Stout was hired to perform a forensic investigation into the actions of the CEO of North American operations for a privately held Italian company in the security technology space. Our client received an internal tip that the CEO was engaging in fraudulent activity, but it was unclear exactly what the alleged fact pattern was, though a sales person also was believed to be involved. Upon engagement, Stout immediately commenced an investigation into the allegations.
Stout, in conjunction with security personnel, locked down the client’s North American headquarters. The CEO and sales person were terminated by outside counsel, and multiple hand guns, some illegal in nature, were discovered and seized. Additionally, all electronic devices were preserved and imaged, including computers, cell phones and fax machines. We immediately performed an audit of the company’s inventory. Next, Stout conducted employee interviews in conjunction with counsel. While interviews were ongoing, the Stout team also began its investigation into the financial records of the company. Ultimately, based on our investigation coupled with the employee interviews, we discovered the CEO had seven different fraudulent schemes in place in the North American operations. This included, among other things, multiple fictitious vendors (companies “owned” by his brother or mistress), inventory fraud, expense statement fraud, recording personal assets in place at his residence as assets on the company’s books, and utilizing company inventory to run a competing business, after which the inventory was returned to the company as “damaged.” More than 15 of the client’s other employees were also involved in the numerous schemes.
Due to the nature of the client’s business, it did not want the fraud to be publically disclosed. Therefore, a settlement with the CEO was pursued rather than prosecution. The results of Stout’s forensic engagement formed the backbone of our client’s settlement position, and a settlement was ultimately reached.