839,593 shares, or 6.2%, of the New York trading technology company's stock.

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