A press release issued last week by prosecutors in the Southern District of New York asserts that the valuation of telco security and RAFM supplier Mobileum was inflated by accounting fraud prior to the acquisition of a majority stake by HIG Capital in 2022. Andrew Warner, the former Chief Financial Officer of Mobileum (pictured left), and Kishore Vangipuram, the former Chief of Delivery (pictured right), are said to have made a fortune by manipulating the accounts to make the company appear more successful than it really was. This resulted in fat bonuses for them when the business was sold. Mobileum had been a leader in several important telecoms revenue assurance and data intelligence markets but the company filed for bankruptcy in 2024. The executive team installed by HIG blamed the bankruptcy on the history of deception under their predecessors. If found guilty, Warner and Vangipuram each face a potential 20 year maximum prison sentence. Their criminal case adds a new dimension to the ongoing civil litigation between HIG and former majority owners Audax.
US Attorney Jay Clayton said of the case:
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.
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.
The stakes were high during the period Warner and Vangipuram worked for Mobileum. They belonged to a management team that sought to become dominant providers of a slew of products and services that are vital to maintaining the integrity of telcos. With the backing of Audax’s private equity war chest, Mobileum acquired the top vendors in a series of niches adjacent to the roaming information business, Roamware, that had been founded by former Mobileum CEO Bobby Srinivasan in 2000. Under Srinivasan’s stewardship, Roamware changed its name to Mobileum to reflect its ambition to become a ubiquitous supplier across the mobile telecoms industry. The acquisitions made by the rebranded business included German business SIGOS, the global leader in mobile network testing, and Portuguese firm WeDo, which had overtaken Indian business Subex to become the top vendor of telecoms revenue assurance and fraud management (RAFM) worldwide. These European firms were then gutted by a Mobileum management team that had one eye on the objectives imposed by American capital and the other eye on the cost advantages gained by hiring replacement staff in India. But the attempts to cut costs were apparently not enough to satisfy the financial targets set for the firm, so Warner and Vangipuram resorted to engineering artificial revenue growth. Per the press release:
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.
The weakness with such a fraud is that it flatters the company’s accounts without bringing in more cash. Any potential buyer would notice that revenues had run far ahead of receipts. Further deception became necessary when HIG showed their interest in acquiring Mobileum.
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.
Warner and Vangipuram received cash, stock and other proceeds as a result of the sale. Warner’s reward was worth USD5.2mn in total, while the benefit to Vangipuram was USD5.5mn. But the alleged lies had to continue after HIG bought a controlling stake in Mobileum to prevent the new owners realizing how the business had actually been run.
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 indictment filed by prosecutors gives a more detailed analysis of what allegedly happened inside Mobileum. It begins with a succinct but accurate description of the overarching business strategy formulated by Audax and Srinivasan while Warner and Vangipuram worked for them.
Mobileum was a Silicon Valley-based company that provided data analytics and network solutions to telecommunications firms around the globe. In 2016, Mobileum was acquired by a private equity firm [Audax] that sought to increase the company’s value by acquiring smaller telecommunications and analytics firms and consolidating them with Mobileum. Through this “roll up” strategy, Mobileum established worldwide operations, including a substantial presence in the United States, Canada, Portugal, and India.
By in or about 2020 and 2021, with the assistance of an investment bank based in Manhattan, New York, Mobileum’s owners initiated a process to sell the company. During that process, Mobileum was marketed to potential investors as a high-growth, high-margin software business. Mobileum’s initial outreach to buyers proved unsuccessful, however. Several sophisticated investors showed little interest in Mobileum, and others considered offers significantly below Mobileum’s owner’s expectations. One potential buyer explored a deal, but the sale did not go forward because Mobileum’s management was unable or unwilling to provide the potential buyer with adequate financial information.
Extra steps had to be taken to make Mobileum more attractive to potential investors.
In June 2021, WARNER instructed a Mobileum employee preparing a financial forecast for Mobileum’s investment bank, “The reality is we have a target number” from Mobileum’s founder and Chief Executive Officer, and “then build the support that makes the number seem reasonable, but we can not say that!!”
In private correspondence, VANGIPURAM emphasized the importance of reaching Mobileum’s $247 million revenue projection to the successful sale of the company and the compensation of Mobileum executives like himself. In or about December 2021, when a subordinate noted that Mobileum stood approximately $15 million short of the $247 million revenue target, VANGIPURAM reacted sharply, stating that falling short would “wipe[] out” the executive team’s bonuses and ensure that “the company will not be sold.”
