Supplier & Manufacturer of Consumer Products
Industry:Banking & Finance
Service:Financial Advisor to Lender
Company:Supplier & Manufacturer of Consumer Products
A lender suspected fraud of its borrower.
At the request of a lender, Focus was engaged to review its financial condition, prepare cash flow forecasts and conduct a forensic investigation of the Company.
Our Professionals’ analysis revealed the following:
- The owner had falsified numerous invoices–and subsequent collections–in order to inflate the company’s borrowing base with its lender, thereby enabling the Company to access funds from the lender in excess of its true "eligible“ borrowing base. The result of including these falsified invoices in the borrowing base created an over advance of the bank line in excess of $8 million.
- Using forensic accounting techniques, Focus Professionals also identified numerous instances where goods had been shipped to customers which had not been set up in the Company’s sales ledgers. Instead of the Company collecting payments for shipment of goods to such customers, the payments were diverted to a separate “phantom” entity controlled by the owner.
Focus identified that the total amount of borrowing base misrepresentations and payment diversion misrepresentations exceeded $10 million.