PE-Backed Mobileum's Execs Charged With Securities Fraud

The U.S. Attorney for the Southern District of New York has unsealed an indictment charging several executives of the private‑equity‑backed telecom firm Mobileum Inc. with conspiring to commit securities and wire fraud. The charges stem from an alleged scheme conducted by former Mobileum Chief Financial Officer Andrew Warner and Kishore Vangipuram, the former chief of delivery (CDO), a press release from the Southern District of New York stated. In 2021, Warner and Vangipuram inflated the value of the company to "convey robust growth and operational efficiency" in order to allegedly deceive an investment firm into overpaying for the business in a private equity transaction. The two executives falsified Mobileum’s financial metrics and when the sale from Audax Group to H.I.G. Capital took place, the firm was valued at $915 million, Bloomberg reported. Warner received approximately $5.2 million and Vangipuram received approximately $5.5 million in stock, cash and other proceeds from Mobileum's sale, the press release stated. ‘Doctored Billable Hours And Invoices’ "Andrew Warner and Kishore Vangipuram allegedly exaggerated their company's fiscal success through doctored billable hours and invoices to defraud an unsuspecting investment firm of nearly one billion dollars," FBI assistant director in charge James C. Barnacle, Jr said in the press release. "These two executives allegedly exploited their respective CFO and CDO positions to betray the trust of an interested buyer out of selfish greed. The FBI continues to protect the integrity of corporate transactions from fraudsters seeking to profit from deceitful practices." After the sale went through, the two executives continued to allegedly commit fraud in order to prevent the investment firm from discovering the truth about Mobileum's financials. They asked employees to "reduce their level of effort" for projects so that they would appear closer to completion than was accurate. This resulted in millions of dollars of imaginary revenue. Before the sale of the company, when a potential buyer asked about the company’s high level of unbilled revenue and whether that was a red flag indicating poor cash conversion, the two executives would tell their employees to create fake invoices for billing milestones that the company had never reached. Warner also allegedly instructed that those invoices be processed internally and would be withheld from the customers themselves. Following the sale, Vangipuram told a colleague not to send any emails regarding invoicing, because it would "land them in a lot of trouble." In 2024, Mobileum declared bankruptcy after H.I.G. Capital discovered the fraud scheme. Warner and Vangipuram are being charged with conspiracy to commit securities fraud and wire fraud, which has a maximum sentence of five and 20 years in prison, respectively. U.S. District Judge Magistrate Judge Kandis Westmore has been assigned the case and will determine sentencing. Photo: Shutterstock