Federal prosecutors have accused a co-founder of Canopy Financial, a provider of financial services technology for healthcare customers, of creating phony information about the company's finances to raise money from investors.
Canopy co-founder accused of wire fraud
Jeremy Blackburn, who also was the company's president and chief operating officer before resigning recently, was charged with wire fraud in U.S. District Court in Chicago and released on $1 million bail. San Francisco-based Canopy filed for bankruptcy protection last week. The Securities and Exchange Commission, meanwhile, filed a civil fraud complaint against Blackburn and Canopy alleging the same scheme.
According to the complaints, Blackburn forged a KPMG audit report for the company's 2007 and 2008 books, working from a sample report he obtained from the accounting firm, and sent the fabricated document to an investment banker who shared it with Spectrum Equity Investors. Blackburn also allegedly sent Spectrum fake bank statements showing balances between $5.7 million and $9 million, although the company's actual account held less than $100,000.
In two 2009 private-placement stock offerings, according to the SEC complaint, Canopy raised $75 million, most of it from Spectrum Equity Investors. Blackburn allegedly steered more than $2 million of ill-gotten funds into his personal accounts.
The SEC complaint describes that the alleged scheme was revealed in November when a new general counsel hired by Canopy unwittingly sent the fake audit to an acquaintance at KPMG while searching for a new chief financial officer for the company.
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