Entellium Execs Simply Made Up Revenue
from the well,-that's-one-way-to-hit-your-numbers dept
It always surprises me when I hear about various tech startups that eventually resorted to outright scamming. I can understand the pressures of running a startup as things get tough, but I can't ever imagine resorting to making up revenue outright. Yet, whenever an economic downturn hits, these stories start popping up. You may recall back in 2001 when the hot startup Critical Path was caught making up about 10% of its revenue. A day later, one of the biggest speech recognition companies of the time, Lernout & Hauspie, announced that its Korean division had made up almost all of its revenue. In that case, it resulted in the end of L&H completely, as well as jail time for the CEO.It looks like we may be getting another such story. Just a few weeks ago, CRM provider Entellium was announcing new products (which they spammed us with a press release about). On October 1st, we received another email pitch from Entellium, urging us to download its software for a free 30-day trial. That same day, the company's CEO and CFO suddenly quit. A couple days later, most of the company's employees were laid off and told that the company was out of money.
The whole thing seemed quite odd, especially considering that the company had raised over $50 million, had just launched this product and everything seemed to have been moving forward. Late Wednesday, however, the details came out. It turned out that the two execs who quit, Paul Johnston and Parrish Jones had been flat out lying to its board and its investors concerning revenue for years. For example, since 2006, the company made less than $3.8 million, but told the board it brought in $15.5 million. That's not just a slight fudging of the numbers -- that's extreme fraud, which was used to help the company raise that $50 million.
The biggest question, though, is where were the board and the investors on this. It's difficult to see how investors would hand over more than $50 million without ever conducting an audit. They simply believed the two execs. It's also worth noting how the fraud unraveled. Apparently, the VP of HR was cleaning out the desk of the former head of sales, and discovered the bogus set of books that the CEO & CFO had been showing the board. She turned them over to the company's comptroller, who gave them to a board member -- which resulted in the board pretty quickly calling the CEO to let him know that they were sending over their own "contract" CFO to "check some things out." That was the point at which the two execs resigned.
You always hope that these stories are simply cases of bad seeds, and that there aren't others doing the same, but it'll be worth watching to see if we start hearing other similar stories. They seem to come in bunches.
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Filed Under: cooked books, fraud, lying, parrish jones, paul johnston
Companies: critical path, entellium, learnout & hauspie
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These guys are smart enough for Wall Street
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Lying
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And this is unusual?
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ex employee
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Re: ex employee
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Re: ex employee
May the lord show mercy on PJ and Parrish and their families.
God Bless
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Small Timers
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Entellium blow up
http://www.wherearejohnandtodd.com/
John Cook
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Re: Entellium blow up
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What was that story not long ago about an Indian CEO who had pulled a similar scam in his publicly traded company? Several investors took it upon themselves to physically drag the CEO out into the street where he was beaten to death by an angry mob. As extreme as that may sound, perhaps a little of that over here would keep guys like this a bit more honest.
just sayin'.....
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we knew it was coming
IF YOUR GOING TO START A COMPANY...Know where you want to end up...if your idea is to start a company and not know how to dynamically run the business just stop and get into wire fraud...
P.S it would be my assumption that the HR gal that "found the books" (MW) probably accidently stumbled into the office after a little incident that left her relationship strained with a former exec....(i wonder how she kept her job) not having any hr experience before and she's the VP of HR?? two words "puts out"
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Re: we knew it was coming
There were, in fact, (and still are) many good people at Entellium, including some members of the Sales Team. The product needs to be vetted and revised, like all software products, but it is effective and powerful in several important ways. Many people were committed and truly believed they were doing something worthwhile. But, due to the immense hubris of the leadership, bad habits and dishonesty were given fertile ground to flourish. And, unfortunately, as is often the case, the lowest common denominator determined the bottom line.
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http://media.linkedin.com/mpr/mpr/shrink_80_80/p/1/000/003/11d/33dcd5f.jpg
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1-888-OOPS-JEW
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Re: we knew it was coming
It does suprise me that the investors & board weren't aware of what was going on, at least financially. At one of the small consulting companies I used to work for, the President was continually having to justify every expense to the board.
