Canopy Financial Fraud

There were two executives named Jeremy Blackburn and Anthony Bansa from Canopy Financial that orchestrated financial fraud in order to steal $93 million from investors. In order for this scheme to work Jeremy and Anthony devised a plan to steal $75 million from private equity investors by providing them with bogus auditor’s report and falsified bank statements. Thus, it was through the use of stating to investors that their financial statements had been audited and approved by KPMG that gave creditability to their fictitious financial statements. For example, “Canopy was absolutely making up their financial statements, even forging audited statements with fake KMPG letterhead” (Arrington). For that reason, Jeremy and Anthony were able to fool investors

The first flag that was missed was the fact that Canopy Financial stated that their financial statements were audited by KMPG and was given the thumbs up without contacting them to make sure they performed the audit. The second flag was a Northern Trust Company account, which was forged by Blackburn, which reported Canopy’s cash balance for June, was about $8.9 million but in fact was $86,000. The investors should of contacted Northern Trust Company to insure that the statement that Blackburn gave to them was accurate and truthful. The last flag was the increased number of customers that Canopy Financial handled that in fact was lower then what they stated. For example, “The reports showed an increase in the number of customers, increasing from 214,735 in February to 1,012,002 in May. In fact, as of June, Canopy ’s internal records show that it only had 81,618 client accounts” (WSJ). Any number of these would of exposed the scheme to the investors if they had in fact called KPMG, Northern Trust, and made sure the number of clients Canopy handled were in fact that many. The first internal control policy would have been to contact KPMG to assure that they in fact were the accounting firm that audited Canopy