Case Study - Project Speed

Background

• A PE firm had purchased an extensive chain of restaurants throughout the Peoples Republic of China (PRC).
• The purpose of the purchase was to augment and grow the business throughout China.
• Shortly after the expiration period of the warranty revenue significantly declined without any explanation.
• The company immediately became loss making with the significant decline in revenue.

Strategy

• To determine the reason why revenue had significantly declined without explanation.
• To utilise alternative data sources to find an explanation for the significant decline in sales.
• Toverify the real underlying trading, we examined point of sale data and determined that there were major anomalies such as:

• Key restaurants were reportedly catering for customers at 3x the seating capacity.
• Serviettes delivered were disproportionate to meals. E.g. there was 1 serviette delivered for 200 meals.
• Some meals had been ordered 3 to 400 times for one customer.
• Similar anomalies occurred when looking at the point of sale data.

Results

• It was our expert opinion, that there had been significant over statement of revenue.
• Over statement of revenue had been disguised by using third-party cash to ensure that the revenue matched banked cash.
• Following the isolation of the meals that had been have fictitiously created, we restated the financials accounts.
• Acted as expert in an arbitration to:
• Explain the fraud.
• Demonstrate the real financial position.
• Calculate the purchases loss and damage.
• Resulted in a judgement against the defendant that enabled the plaintiff to recover significant damages.