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Audit
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I attempted to communicate with the CEO about 3 months ago
I feel very empathetic for you all, the employees, the customers, and the investors. I don't know if my experience will even have meant anything to you, but I did try and I wanted you to know that. I love as you must realize the whole concept of CRM, as it is my DNA, my baby if you will. I saw the fallacy of the Siebel story, I even knew Tommy and played golf with him, but if you knew Tommy you knew he wasn't for the customer. I laugh at Salesforce.com and now had a similar experience with Mark Benioff, and now look what is coming out about them. I was actually rooting for Entellium, telling two of the young men who called me following up from my registering on the Entellium website. If there is any way that I can be a listening ear to any of you, please feel free to write me.
Sincerely, Mike Muhney
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Re: I attempted to communicate with the CEO about 3 months ago
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Re: Re: I attempted to communicate with the CEO about 3 months ago
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Re: I attempted to communicate with the CEO about 3 months ago
Are you saying that the hosted CRM may not be what we want if we are a 5 user small business just looking to keep a simple CRM system going? It looks like ACT for 5 users is a one time $1000, obviously there would be charges to update the SW, but I have been spending $1000/qtr for over 2 years and still haven't gotten Entellium to integrate my data and get me up and operating. Assuming they crash and burn shortly, it doesn't matter but I feel like I am fluching the money down the toilet being locked into a non-performing annual contract. I would like to contact you - do you have a website where I could ask further questions?
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Hard to believe that only two knew of the scam
Who/where were the auditors?
What about their lawyers who probably worked the contracts?
What about sales execs in the board meeting?
How about sales people who kibitz on sales numbers and probably could not come close to the claimed figure?
More here than stated in the CEO/CFO emails IMHO
Somebody will have an interesting time tracking down expenditures to Malaysia.
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religious cult
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History Lesson
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This surprises you?
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he ran away from Malaysia
Interesting, I'm not sure what is being implied here, that PJ also did something illegal in Malaysia and fled the country? That's quite odd as I saw him travel to Malaysia approximately 4-6 times a year and he actually worked with the Malaysian government to receive additioanl funding (did he lie to them also about earnings, probably), but what I'm intrigued by is the accusation that he did something previously in Malaysia that caused him to "run away"? I've never heard this before and if it's true the Malaysian government must have been very forgiving because they continued to give him money.
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Re: he ran away from Malaysia
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we are a customer
Salesforce.com here we come.
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ex employee
(deminse = Main Entry: 1de·mise
Pronunciation: di-ˈmīz
Function: verb
Inflected Form(s): de·mised; de·mis·ing
Date: 15th century
transitive verb
1: to convey (as an estate) by will or lease
2obsolete : convey , give
3: to transmit by succession or inheritance
intransitive verb
1: die , decease
2: to pass by descent or bequest
So once again...let the idiot rot in jail... I am not asking him to be executed; one less conman in the world means more lives will not be affected. Perhaps he will repent when he gets out and does God's work. He professes to be a Christian, I have my doubts. Don't be conned.
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An angry Customer
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Entellium is Disgrace to CRM
Then comes the inflated revenues, but only 4 years after the scam started; oooooook!!
In a market where customers are welling to sign yearly contracts, entellium offered none; don't you think they were trying to avoid any future liabilities?
Also, I have to be really dumb to believe that the ceo and cfo of entellium were the only two persons involved in this scam.
I spoke to a customer service and support agent of entellium via online chat and he told me that most of the story in the media is false and wrong, and they are still in business; yet many customers have told me that they could not get their data out of entellium!
If you look at salesforce.com books you will find that they mentioned Entellium as a close competitor ; and that gave many people the idea that entellium is a good company, but the reason salesforce.com mentioned them is that they represented no threat to them at all, but I am sure it helped get entellium major funding.
Anyways, Entellium customers have to quickly move to other crm vendors, and there are only three worth looking at: Salesforce.com, Netsuite, and Salesboom.com
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Where was the board?
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Shame
Although the actual sales are much lower, the true numbers do show traction, so the model is sound, it is just the players were dishonest and didnt have to work hard to create sales, they just made them up....
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Your all missing the big picture
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