Author Archives: Bill Foote

About Bill Foote

Bill Foote is a partner in Aronson LLC’s Forensic & Valuation Services practice. He also leads Aronson’s Transaction Advisory Services practice. Bill has 18 years of consulting and assurance experience serving clients in a variety of industries, including government contracting, technology, construction, real estate, and professional services. Bill’s consulting background includes projects such as: lost profits and lost earnings damages calculations; post-acquisition disputes; fraud investigations; buy-side financial/accounting due diligence; valuations for estate and gift tax compliance; valuations for stock option plans; purchase price allocations and goodwill impairment testing; valuations for S Corporation conversions; and valuations for disputes.

Bill Foote

CFO Penalized for Company’s Timesheet Falsification Fraud

Financial statement fraud schemes commonly take the form of overstated revenue. That was indeed the case in a recent SEC investigation into the falsification of time records by certain professional services employees of Saba Software, a provider of cloud-based intelligent talent management solutions that had its IPO in 2000.[1] According to the SEC, “[t]he improper time-reporting practices enabled Saba Software to achieve its quarterly revenue and margin targets by improperly accelerating and misstating virtually all of its professional services revenue during a four-year period as well as a substantial portion of its license revenue.”

For the applicable time periods, Saba reported annual revenue in the $100M to $120M range. As a result of the time record falsification scheme, revenue was overstated by at least 5% annually, resulting in a cumulative $70M overstatement of pre-tax earnings. From a GAAP perspective, Saba’s improper time-keeping practices precluded it from demonstrating VSOE and therefore required recognition of professional services revenues on a completed contract basis. In short, Saba recognized revenue earlier than it should have, which caused operating results to be materially misstated.

Although there was no indication that the company’s CFO was involved in the scheme, the SEC applied the “clawback” provision of Section 304 of the Sarbanes-Oxley Act of 2002, ordering that nearly $500,000 be reimbursed to Saba for stock-sale profits and bonuses.[2] Separately, a former CEO also agreed to a similar “clawback” of $2.5 million last September, and Saba itself received a $1.75 million financial penalty in connection with the fraudulent accounting scheme.

As this SEC investigation illustrates, emerging and later-stage companies in the technology sector should be on the lookout for improper billing and revenue recognition practices, including premature and/or accelerated revenue recognition. As part of our Forensic & Valuation Services practice, Aronson LLC helps clients investigate financial statement misstatements and asset misappropriation schemes. To learn more about how our team of Certified Fraud Examiners can assist your organization, contact Bill Foote at 301.231.6299.



[1] A publicly traded firm until recently, Saba was taken private last month and is now owned by a San Francisco based private equity group.

[2] See SEC Order dated 2/10/2015 at During the applicable time periods Saba actually employed two different CFOs; the $500,000 is a combined figure.

Industry Insights on Fraud

Recent data from the Global Fraud Study, published by the Association of Certified Fraud Examiners (ACFE), provides occupational fraud insights by industry. The most active industries in the Washington D.C. metropolitan area (e.g., construction, real estate, technology, government, nonprofits) are among those covered in the Global Fraud Study. For the categories shown in the chart below, victim organizations in the real estate industry tend to suffer the highest median losses, followed by technology and construction.


While the median losses reported for the government and public administration category are comparatively small, it should be noted that fraud occurs far more frequently in that industry based on the cases reported in the Global Fraud Study. In terms of the type of fraud reported, cash disbursements schemes such as fictitious or inflated vendor invoices are common across most of these industries.

Aronson LLC is committed to serving the needs of the most active industries in the region, including the investigation of losses in fraud or defalcation situations. To learn more about how our Forensic & Valuation Services practice can assist your organization, contact Bill Foote at 301.231.6299.


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