APC’s round trip transactions

Securities and Exchange Commission filed a civil injunctive action against a former senior vice president and a vendor of InPhonic, Inc., a now-bankrupt online retailer of cellular phones that was headquartered in Washington, D.C. According to the Commission’s complaint, from late 2005 through early 2007, Len A. Familant, then an InPhonic senior vice president, and Paul V. Greene, president of telephone supplier Americas Premiere Corporation, engaged in a fraudulent scheme involving a series of “round-trip transactions” to artificially inflate InPhonic’s financial results.

The Commission’s complaint, filed in federal court in the District of Columbia, alleges:

  • After the end of the third quarter of 2005 and each quarter in 2006, but before InPhonic reported its financial results, Familant obtained a total of almost $10 million in sham credits from APC and Greene. Familant and Greene entered into an unwritten, undisclosed agreement that InPhonic would repay APC by purchasing cellular telephones and repair services from APC at inflated prices and by paying for fake repairs.
  • InPhonic improperly recorded the false credits from APC as a decrease in cost of goods sold. InPhonic subsequently made repayments to APC in the form of overpayments for cellular telephones, repair services and fake repairs.
  • The round trip scheme agreed to and implemented by Familant and Greene resulted in material understatements of InPhonic’s net loss (between 7% and 55%) in quarterly and annual filings with the Commission and material overstatements of InPhonic’s adjusted EBITDA in earnings releases from 2005-2007.
  • Familant and Greene concealed the fraudulent round-trip scheme. For instance, together they identified particular telephone models APC could provide to InPhonic at inflated prices without raising suspicion.
  • Greene hid the round trip scheme from InPhonic’s independent auditors even after APC’s accountant had informed Greene that APC’s sham credit transactions with InPhonic were illegal.
  • Familant encouraged APC to hide its billing for phony services after Familant learned that APC’s accountant had told Greene, “[w]e cannot do that. That is fraud. . . .”
  • In October 2007, as InPhonic’s business was failing and after APC had been unable to fully recoup the credits, Greene sent an email to himself outlining a proposed lawsuit against InPhonic. Greene referred to “the fake credits that were negotiated with INPC that they were using to hit certain quarterly numbers.”

Source: SEC


Sarang is one of the first forensic accountants in the country who worked extensively with the law enforcement agencies across the country to solve the fraud problems. He is a Certified Anti Money Laundering Expert. He worked in the shipping industry before joining Riskpro and is instrumental in exposing the Trade based money laundering cases for the banking sector. He investigated numerous Ponzi Schemes for the Government of Maharashtra and presented in the court of laws as the expert witness to justify the findings of the reports.