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crm Entellium Execs Charged With Wire Fraud
The plot thickens for hosted customer relationship management software maker Entellium. After a stunning series of events which included the sudden and unexpected loss of top executives and a massive staff layoff the following day, we have now learned that the FBI has arrested former company CEO and co-founder Paul (PJ) Johnston and CFO Parrish Jones on at least one charge of wire fraud. A complaint filed Tuesday in U.S. District Court alleges Johnston and Jones "devised a scheme to defraud investors in the company by representing that company revenues far exceeded the actual figures," according to a news release from the U.S. Attorney's Office. Using the inflated revenue figures, the company was able to attract $50 million in private investments, including $19 million from Bellevue-based venture capital firm Ignition Partners.

According to the government’s complaint, an Entellium lawyer contacted the U.S. Attorney’s Office on Oct. 3 to report possible criminal activity by Johnston and Jones. That attorney provided text of an e-mail reportedly sent from Johnston to Entellium board members Pete Solvik and Jonathan D. Roberts on Sept. 30. The text follows:

Jonathan and Pete

This is a very difficult email to write but effective immediately both Parrish and I are tendering our resignation.

We have both made a grave mistake to misrepresenting our revenue reporting to the board. Looking back at the time we thought we would be able to right the wrong and correct our representation, but we have not been able to do this. Revenues have been overstated since 2004 with a delta of approximately $400k a month. All other representations are accurate and no one else in the company was aware of this.

Clearly this is devastating news and something we are both regret and are deeply sorry for. Our families are not aware of this and we are telling them now. Clearly this is going to be a very difficult period all around for everyone.

My recommendation is that payroll is funded and that you work with the management team in place to conduct a transition and continue to build the business. We will do what we can to ensure a level of continuity. Parrish and I will work through the process to ensure that all investors can continue to protect downside and right the ship.

As I said, all other representations are accurate and the business has traction. For the next 24 hours we need to discuss the consequences of our actions with family members and ensure we do what we can to make the best of a terrible situation for everyone concerned. Deeply shamed and sorry.


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tags Tags: Entellium
posted Posted: On-Demand CRM Software
author By: Chris Nichols
date Date: October 9, 2008
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crm Reader Comments

By anonymous on October 12, 2008
After reading a number of blogs covering this topic with many of the posts coming directly from former Entellium employees, the so called 'extravagant scheme' conjured up the by CEO and CFO does not really seem that extravagant. The only thing that seems to reach the level of greed by these unethical executives is the ineptness of both the Board of Directors and outside accounting firm. With approximately $30M invested and 2 seats on the board, just where was the board oversight by Ignition Partners? Similarly, why was Seattle based accounting firm Moss Adams not able to perform its auditing responsibilities? The reality is that the ineptness of Entellium Board lead by venture capital firm Ignition Partners shares responsibility for the sudden and unfair job losses of the company's staff.

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