A once up-and-coming technology startup in Brookville has shut down amid investigations into whether it improperly received an investment of $500,000 in taxpayer money.
General Sentiment Inc. laid off its half-dozen employees and ceased operations after failing to "attract capital" from new sources, according to a June 24 shareholders' letter reviewed by Newsday.
General Sentiment tracked public opinion on the Internet about topics such as consumer products, entertainment, sports and politics. It accurately predicted the winner of "American Idol" in 2011 and its customers have included NBC Universal, Research In Motion, Bethpage Federal Credit Union and the 2012 presidential campaign of Republican Mitt Romney.
General Sentiment also has been the subject of a probe by the U.S. Treasury Department since fall 2013 into possible conflicts of interest involving an investment of government money into the company.
Investigators have been looking into whether Mark Fasciano, the startup's board chairman, broke federal conflict-of-interest rules when he invested $500,000 from a state investment fund into General Sentiment. Most of the money came from the Treasury through New York State and was awarded to Canrock Ventures, a venture capital firm based in Brookville, to invest in promising technology businesses on Long Island. Fasciano, a founder of General Sentiment, also helped start Canrock and is one of its three managing directors.
What began as an audit of General Sentiment, after questions from Newsday, has become a wide-ranging examination by the Treasury of the state's Innovate NY Fund. The audit hasn't been completed, a Treasury spokesman said Thursday.
Empire State Development, the state's primary business aid agency, has suspended new investments by Canrock after conducting a separate probe. The agency also has requested that Canrock return nearly $2 million invested in General Sentiment and three other startups with close ties to Canrock, according to documents.
Fasciano has denied any conflicts of interest and said he disclosed to state officials his and Canrock's ties to the startups before investing Innovate NY funds.
Fasciano Wednesday night declined to comment on General Sentiment's circumstances, saying that, until a July 30 meeting of shareholders, "the company has no information for you."
In his letter to shareholders last month, Fasciano said Canrock had invested $3.2 million in General Sentiment, which was founded in 2008. The letter said the company couldn't be sustained by customer revenue alone. Its bills totaled $220,000, the letter said.
"Accordingly, the board of directors determined it was in the best interests of General Sentiment and its creditors and shareholders to terminate its staff and suspend day-to-day operations," the letter said. "The company is currently in a holding pattern seeking outside offers to license or buy the technology."
An Empire State Development spokesman confirmed Thursday it had received the letter and notice of the July 30 shareholders' meeting.
In its first two years, the agency's Innovate NY program has allocated investment dollars to eight venture capital firms, including Canrock. Together, they have invested $22.3 million from Innovate NY into 61 startups. These funds have been augmented by more than $127 million from private investors.
One of General Sentiment's largest shareholders, Russell Artzt, co-founder of computer software giant CA Technologies, said last year that an investment of public money in the startup -- which his son ran for a time -- was justified.
Artzt said, "I don't think it's unreasonable to invest in a company that is trying to blaze new paths, has good technology and is just cash poor."