Accounting Fraud Watch: Jumio Founder, Former College Controller, Ex-Roadrunner Execs

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We arrived late to a couple accounting fraud settlement parties thrown by the SEC recently. All the Lagunitas and buffalo chicken dip were gone, and we were stuck drinking Busch Light and munching on carrot sticks. But we’ll still recap what happened at these shindigs anyway.

Silicon Valley startup Jumio’s ex-CEO settles SEC fraud charges [Reuters]
Daniel Mattes, the founder and former CEO of Jumio Inc., will pay $17.4 million to settle SEC charges that he defrauded investors in the mobile payments and identity verification startup before it went bankrupt.

Mattes was accused of overstating the Palo Alto, Calif.-based company’s revenue more than tenfold, making $14.6 million by selling his shares from April 2014 to February 2015, hiding the sales from Jumio directors, and falsely telling Jumio lawyers that the directors approved the sales.

The SEC said on April 2 that Mattes agreed to disgorge $16.76 million including interest and pay a $640,000 civil penalty. Former CFO Chad Starkey will pay $421,000 to settle SEC charges related to Jumio’s financials and Mattes’ stock sales.

Neither Mattes nor Starkey admitted or denied wrongdoing.

SEC Charges College Controller with Fraud [CFO]
The SEC announced charges on March 28 against Keith Borge, the former controller of the College of New Rochelle, alleging he defrauded municipal securities investors by concealing the college’s poor financial condition.

The SEC said Borge created false financial records, did not file payroll tax submissions, and did not assess the collectability of pledged donations that were unlikely to be received as donors became frustrated with the college’s operations.

His misconduct resulted in the college’s financial statements for its 2015 fiscal year falsely overstating net assets by almost $34 million.

Borge agreed to a partial settlement of the SEC charges. He pleaded guilty to one count of failing to pay federal payroll taxes and one count of securities fraud in a White Plains, N.Y. federal court.

Ex-Trucking Firm CFO Charged in $245M Fraud [CFO]
Peter Armbruster, the former CFO of Roadrunner Transportation Systems, was charged on April 3 with using “cushion” accounting and other deceptive accounting methods to manipulate the trucking company’s earnings so it could meet Wall Street estimates.

The SEC said Armbruster was part of a fraudulent scheme that “presented the illusion of a company that performed in line with analyst expectations when, in reality, Roadrunner’s performance was subpar.”

Armbruster, 60, and two former Roadrunner controllers—Bret Naggs, 52, and Mark Wogsland, 54—used deceptive accounting to hide “significant expenses that were affecting Roadrunner’s financial performance,” the SEC said in a civil complaint.

Naggs and Wogsland were indicted on related criminal charges in June 2018. Armbruster was arrested on a superseding indictment in that case on April 3. The criminal charges against Armbruster include wire fraud, securities fraud, and bank fraud.

After the alleged fraud was disclosed in January 2017, Roadrunner’s stock plunged, causing $245 million in shareholder losses.

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