Documents in the civil litigation between HIG and Audax discuss the role of Kibott, a Luxembourg-based client of Mobileum, in the alleged fraud. This has been covered in more detail during a 2023 Commsrisk article about the civil litigation but it comes up again during the indictment of Warner and Vangipuram.
A primary method of the fraud involved a timesheet shell game, in which ANDREW WARNER and KISHORE VANGIPURAM, the defendants, reclassified internal, non-billable labor as billable client work to manufacture the appearance of progress on project milestones. The defendants used one Mobileum client, Kibott SARL (“Kibott”), a purported Luxembourg-based technology startup, as a key vehicle for this type of fraudulent revenue creation. In or about July 2021, WARNER executed a contract with Kibott for 660,000 euros (then equivalent to approximately $783,000). Within months, the defendants repeatedly expanded the Kibott contract to 16 million euros (then equivalent to approximately $18.6 million) — not to reflect a surge in actual work, but to create a repository for fraudulent revenue. When employees questioned the aggressive billing of Kibott, WARNER instructed them to “[t]hink of this as a blank canvas” to be used “to maximize revenue.”
The scale of the discrepancy between what was invoiced and what was actually paid was large. As part of this scheme, between September 2021 and July 2022, ANDREW WARNER and KISHORE VANGIPURAM, the defendants, caused Mobiluem to invoice Kibott nearly 12 million euros. In reality, Kibott paid Mobileum only approximately 40,000 euros during the entire period. By recharacterizing internal overhead as billable project progress, the defendants created the illusion of growth…
It is hard to believe that any serious attempt was made to evaluate Kibott’s capacity to settle the huge invoices being issued to them. An obscure Luxembourg firm with no track record in the communications sector was somehow being treated as a larger source of Mobileum’s income than several of the world’s leading mobile network operators, despite settling only a tiny fraction of the invoices it received. Kibott later filed for bankruptcy after the new management team of Mobileum sued them over the unpaid invoices.
Just one look at Kibott’s website should have raised numerous red flags, especially as fraud prevention begins with robust know-your-customer controls. The January 2022 archive of Kibott’s website reveals a cheap and crude website design, despite Kibott claiming to have artificial intelligence that can “transform” the online portals of retail businesses. The website names only one customer of Kibott, a German online store for baby accessories, alongside the unsupported claim that Kibott has “years of experience” of the telecommunications industry, including “roaming and telco fraud, security & revenue assurance”. The scale of this lie should have been obvious to the many Mobileum staff with genuine experience of roaming, fraud, security and revenue assurance.
The prosecutors may offer Warner and Vangipuram a deal if they are willing to testify against other people responsible for the alleged deception. It strains credulity to believe only two executives would have been aware of such a deliberate manipulation of the company’s accounts.
I have only spoken to Bobby Srinivasan once, but it was a memorable conversation. Srinivasan called me out of the blue on the day after Commsrisk published an article about Mobileum being linked to a 10 year national revenue assurance contract awarded by the Nigerian telecoms regulator to a business consortium led by the politician that proposed the legislation which created the obligation for a national revenue assurance scheme. Srinivasan offered to introduce me to John Hoffman, CEO of GSMA Ltd, the business arm of the GSMA, alongside other vague promises about boosting my profile within the industry. Nothing came of these promises, which I did not take seriously. If a person like Srinivasan will go to the trouble of finding my telephone number just because he hopes to influence my output then I already know more about my reach than some people want to publicly admit. Regular readers will already appreciate the similarities between the Nigerian revenue assurance scheme and the ‘regtech’ sold by Global Voice Group (GVG), a business that hired the world’s most notorious libel lawyers to threaten me last year.
Around the time that Srinivasan called me, Mobileum was trying to launch a service in cooperation with the GSMA that centered on the use of Mobileum’s technology to exchange data about the frauds that blight telcos. Nothing came of it, mostly because the GSMA’s involvement upset many other businesses that pay to attend GSMA events on the basis that they provide a neutral space where rivals can fairly compete for the attention of telcos. However, the notion that we need corporatized, centralized and monopolized exchanges of fraud intelligence keeps growing in popularity every day. More and more companies are seeing the potential to make money by becoming the sole supplier of this kind of service, whether it is within a single country or across multiple countries, and whether it is solely between telcos, or between businesses in multiple sectors. It is obvious why companies that can automate the exchange of data would like the prospect of securing long-term contracts that were obtained with the blessing of government agencies. The valuation of a company that secured a deal of that type would inevitably rise. Businesses of this type are being bought and sold because rich people see them as a good future bet. These companies spend liberally on lobbyists that seek to influence the anti-fraud policies of national governments, especially in rich regions like Europe and the Arab Gulf states. The potential for abuse of data monopolies is also obvious, and is made worse by the low likelihood that any member of the public would be able to determine if the long-term contract represents good value or not.
