GovWorks Files for Bankruptcy

E-government services portal GovWorks Inc. of New York filed for Chapter 11 bankruptcy protection and plans to sell its transaction processing business to American Management Systems Inc. of Fairfax, Va., and eOne Global LP of Menlo Park, Calif.

In its filing, GovWorks called itself a victim of the "growth-at-any-cost craze" that has killed a slew of Internet companies. The company claimed assets of $8 million and liabilities of $40 million.

The filing follows months of unrest at the company. In November 2000, GovWorks reduced its staff to fewer than 60 people and cut expenses in hopes of cooling the burn rate to less than $1 million per month, court papers said.

The deal with AMS and eOne will not be complete until the bankruptcy court finalizes certain documents. In March 2000, AMS took an undisclosed equity stake in GovWorks. Founded in late 1998 as Public Data Systems, GovWorks employed 250 people in April 2000.

GovWorks' first layoffs were part of a restructuring to shift to an application services provider model. But competitors offered the same services at lower or no cost, and the staff cuts and cost reductions continued. A plan devised last summer to raise $25 million in financing fell flat, and efforts to find a buyer were to no avail.