You can't just tell the board anything you want

Came across an almost unbelievable story tonight. The title of the story was that 40 people were laid off at a software company. I figured it was going to be about the economy, but no.  This one is crazy.  Seems the CEO and CFO of Entellium decided that they were were going to tell the board that their revenue was 400k a month higher than it really was! Over time the revenue of the company was stated to be over 15 million, when it was just over 3 million. I know there are used car salesman type of companies that might overstate revenue to a reporter or analyst, but it takes some set of stones to lie to the board about it. 

Now Entellium is not a public company, so there was not public stockholder fraud.  The fraud came into play when the investors including the well known Ignition Partners, claimed they would not have invested in the company had they known the real revenue numbers. It was based upon this claim that the charges were bought.

But I ask myself, what kind of venture company would invest money and keep investing more money (they raised about 50m total), without some sort of audit of the books?  We have yearly audits here at StillSecure.  I can't imagine with raising that kind of money, no one asked for an audit.  It just seems incredulous.

I think before the dust settles on this one, we may find out that there was more here than meets the eye. I would not be surprised if someone was not turning a blind eye towards the revenue reports to facilitate an exit or something else.  If that is the case, these two guys may be just the tip of the iceberg here! In the meantime, 40 more people are out of a job.

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