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October 9, 2008
don't lie to your board
I have invested in over 30 companies. Have sit on five boards. Been a CEO four times. I have been an optimistic CEO, but have never lied to any investor or board member about anything. Today, the CEO and CFO (both of whom I know) of the Ignition Partners (where I am affiliated) funded company Entellium did the perp walk for cooking the books to the tune of almost $12M in non-existent revenue over the last three years. This is actually very easy for me. As CEO you are always responsible for everything that you say to the board and all the performance of the company regardless of if you actually had any knowledge of it (see Enron). Keeping two sets of books in the hopes that you can raise lots of venture money on lies and "make up the difference" in later quarters is the most bizzare strategy I have ever heard of. I hope Paul and Parrish have a better defense than they put in their e-mail admitting the scheme to the board "it seemed like a good idea at the time." I am hoping drugs and hookers were at least involved. But this was not a one time thing. This was month by month fraud for three years. That was only discovered by confession. I can see more private company audits coming..... This sucks for the entire start-up community. You can't blame that on the credit crunch.
Posted by Martin at October 9, 2008 12:21 AM
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