District Software Purchase Sparks High-Level Shakeup at LeapFrog

The president of a division of LeapFrog Enterprises Inc. left his job last month as the result of an internal investigation of a sales commission involving the Prince George’s County, Md., school district.

Bob Lally, the president of LeapFrog SchoolHouse and the executive vice president of LeapFrog’s Education and Training Group, resigned Dec. 14. The departure was a “mutual decision” by him and the Emeryville, Calif.-based educational software company, according to a company press release.

“Although we are disappointed and saddened by this development, we take our code of conduct very seriously and believe we have expeditiously addressed this event,” Tom Kalinske, the chief executive officer of LeapFrog Enterprises, said in a statement. “We … have taken actions to reinforce the division’s solid reputation in the education industry.”

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Mr. Lally was unavailable for comment.

Superintendent Defended

In addition, LeapFrog sales representatives Sienna Owens and Debora Adam have left the company. Ms. Owens lived with Andre J. Hornsby, the superintendent of the Prince George’s County schools, when he approved a $1 million LeapFrog software and product purchase last June. Ms. Adam was a LeapFrog employee whom district officials worked with on the sale.

A LeapFrog spokeswoman would not say whether the two resigned or were fired.

The company is investigating how a $40,000 sales commission for Ms. Adam was distributed. The LeapFrog representative would not comment further on the internal review.

John White, a spokesman for the 140,000-student Prince George’s County district, defended Mr. Hornsby, and said that LeapFrog’s reading products have been successful in the district’s schools.

“How was he to know who was benefiting from the sale?” Mr. White said of the superintendent. “The investigation by LeapFrog in no way implies there’s anything amiss with Prince George’s County schools.”

The departures of Mr. Lally and the sales representatives come as LeapFrog, which makes educational software and interactive toys, is experiencing lackluster sales and higher operating expenses, resulting in a profit drop of 40 percent in the third quarter of 2004.