An acquisition in wonderland?

Case in Point: Financial statement fraud

By Elizabeth M. Junell, CFE, CPA

Just like Alice in her Wonderland, the acquiring company didn't anticipate the tricks of the Mad Hatter and March Hare. But eventually the purchasers discovered the nightmare of an $18-million fraud in the company they had bought. 

This case involves a post-acquisition dispute arising after a multi-million dollar acquisition through a stock purchase of a company burdened by a complex financial statement fraud. A serious matter indeed, but as our investigation during the case unfolded, it recalled elements of Lewis Carroll's book, "Alice's Adventures in Wonderland." One of the plaintiff's reports, which refers to the defendant's dubious expert witness's testimony, first raised the theme:

(Mr. Expert's) report evokes memories of a passage from "Alice's Adventures in Wonderland," in which Alice and the Queen of Hearts have the following exchange:
"There's no use trying," (Alice) said; "one can't believe impossible things."

"I daresay you haven't had much practice," said the Queen. "When I was your age, I always did it for half-an-hour a day. Why, sometimes I've believed as many as six impossible things before breakfast."

(Mr. Expert) obviously adopted the Queen's advice in connection with this engagement. Close analysis of his recent report reveals that (Mr. Expert) is asking Your Honor to believe scores of impossible things...

Follow me into an Acquisition in Wonderland.

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