When making investments many think seeing is believing. That often means asking for the key documents and carefully examining them. If it is in the documents then it must be true. If the papers are furnished by a reputable professional such as a former professor who is an accountant at a known firm, the belief can be bolstered. Thus the investors in an intellectual property firm obtained and reviewed the key documents. They invested millions of dollars. The documents were fraudulent. Their funds were misappropriated. U.S. v. Henning (S.D.N.Y. Oct. 9, 2018).
Defendant Steven Henning is a certified public accountant who was the Managing Partner at a Manhattan accounting firm. He was also the Partner-in-Charge of Advisory Services and served on the firm’s Executive Committee. Prior to joining the firm Mr. Henning had been a Professor of accounting at a Texas university. He had also served as an Academic Fellow in the Office of the Chief Accountant at the U.S. Securities and Exchange Commission.
In June 2008, while still with the accounting firm, Mr. Henning formed OpportunIP, LLC for which he was the CEO. He held an interest in the fund through a family partnership. Other members of the accounting firm owned interests.
In May 2012 Mr. Henning told one of his prior students from the University about the firm, describing it as a venture through which he would establish partnerships with owners or developers of intellectual property and assist them in taking that IP to market. Mr. Henning and the Former Student continued to discuss the firm.
Two years later Defendant Henning approached Former Student about investing in the firm. Specifically, he offered an opportunity to invest in a situation where an IP owner needed a $500,000 loan to get past certain financial difficulties. The loan would be repaid in six months.
As Former Student and Mr. Henning discussed the lending opportunity another arose. This one involved a License-Out deal involving an agreement between an IP owner represented by OpportunIP and a global automobile manufacturer. Mr. Henning furnished copies of all the pertinent documents and, in addition, an agreement with a second global auto dealer to license the same technology.
As discussions continued Mr. Henning listed out IP transactions where he had signed deals and secured minimum guarantees. He proposed that Former Student acquire 5% of OpportunIP for $2 million. Former Student agreed to go forward with two licensing agreements pursuant to which $35 million would be held in escrow and OpportunIP would receive $2 million no later than the end of the year. Former Student sent Mr. Henning $500,000. Later he wired another $500,000 to his former professor while continuing discussions about investing in the firm.
Subsequently, Mr. Henning proposed forming an entity similar to OpportunIP. Former Student brought in his Relative and that person’s family. Eventually Mr. Henning furnished the potential investors with electronic bank records for OpportunIP. Based on those records plus the documents from Former Student’s initial investment, Former Student and Relative had $1 million wired to an account in the name of an entity that was set up to be a branch of the new OpportunIP. Mr. Henning continued to discuss the business after the investment.
In August 2017 during a search of Mr. Henning’s office at the accounting firm portions of the deal documents from the transactions were found. They contained taped-on signatures of executives on their signature pages. The deal representations were false; the papers were false; and the money was gone. Mr. Henning was charged with wire fraud. The case is pending.