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...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.
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 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.