A food manufacturer requiring forensic accounting help
case study

Synopsis

Blackhawk was enlisted by a part-owner of a company who was frozen out of their enterprise’s operations and barred from accessing critical business information, including accounts and company performance reports.

As a shareholder in the profitable family-owned business; this client was forcibly pushed out of the company against their will and despite holding a 50% stake. As such, they contacted Blackhawk in order to investigate the other owner, gather evidence and potentially exercise their legal rights.

Scope of investigation

It’s not uncommon for disputes to arise in directorial/boardroom environments, however, the terms and conditions of a company’s Articles of Association bylaws should stipulate that board members are protected in circumstances where these disputes do eventuate.

In this case, the freezing out of a 50% stakeholder is the first red flag that something unethical or illegal might be going on at the company. Notwithstanding the fact that this has been a profitable business, it raises concern that there is a great deal of potential for fraud.

This is all circumstantial, however, and without any evidence of wrongdoing or access to the company’s accounts, our client had no proof of malpractice. We implemented a ‘capture, preservation, extraction and analysis’ method when investigating and recovering the business’s financial data and then prepared an evidential report for the client.

Outcome

The specialist teams at Blackhawk implemented a strategy that sought to ascertain the goings-on of the company behind closed doors.

In order to do this, Blackhawk’s process spanned from accounting forensics and computer forensics to background investigations in order to ascertain the reasoning behind the freezing out of the client, find evidence of it and discover any potential fraud being committed.

One of the main considerations in such circumstances was ensuring that the data collected retained their integrity or were ‘preserved’ so as to retain their admissibility in court. Further to this, we needed to ensure that the investigation was conducted with the utmost discretion to avoid alerting anyone involved.

It was discovered through a comprehensive investigation that the other owner had been defrauding the company without the knowledge of our client, which was the reason for their exclusion from the company. Legal proceedings followed shortly thereafter.

Challenges presented

A number of challenges were posed throughout the process of this investigation; most difficult of these were the means by which we were able to acquire insights into the accounts of the company.

Moreover, navigating the complex relationship between family members who are also business partners represented another hurdle for us to overcome – initially our client was hesitant to believe that their sibling was capable of what was discovered, however, our evidence managed to convince them otherwise.

Client Testimonial

Case Leader