Font Size: 
Troubled Startup's CEO 'Relied on' Lawyers
The Recorder
November 30, 2009
As allegations of massive fraud at Canopy Financial surfaced last week, the startup's outside counsel at Wilson Sonsini Goodrich & Rosati moved quickly -- to scrub its Web site of any mention of the company.
Canopy Financial, a San Francisco high-flyer that raised $85 million from venture capitalists, ran into trouble recently when an investor audit turned up improprieties, according to a report from Private Equity Hub. The Silicon Valley blog TechCrunch first alleged that Canopy, whose technology helps streamline the administration of Health Savings Accounts, had been "making up" financial statements.
Wilson Sonsini partner Caine Moss and associate Daniel Green represent Canopy as corporate lawyers, but as of Nov. 25 their Web bios no longer listed Canopy as a client. Venture capitalists who backed the company had also scrubbed their sites. It doesn't mean that the lawyers did anything wrong -- but Canopy CEO Vik Kashyap, who resigned Nov. 24, may disagree.
In a prepared statement, Kashyap's lawyer, Ismail Ramsey of Ramsey & Ehrlich, said that the CEO "relied on financial and legal professionals in accepting the authenticity of the company's financials." Ramsey also said that Kashyap had "no prior knowledge whatsoever of any fraud regarding Canopy's financial statements."
Canopy's general counsel is a former Wilson Sonsini associate from Seattle named Daniel Stevenson. Neither Stevenson nor a Wilson Sonsini spokeswoman would comment on Kashyap's statement.
Stevenson said the company has hired a law firm -- not Wilson Sonsini -- to conduct an internal investigation. He declined to answer any other questions.
Canopy was a sweetheart of venture capitalists. It raised its millions with the help of investment bank Financial Technology Partners. TechCrunch reported that Spectrum Equity had put $62.5 million in the company in its latest round of financing.
But according to the report by Private Equity Hub, a news site, the company laid off most of its employees last week after the investor audit.
It is not an unusual practice to remove unsavory clients from marketing materials. Last year, when Seattle's Entellium saw its CEO and CFO charged with wire fraud and cooking the company's books, the company's law firm, Wilson Sonsini, moved quickly to get the name off its site.
