Inc. 500 Company Canopy Financial Subject of FBI Probe

The health care company's founder, Vikram Kashyap, has stepped down as CEO.

By Jason Del Rey and Max Chafkin | 
 

Courtesy company

Resigned: Canopy Financial CEO Vikram Kashyap resigned amid an FBI investigation of the company.

Canopy Financial, a health care software company that ranked No. 12 on the 2009 Inc. 500 list of the nation's fastest-growing private companies, is at the center of a criminal investigation, FBI spokeswoman Virginia Wright said today. “There's an ongoing investigation,' said Wright, noting that no arrests have been made.

Separately, Canopy Financial CEO Vikram Kashyap resigned from his position, though he remains chairman of the company's board of directors. Additionally, Jeremy Blackburn has resigned as the company's president and Anthony Banas, Canopy's chief technology officer, has been placed on administrative leave, according to company spokesperson Jim Bridges. Canopy Financial, which has offices in Chicago, San Francisco, and Plainsboro, New Jersey, has also experienced “a significant reduction in workforce,' Bridges said.

Kashyap's departure comes amid allegations of financial impropriety at the company, which were first made public yesterday by Michael Arrington, the founder of TechCrunch, the popular technology blog. According to Arrington, anonymous sources allege that the company provided false or misleading financial statements to investors, including some big-name venture capital firms. Arrington's sources further claim that Canopy submitted financial statements on KPMG letterhead that were not authentic. Dan Ginsburg, a KPMG spokesperson, said, "Whether they are a client or not a client, we cannot comment on client matters.'

As part of the Inc. 500 reporting process conducted earlier this year, Canopy Financial submitted to Inc. completed U.S. corporate income tax return forms that reported annual sales of $246,480 in 2005 and $19,790,187 in 2008. The company also submitted a revenue certification form showing those same numbers and signed by Kashyap.

In recent years, Canopy had been a darling of venture capitalists, raising nearly $90 million. A partner at Foundation Capital, an elite Silicon Valley venture firm that invested $8 million in Canopy in August 2008, said the firm had no comment; he noted that Foundation does not hold a seat on Canopy's board. Calls to Spectrum Equity and GGV Capital--two of Canopy's other major backers--were not returned.

Kashyap did not return e-mail and voice messages seeking comment. His attorney, Ismail Ramsey, issued the following statement: “Vik Kashyap had no prior knowledge whatsoever of any fraud regarding Canopy's financial statements. He is as surprised as anyone about these allegations. He relied on financial and legal professionals in accepting the authenticity of the company's financials. Going forward, he will leave his role as CEO of Canopy but will remain as chairman of the board of directors, helping to ensure that anyone who committed fraud is held fully accountable.'

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    • Max Chafkin

    Senior writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York.


    Jason Del Rey

    Senior reporter Jason Del Rey covers technology, branding, and company culture for Inc. magazine and contributes to the From the Reporters daily blog. Before joining Inc., his work appeared in Newsday, The (Newark) Star-Ledger, and the Staten Island Advance, and on ESPN.com. He lives in New York City.


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