We should all be asking hard questions about the integrity of the people pitching for these anti-fraud services. However, I routinely encounter stonewalling from senior decision makers and naivety from the junior staff who work in fraud management roles. We will never defeat the fraud that lies out there if we first have to blind ourselves to the fraud that occurs inside our industry. It is only on occasions where a Bankai or a GVG or a Mobileum is linked to fraud and corruption that the potential insider risks are briefly acknowledged… before we immediately return to business as usual. This is foolish. If governments and regulators do not choose to be more forthright about demanding integrity from businesses that offer anti-fraud services then nobody else will. This little website cannot do it for them, and industry associations like the GSMA are too dependent on the income they receive from crooked firms to exert any useful influence. The comms sector is not just incapable of policing itself, but has become the enabler of chancers and crooks who seek to control the flow of data so they can ruthlessly exploit it for financial gain while pretending they can be trusted to protect the public from harm. When corrupt individuals become essential to the process of enforcing the law, we risk making them above the law.
European government agencies deserve an especially hard smack to awaken them from their slumbers. Africans and Americans may choose to treat corruption as a cost of doing business, even if they are wrong to do so. Europeans now need to be thinking in terms of national security as much as profit. The dividing line between networked crime and cyberwarfare is dissolving. Europe needs to be able to stand alone instead of relying so heavily on American support. Exporting skilled jobs to India will not help Europe either. The Europeans with most knowledge of how to tackle telecoms cybercrime are reaching retirement age and no investment has bene made in developing new generations of experts to replace them. But instead of devising a strategy to harness Europe’s past leadership in fields like fraud management, a mix of empty words and short-term thinking has permitted fine businesses like SIGOS and WeDo to be hollowed out just so some greedy American capitalists could buy bigger houses and new cars. Instead of learning the lesson, I see example after example of American businesses attempting similar tricks so they can earn high margins at the cost of Europe’s security.
I try to be a patriot and a humanist. I complain about the failure to meet the fine ideals espoused by European civilization because they are worth pursuing. Some things should matter more than money. That is why calls from people like Bobby Srinivasan are never going to make me rich, even if he knows how to turn his entourage into multimillionaires. I ignore the opportunity cost involved in running Commsrisk, but there is also the cash cost in running this website, and in providing the unbiased, independent news coverage that you will never get from all those associations and meetings and webinars where participants congratulate themselves for sharing information while keeping shtum about corruption inside our industry. That is why we are trying to use data to methodically limit the lies that have been repeatedly spread around this industry, such as the lie that US technology had reduced the number of robocalls received by Americans, or the lie that the UK had implemented STIR/SHAKEN. But while I am a humanist, I am only a single human being. As John Donne so famously observed, no man is an island. I stick my neck out, week after week, to report on matters that others choose to ignore, but I cannot make change happen alone. It will take an army of industry insiders, standing arm-in-arm, to turn the tide on fraud and corruption. Success will not come easily, which is why it will never come from the easy (and lucrative) solutions being touted by the sorts of people who pretend there was a 57% reduction in global scams within just one year.
So today I ask for your help. The subject of this article means it will receive an unusually large audience. One reason for the large audience is that so many people are fed up with the cheating and the deception in the way communications providers and their suppliers are run. The other reason for the large audience is that you are not going to read this story being told in this way anywhere else. Please help me to assemble the legion of insiders we need to turn the tide by making a donation to our Global Fraud Dashboard fundraising campaign. Thousands of people read Commsrisk for free every day; our goal would be met if one thousand readers donated just $10 each. Your donation will not just help us to increase the factual information being supplied to decision-makers. Your donation will also signal that there will be less tolerance for dishonesty within our industry. We can defeat the liars, one step at a time, if we take the steps together. Please take that step now.
The prosecutors’ press release about the indictment of Warner and Vangipuram can be found here.
