healthcare services

FINANCIAL INVESTIGATION – RECONSTRUCTION OF BOOKS & RECORDS – ASSET TRACING

Investors in an early-stage start-up venture exercised their right to audit clause after the business owner died unexpectedly and other members of management failed to provide timely financial information while asking for additional capital.  Counsel for the start-up retained  an HMP executive (at a former firm) to investigate the Venture’s financial position by reconstructing the books and records and by tracing the Venture’s cash inflows and outflows.

Issues:

  • Deceased owner had complete control over the books and records with no other personnel involved in the accounting function
  • We received paper bank statements as the only information source to conduct our investigation
  • Investors demanded a short timeline of less than a month for completion of our analysis so they could make decisions regarding additional funding
  • All investors perceived their investments were initially treated as capital or a triggering event had converted their notes to equity. However, there were missing and incomplete agreements for several investors resulting in a disagreement among the investor group.

Approach:

  • Analyzed available records and uncovered hundreds of thousands of dollars that appeared to be embezzled by the deceased owner. We also found instances of seemingly personal expenses of the owner were paid directly by the company with no accounting for these amounts and no repayment from the owner.
  • Prepared a sources and uses of funds analysis and determine millions were transferred to a bank account that no one could identify the account holder.
  • Traced investors funds to the venture’s bank statements to ensure capital was properly deposited into the Venture’s bank accounts and not siphoned off by the owner.

Result:

  • We presented our findings to Counsel and the investor group for further investigation and proper disposition

 

Scroll to top