Entellium CEO, CFO Arrested by FBI
ADOTAS – Software startup Entellium is in hot water for allegedly cooking the books. Its CEO, Thomas Johnston, and its CFO, Parrish Jones, have been arrested by the FBI for pumping up sales figures to attract venture funding. And attract it they did!
According to a release from the U.S. Attorney’s Office in the Western District of Washington, Johnston and Jones “devised a scheme to defraud investors in the company by representing that company revenues far exceeded the actual figures.”
An HR rep first discovered the alleged fraud in September of 2008. “[A] human resources employee was cleaning out the desk of a former Vice President of Sales for Entellium. The human resources employee discovered “board books” which contained financial information that had been presented to the Entellium board of directors. When the company comptroller reviewed the board books she discovered that the company revenues had been grossly inflated. The board was told that in 2006 the company had revenue of nearly $4 million when in fact if was just $582,789. The stated revenue figure for 2007 was $6.2 million, when in fact it was $1.4 million and in 2008 the stated revenue was $5.2 million when in fact it was only $1.7 million. The Entellium legal counsel reported the matter to law enforcement,” according to the U.S. Attorney’s Office.
The false revenues were allegedly used to snag roughly $50 million in private investments, including $19 million from VC firm Ignition.
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