LameList!

Scandals, swindles and secrets entertain fans of crime stories and  film noir movies. Here are some real-life dramas:

From TechCrunch: “Last week, Danish Computerworld awarded IT Factory … with the prestigious Denmark’s Best IT-company 2008. This week, the company has been declared bankrupt and its managing director Stein Bagger went missing in Dubai while under scrutiny by the police.”

Reporters also found out Bagger had been renting a secret office in a conference hotel since two weeks near the IT Factory offices, which he reportedly used to forge documents and signatures in order to keep the massive-scale fraud going (it concerns about half a billion Danish Kroner or $85 million). Overall, sources assess that up to 90 percent of IT Factory’s turnover had been based on non-existing or false contracts. There’s also talk of a scam where non-existing IT equipment and other stuff was sold to leasing firms, and the cash was sent off to shady offshore companies.

In October, executives from Entellium, a Seattle company  were charged with fraud — cooking the books to make up revenue in order to raise millions from venture capital firms.  From the Seattle PI:

FBI agents arrested the chief executive officer and the chief financial officer of a prominent Seattle software startup on fraud charges that, if proven, would constitute a $50 million betrayal of the venture capital community.

Assistant U.S. Attorney Carl Blackstone, head of the complex-crimes section, said the men kept “two sets of books.” One set was “the cooked books for the board,” which included principals from Ignition Partners, a Bellevue venture capital firm populated in part by former Microsoft executives. 

The books contained inflated revenues used to attract investors such as Ignition, which has sunk more than $19 million into Entellium, according to the U.S. Attorney’s Office. A spokeswoman said Ignition executives were not available for comment.

Techdirt added:

since 2006, the company made less than $3.8 million, but told the board it brought in $15.5 million. That’s not just a slight fudging of the numbers — that’s extreme fraud, which was used to help the company raise that $50 million. 

The biggest question, though, is where were the board and the investors on this. It’s difficult to see how investors would hand over more than $50 million without ever conducting an audit. They simply believed the two execs. It’s also worth noting how the fraud unraveled. Apparently, the VP of HR was cleaning out the desk of the former head of sales, and discovered the bogus set of books that the CEO & CFO had been showing the board. She turned them over to the company’s comptroller, who gave them to a board member — which resulted in the board pretty quickly calling the CEO to let him know that they were sending over their own “contract” CFO to “check some things out.” That was the point at which the two execs resigned. 

TechFlash continues to update the Entellium saga.