The team assisted the Securities and Exchange Commission (SEC) in litigation against a major supplier of goods to federal and local governments. The company’s management and founder were charged with violations of securities fraud and violations of insider trading, including misappropriating company assets and financial statement fraud through the manipulation of the company's inventory values and falsifying journal entries. As part of the alleged "pump and dump" scheme, when the misstated financial statements inflated the company’s share price, the founder took advantage the inflated price to sell shares.
As part of the damages calculation, the team performed a valuation of the company’s shares based on both the misstated and corrected financial statements to determine the inflated price due to the alleged fraud and the ultimate benefit the owner received from selling his shares at the inflated price. We also identified unauthorized transfers of funds from the company to senior management, the owners’ family members, and to related parties owned or controlled by the owners and their family members. An asset tracing analysis of company funds through multiple entities, trusts, and personal accounts was performed to show where the misappropriated funds were ultimately being held by the defendants.
Note: This work was performed prior to joining Stout.