Sunday, December 20, 2015

Innovate Mississippi refiles lawsuit against accountants.

Innovate Mississippi sued its former accounting firm in Madison County Circuit Court on December 16.  The company accused accounting firm Carr, Riggs, & Ingram, LLP of failing to detect alleged embezzlement by its former Chief Financial Officer, Tanya Klauser.   Innovate Mississippi claims the embezzlement was more than $500,000 and probably $1 million.  Innovate Mississippi was formerly Mississippi Technology Alliance.  Ms. Klauser pleaded guilty to embezzlement in October 2014.

 Innovate Mississippi sued the firm in federal court in October but the case was dismissed for lack of jurisdiction.   Innovate Mississippi is a Ridgeland non-profit company that focuses on helping technology start-up companies obtain venture capital from private investors.  The company charged that CRI should have detected Ms. Klauser's alleged embezzlement.  The complaint restates the charges that were made in the federal lawsuit:

For each year it prepared audits for Innovate, CRI issued "clean" audit reports in every material aspect.  At no time during its tenure did CRI ever raise a concern of any significance involving Innovate's management, internal contrnols, or financial practices.  CRI repeatedly informed Innovate's board of directors that it uncovered no material deficiencies...

Innovate replaced CRI with BKD, LLP as its new auditor for the fiscal year ending on June 30, 2013.

Durins its initial assessment, BKD immediately discovered several issues of concern regarding Innovate's CFO, Tanya Klauser, and Innovate's internal controls.

BKD advised Innovate regarding its concerns and Innovate subsequently engaged BKD to conduct a full forensic investigation.

Through its forensic investigation, BDK discovered three types of unauthorized transactions perpetuated by Klauser:

1) unauthorized payments to Klauser's personal credit card.
2) unauthorized expense report charges
3) unauthorized charges to Innovate's credit card.

It was discovered that Klauser had embezzled more than $500,000 from Innovate during her employment.  The exact amount of Klauser's embezzlement has not been finally commputed but is believed to be approximately $1.0 million....

Indeed, BKD discovered Klauser's fraudulent activity in a matter of days whereas CRI gave no hint during its long engagement (six years) that either fraud was occurring....
The 2013 tax return states Ms. Klauser's salary was $115,916 and her benefits were $12,619.  The 2012 tax return states her salary was $110,311.  The 2013 tax return claims a loss on embezzlement of $165,123 although the 2014 tax return is not available.

The case has been assigned to Circuit Judge Steve Ratcliff. 

* Sentence: "30 days incarceration; 2 months halfway house; 3 years supervised release, with 6 months being home confinement; $598,143.38 restitution; $100 special assessment. Signed by District Judge Tom S. Lee on 9/10/2015 (ND)" Earlier post with copy of charge and order.

Kingfish note: The Clarion-Ledger has apparently chosen to bury this story.  The CEO of Innovate Mississippi pens a regular technology column for the newspaper.   One would think that an embezzlement of over half a million dollars from a local company and a lawsuit against the former accounting firm would garner attention on South Congress Street but such is apparently not the case. 


Anonymous said...

No way one person can steal this much with out help. This outfit has a history of being filled with dirty people.The audit firm did not look the other way without being made to.

Anonymous said...

Who was the partner from CRI on this audit? The manager? Someone reading this knows.

Anonymous said...

It is odd that the C-L is crickets about this story. She was ordered to pay $600,000 restitution and I hear she still teaches Sunday School.

Maybe JFP and Northside Sun can pick up this story and then the C-L and Supertalk radio will then say something about this rat hole.

Anonymous said...

Didn't she work at the firm before coming to Innovate? If the CFO and auditors are that close, theft and embezzlement be very easy. What is the story for the Clarion Ledger? We know a theft occurred. Time will tell the rest.

Anonymous said...

Didn't she work at the firm before coming to Innovate? If the CFO and auditors are that close, theft and embezzlement be very easy. What is the story for the Clarion Ledger? We know a theft occurred. Time will tell the rest.

Anonymous said...

How much State money has I.M under all its different names over the years.Many , many millions.

Anonymous said...

Kingfish....quit protecting CRI and let people name the partner/manager involved. I've tried to name them on this post, as well as the last post, yet for some reason neither comments were approved.

And if you think this is the only fraudulent audit conducted by CRI, then you are a fool.

P.S. CRI is very involved with the State of Mississippi and the Mississippi Development Authority.

Anonymous said...

I wonder what the correct spelling of Ms Klauser's first name is.

The suit uses Tanya but the filings in the criminal case use Tonya.

Anonymous said...

I already know I'll get beat up about this but isn't this the way the system's supposed to work? Somebody does something wrong, they get caught, they pay. I love the way all you W2 disgruntleds have an answer for everything. You must feel satisfaction that your non-credited thoughts "are up in lights". You guys are the best, I bet more than half of you work in state government and are just mad no one listens to you.

Jackistan Can! said...

If the original accounting firm is supposed to detect this level of fraud from its documents and spreadsheets, then what is the responsibility of the CEO and other staff at Innovate MS to detect such fraud as well? Should they sue themselves? Were they too dumb to notice after 6 years that the lady down the hall was a little richer than normal??

Anonymous said...

Audits are not designed to detect fraud. An audit is an opinion that the financials are presented according to Generally Accepted Accounting Principles (GAAP). In addition, Management bears responsibility for the financials NOT the accounting firm. It appears this was a case of management over-ride of internal controls.

Anonymous said...

Bernie went to jail becuase he was supposed to know. Whether he knew or not, he should have. Seems like this board needs to face a judge too. How can $500k or more be missed in such a small budget?

By the way, how much is the budget for this outfit and how much comes from taxpayers?

One more thought....why is this so different than what the Terry Mayor did? He got 20 years.

Anonymous said...

Bingo 12:00am Problem is, all of these "innovators" down there have not had a real job in the real world. The whole entity is quite silly.

Anonymous said...

The State funded this organization; what was their over sight? The entire effort has been under several names and many leaders and was a con game from the start.

Anonymous said...

Innovate Mississippi = GOP good ol' boy employment agency

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