Stout was retained by the government to investigate potential revenue overstatement of a health technology start-up that installed television screens and tables in doctors’ offices and then sold advertising space on those devices to clients, most of which were pharmaceutical companies. The government requested that we quantify the under-delivery of promised ad spots for pharmaceutical companies and the corresponding overstatement of revenues in 2015 and 2016.

The project team reviewed contracts between the health technology start-up and the pharmaceutical companies, general ledger entries, internal delivery reports, retrospective audit reports, auditor work papers, and other relevant documentation. The team then categorized the general ledger entries associated with each ad campaign and plotted the recognized monthly revenue against the agreed-upon monthly contractual device counts.

We estimated the actual delivery by month and by device, ultimately calculating the monthly shortfalls and overstated revenue. Our analysis conservatively identified a revenue overstatement of nearly 25% for both 2015 and 2016.

The government argued that these overstated revenues were relied upon by investors and creditors, enabling the technology start-up to secure the equity and debt capital that resulted in substantial dividends for executives.

A federal jury convicted three former executives of the technology start-up for their roles in the fraudulent scheme.