Forensic Accounting

Select Cases

REVENUE RECOGNITION INVESTIGATION
Counsel to a telecommunications equipment manufacturer retained StoneTurn to review certain revenue transactions involving non-standard terms, side letter agreements, relationships with value-added resellers and other technical accounting issues. StoneTurn’s Forensic Accounting and Forensic Technology teams assisted the Audit Committee in its investigation and the Company in its restatement of financial statements, ending with the identification and remediation of control weaknesses.

REVENUE RECOGNITION INVESTIGATION: DATA ANALYTICS
Counsel to a telecommunications equipment manufacturer retained StoneTurn to review certain revenue transactions involving non-standard terms, side letter agreements, relationships with value-added resellers and other technical accounting issues. The Data Analytics group brought together the ordering, distribution, sales and cash receipts records from different systems and compared the data. Through this comparison, certain transactions, customers and sales personnel were identified as warranting particular attention and testing. StoneTurn ultimately assisted the Audit Committee and the company as it restated three years of financial statements as a result of misstated revenue.

STOCK OPTION RESTATEMENT
Counsel engaged StoneTurn to assist management of a publically traded semiconductor manufacturer in its restatement of nine years of previously issued financial statements arising from errors in accounting for stock-based compensation. StoneTurn conducted interviews, reviewed documents and prepared analyses to assist management in determining the appropriate accounting treatment for stock-based compensation. StoneTurn also worked with management to present its conclusions to the Company’s external auditors. The restated financial statements increased stock-based compensation expense by approximately $700 million during the affected period.

FCPA INVESTIGATION
Counsel retained StoneTurn professionals to assist in an investigation of alleged bribes and kickbacks paid by a U.S.-based global food service company to obtain additional contracts. The investigative team was dispatched to eight different countries across South and Central America and Europe to conduct simultaneous investigations into allegations of potential bribes. Our experts conducted a forensic analysis of books, records and internal controls at each location and identified specific instances of bribes paid to secure further business, as well as financial budgets that incorporated allocations for future bribe payments.

EMBEZZLEMENT INVESTIGATION
A privately held investment management team engaged StoneTurn to investigate and quantify losses due to employee theft. The investigation uncovered a range of complex schemes used to defraud a series of family trusts. StoneTurn assisted counsel in unraveling a web of related companies and associates to identify hidden relationships and fraudulent investment transactions totaling more than $50 million in misappropriated funds dating back over 20 years. After reporting its findings to the Company’s Board of Trustees, StoneTurn assisted the Company in restating the trusts’ accounts and referring the matter to the U.S. Department of Justice for criminal prosecution. StoneTurn subsequently assisted the Company’s counsel in its civil suit against the former employee and the employee’s associates.

MERGERS AND ACQUISITIONS DUE DILIGENCE
StoneTurn professionals were retained to conduct pre-transaction FCPA due diligence for several planned acquisitions of a U.S.-based office supply company in Asia and the Americas. During the investigation, our forensic accountants identified improper use of gift cards and gift certificate programs, and found that a second set of books had been created to hide revenue from the government for tax purposes. Other findings included illegal facilitation payments and various instances of misconduct. StoneTurn professionals then provided post-transaction assistance to identify FCPA risks and to bring the newly acquired companies into compliance with FCPA requirements.

SEC ENFORCEMENT ACTION DEFENSE
Counsel engaged StoneTurn to assist in defending an individual client against an SEC enforcement action related to the Company’s accounting for stock-based compensation. StoneTurn reviewed relevant case material, advised counsel on technical accounting issues and helped prepare multiple submissions to the SEC as part of the “Wells Notice” response. StoneTurn personnel also appeared before the SEC as counsel’s accounting consultant.

AUDIT MALPRACTICE DEFENSE
Counsel to an international public accounting firm retained StoneTurn to assist in the defense of an audit malpractice suit. StoneTurn assessed the procedures performed during the audit from the audit workpapers and other related documents and provided counsel with observations and advice necessary to develop the legal defense strategy. StoneTurn also provided counsel with a detailed overview of Generally Accepted Auditing Standards (GAAS) and prepared various analyses of Company documents.

CORPORATE MONITORING
A publically traded software company engaged StoneTurn to serve as an “Independent Consultant” pursuant to a cease-and-desist order issued to the Company by the SEC. The engagement required approval of StoneTurn’s appointment by the SEC and submission of a detailed report to the Staff of the Division of Enforcement, as well as to the Audit Committee of the Company. StoneTurn reviewed and evaluated the Company’s accounting policies and procedures and prepared a report outlining the internal controls in place, an assessment of the design of those controls and recommendations for improvements or additions to existing controls.

POST-ACQUISITION DISPUTE
Counsel engaged StoneTurn to analyze certain allegations concerning Generally Accepted Accounting Principles (GAAP) and the Company’s working capital calculations in connection with the purchase of a medical testing business. StoneTurn also assisted counsel with presentations to the arbitrator and analysis of possible financial outcomes for settlement purposes.

FCPA INVESTIGATION
StoneTurn professionals were retained to investigate whistleblower allegations of potential FCPA violations involving a U.S.-based oil and gas company’s European subsidiaries. StoneTurn analyzed financial records and documents for indications that kickbacks and bribes had been paid, and then did on-site document review of more than 10 years of financial data and helped U.S. counsel prepare and conduct multiple interviews, which revealed that millions of dollars in unusual payments had been made over a number of years.

MARKET TIMING ALLEGATIONS: DATA ANALYTICS
Counsel retained StoneTurn in a matter involving allegations of trade improprieties against a major investment firm. After conducting data analysis of previous broker transactions, StoneTurn successfully identified excessive trading patterns and translated the findings into damage calculations, which were subsequently presented to counsel.