All right Klynveldians, we don’t know which one of you was a little generous with the letterhead but you’ve really done it.
Jeremy Blackburn, COO and President of Canopy Financial was able to raise $75 million for Canopy Financial based on bogus audit reports he provided to investors and pocketed more than $2 million for himself, according to the SEC’s complaint against Blackburn and the Company.
We’ll give the man cred ew the script:
Blackburn sent [Canopy CEO, Vikram] Kashyap an email dated June 30, 2009, attaching the KPMG Audit Report and the audited Canopy financial statements, with an email subject heading of “Audit Finally Complete,” and email text stating “I never wanna [sic] go through this again!!”
Kashyap apparently wasn’t in on the little secret that KPMG was not engaged to audit squat for Canopy. Nice work staying on top of everything, Vik. Meanwhile, Canopy’s investment bank, Financial Technology Partners, didn’t need an email telling them the audit was hell. They just ran to VCs with the notion that everything was on the up and up.
The bank is all bent out of shape because they’re taking heat and claim ‘We clearly had no clue about any such wrongdoing.’ Who wants to bother with the auditors? As Michael Arrington of Tech Crunch notes, “A 10 second phone call could have cleared this up before investors plowed $85 million into the company.”
The whole thing finally went south when Canopy’s new general counsel contacted an acquaintance at KPMG to help him find a new CFO. Canopy’s general counsel then sent over the “audit report.”
KPMG quickly responded to Canopy and advised Canopy in a “Cease-and-Desist Demand” letter dated November 3, 2009, that Canopy used KPMG’s name without KPMG’s authorization and consent. Further, KPMG told Canopy that it: (1) had never been retained nor agreed to audit any of Canopy’s financial statements; and (2) did not issue the audit opinion dated June 29, 2009. KPMG demanded, among other things, that Canopy “immediately CEASE AND DESIST from using the subject report and/or the unauthorized use of the KPMG name….”
It’s seems obvious that KPMG did nothing wrong here but this is still a big bowl of awkward. The firm’s name is all over the complaint and who knows how many other companies are running around with the firm’s letterhead throwing their “audited” financials around.
As we’ve indicated, this may call for a completely new look for KPMG. That means no more blue squares. We realize that’s a horrifying thought but the whole firm may be compromised. If you’ve got suggestions for the look (other than pink) or any thoughts on this snafu, discuss in the comments.
UPDATE: A tiny clarification/correction here: The original post over at Tech Crunch states, “Multiple sources have told us that Canopy was absolutely making up their financial statements, even forging audited statements with fake KMPG [sic] letterhead.” One could get the impression from our post here that genuine KPMG letterhead was used. That does not seem to be the case. The SEC’s complaint states that the audit report was “falsified” or “forged” without mentioning the authenticity of letterhead.
Nevertheless, we still stand by our conclusion that the Firm has no choice to either revisit stationery controls (since it’s obvious you can’t just get the shit anywhere) or change the entire logo as a precautionary measure. Similarly, we will continue to address this particular scandal as “Letterheadgate” to best follow the tradition of any scandal happening in the post-Nixon era to be suffixed with “gate”. We’re done here.
Canopy Financial Turns Into Sad, Comical Game Of Hot Potato [Tech Crunch]
Earlier: KPMG Will be Stingy with the Letterhead From Now On
Have you been craving a tech startup accounting scandal? Thought so. Enter Canopy Financial, Inc. who “provides technology-enabled electronic payment, account management, and investment technology platforms for health savings accounts, flexible spending accounts, and health reimbursement arrangements.”
The company was ranked #12 in the 2009 Inc. 500 List of fastest growing companies in America:
In 2008 CEO Vikram Kashyap said his company had 2007 revenues of $9 million. More recently, we’ve heard, the company was saying they’d hit $60 million in revenue and $9 million or so in EBITDA.
All of this may have been lies.
Until recently all the venture capitalists involved proudly placed Canopy Financial on their portfolio pages. Now all trace of the company have been erased from the portfolio pages of investors GGV Capital, Spectrum Equity and Foundation Capital. And their investment bank has erased them from their trophy page as well.
So what happened? Multiple sources have told us that Canopy was absolutely making up their financial statements, even forging audited statements with fake KMPG [sic] letterhead. And somehow the investment bank and all the investors never figured it out.
Jesus, this doesn’t even qualify as cooking the books. This is more along the lines of:
CFO: No, we cannot say $100 kajillion.
CFO: Because no one will believe it.
CFO: Do you know what a kajillion looks like?
CEO: Um, no.
CFO: It has to look like a real number. I’m saying $59,984,387.
CEO: What about…
CFO: Shut up, that’s the number.
Then all you have to do is get your hands on some KPMG letterhead and BAM your company is listed in a magazine.
We tried contacting KPMG about this but our emails have gone unreturned. We’ll let you know if we hear back from them. In the meantime, if you know anything more about this particular story, enlighten us in the comments.
UPDATE: See the clarification about the authenticity of the letterhead on our post from December 3rd.
Canopy Financial Accused Of Serious Financial Fraud, Investors Burned [Tech Crunch via FINS]