Andrew Warner and Kishore Vangipuram Schemed to Defraud Investment Firm in Connection with Its $915 Million Acquisition of Mobileum, Inc.
United States Attorney for the Southern District of New York, Jay Clayton, and Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation, James C. Barnacle, Jr., announced the unsealing of an Indictment charging ANDREW WARNER, the former Chief Financial Officer of Mobileum, Inc., and KISHORE VANGIPURAM, the former Chief of Delivery of Mobileum, with conspiracy to commit securities fraud and wire fraud, securities fraud, and wire fraud. The charges in the Indictment arise from an alleged scheme by WARNER and VANGIPURAM to inflate Mobileum’s key financial metrics in advance of the company’s 2022 sale to an investment firm at an enterprise value of $915 million. Mobileum declared bankruptcy in 2024, after the fraud was uncovered. WARNER surrendered in San Jose, California, and was presented before U.S. Magistrate Judge Susan van Keulen. VANGIPURAM was arrested at the San Francisco International Airport and will be presented before U.S. Magistrate Judge Kandis A. Westmore. The case has been assigned to U.S. District Judge J. Paul Oetken.
“As alleged, Andrew Warner and Kishore Vangipuram manipulated Mobileum’s financial metrics to sell the company at a higher price and, as a result, line their own pockets,” said U.S. Attorney Jay Clayton. “The company’s investors, creditors, and employees deserved fair and complete financial information, not inflated numbers and schemes. When C-Suite executives commit fraud, the women and men of our Office, together with our law enforcement partners, will hold them accountable. That is what investors and the American people want.”
“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,” said FBI Assistant Director in Charge James C. Barnacle, Jr. “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.”
As alleged in the Indictment unsealed in Manhattan federal court:
WARNER and VANGIPURAM were the Chief Financial Officer and Chief Delivery Officer, respectively, of Mobileum, a Silicon Valley-based company that provided data analytics and network solutions to telecommunications firms around the world.
Beginning in or about September 2021, WARNER and VANGIPURAM schemed to deceive an investment firm into overpaying for Mobileum as part of a private equity transaction. To inflate Mobileum’s apparent value, and to convey the illusion of robust growth and operational efficiency, WARNER and VANGIPURAM falsified the company’s financial metrics, including revenue and unbilled revenue. In or about March 2022, after receiving those artificial metrics, the investment firm acquired Mobileum at an inflated enterprise value of $915 million. In connection with the sale, WARNER received approximately $5.2 million, and VANGIPURAM received approximately $5.5 million, in cash, stock, and other proceeds.
WARNER and VANGIPURAM’s scheme hinged on the fraudulent acceleration of revenue. Under Mobileum’s accounting method, the company purported to recognize revenue over the life of a project in proportion to the work performed. Consequently, any inflation of hours worked, or reduction in estimated total effort, resulted in fraudulent recognition of revenue. WARNER and VANGIPURAM manipulated the revenue recognized by directing employees to transfer hours from projects where the hours were non-billable to projects where the hours were billable, to create the false appearance that billable work had been performed. They also directed employees to artificially reduce the “level of effort” for projects, effectively shrinking the total work required so that work already performed represented a higher percentage of the contract. By making projects appear significantly closer to completion than was factually accurate, the defendants manufactured millions of dollars in imaginary revenue.
To cover up their fraudulent acceleration of revenue, WARNER and VANGIPURAM engaged in more fraud. Their fraudulent revenue acceleration resulted in a substantial spike in “unbilled revenue”—income recognized on Mobileum’s books but not yet invoiced to customers. Before the sale of Mobileum, when the potential buyer repeatedly inquired about Mobileum’s high unbilled revenue as a red flag indicating poor cash conversion, WARNER and VANGIPURAM directed employees to create fictitious invoices for billing milestones that Mobileum never reached. To prevent discovery of the underlying fraud by Mobileum’s clients, WARNER instructed that those invoices be processed internally to satisfy the investment firm’s scrutiny but strictly withheld from the customers themselves.
Even after the sale of Mobileum to the investment firm, WARNER and VANGIPURAM continued their deceptive practices to prevent the investment firm from discovering the true state of Mobileum’s financial health. After the sale, VANGIPURAM cautioned a subordinate not to send emails about their invoicing because it would land them in a “lot of trouble.” The scheme unraveled in 2024 after the investment firm discovered the defendants’ fraud, Mobileum’s true financial condition was disclosed, and the company—which the defendants had represented as a nearly billion-dollar enterprise—filed for bankruptcy.
WARNER, 62, of Morgan Hill, California, and VANGIPURAM, 53, of Pleasanton, California, are charged with conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of five years in prison; securities fraud, which carries a maximum sentence of 20 years in prison; and wire fraud, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Clayton praised the outstanding work of the FBI.
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