Ex Con

Intelysis was approached by a financial services client that had financed a sizeable retail business in a factoring deal that had gone sour. The more our client looked at the situation, the less it made sense, and our forensic accounting professionals were retained to help them solve the problem. The Intelysis team began a full forensic audit of the business, and after a considerable amount of work, identified a carefully disguised discrepancy in payments that were supposedly for “management fees”. While our investigators looked into the trail left by these payments, the accountants continued with their painstaking search for evidence of fraud.

The investigators traced the money to a Florida company, and with these details in hand the accountants unearthed a complex scheme of fraudulent shares, options and warrants issues that had effectively moved control of the company into the hands of the wrong doers behind the Florida corporation. Further spade work revealed that the mastermind behind the scheme was a high profile felon who had been notorious in the previous decade for a major scam and had spent time in jail on that case. When his links to insiders at our clients company were confirmed, a series of lawsuits were considered, including one against the auditors who appeared to have turned a blind eye to the scheme. As the strength of our case became clear the matter was settled to the satisfaction of our client and the mastermind was forced to abandon the spoils and seeks greener pastures elsewhere.

Fallout

Intelysis was contacted by the legal representative of a shareholder in an active business who felt that he was being treated unfairly by his partner. An initial review showed that our client’s shareholding had been unlawfully diluted when his partner unilaterally issued additional shares to corporations that he controlled, effectively taking over control of the company. Having seized control, the partner then proceeded to execute a series of inappropriate transactions with non arms length entities, thereby diverting the profits of the company into his own pocket.

A forensic audit confirmed the details of the fraudulent share transactions and with this evidence in hand the Intelysis team was able to assist the client gain access to the company records under a shareholder oppression remedy. Subsequent work uncovered both the non-arms length transactions as well as a body of evidence detailing excessive expenditures by the partner, again unjustly enriching himself at the company’s expense.

With the evidence against him piling up, the other shareholder made a strategic move by putting the company into bankruptcy proceedings, but with the benefit of sound legal and financial advice, our client was able to recover substantial assets from the company.