ILMC 30 SL
eps Super Leaderboard 2017
LN Source SL
Ticketmaster ILMC 30 SL
x

The latest industry news to your inbox.

news

Sillerman auditor resigns over “illegal” withdrawals

BDO, accountant and auditor for Function(x), has tendered its resignation after discovering alleged unauthorised payments of company funds to CEO Robert Sillerman

By Jon Chapple on 28 Jun 2017

Robert Sillerman, Function(x)

image © SFX Entertainment

Accountancy firm BDO USA, LLP, formerly auditor for Robert Sillerman’s troubled Function(x) web business, has resigned amid allegations of “insufficiently authorised cash disbursements” to Sillerman from company bank accounts.

In a 21 June letter to Function(x)’s CFO, Michelle Lanken, and general counsel, Tom McLean, BDO said it had, through a phone conversation on 12 May, been made “aware of information indicating that an ‘illegal act’ […] may have occurred”.

It continues: “BDO stated that information provided to it at the time of the phone conversation […] included insufficiently authorised cash disbursements from a [Function(x)] bank account, unexplained deposits into the same registrant bank account and possible repayment to the registrant’s chairman of the board, chief executive officer and controlling shareholder [Sillerman] in excess of the amount owed to him under his line of credit to the registrant.”

The letter says the “possible payments” include a US$500,000 cash withdrawal by Sillerman in March 2017, “done without proper approval from the board”, and, more seriously, a total of $6.1m “released from a [Function(x)] bank account into an account held by the CEO at the same financial institution”.

The findings mirror similar allegations levelled at Sillerman in the final months of SFX Entertainment

At BDO’s request, it and Function(x) hired a third-party law firm to investigate the missing money, as well as alleged irregularities relating to a recent series-G stock offering. It concluded that there were “likely illegal acts committed by the CEO and the registrant [Function(x)]”, including “false and misleading statements in connection with the series-G offering”.

The findings mirror similar allegations levelled at Sillerman in the final months of SFX Entertainment, when he was accused of making “misleading statements” designed to boost the ailing business’s attractiveness to investors.

He denies any “wilful” wrongdoing, saying he was “misinformed as to the amounts outstanding on loans the CEO had made to the company” and paid Function(x) back as soon as he realised the error.

Function(x), which specialises in ‘viral’ online content, was last week delisted from the Nasdaq stock exchange after failing to file an up-to-date current report.

 


Get more stories like this in your inbox by signing up for IQ Index, IQ’s free email digest of essential live music industry news.

More news

Sillerman upbeat as Function(x) is delisted Robert Sillerman says his new company is still on track to become the "preeminent digital media publisher", despite its delisting from the Nasdaq amid...mounting debt
Function(x) furloughs 75% of its employees 22 of 31 employees at Robert Sillerman's new venture have been placed on indefinite leave, with "no assurance" they will have jobs to which to return
Function(x) threatened with Nasdaq delisting Robert Sillerman's digital media business is guilty of a "public information failure" by failing to file a quarterly report, new SEC filings reveal
Sillerman’s Function(x) on clickbait buying ... The acquisitions of BumpClick/ViralNova and Rant are part of a strategy to "capture as much of [the viral content] market as possible", says the...ex-SFX CEO's new venture
Indebted iHeartMedia ‘may not last 12 months... The radio and outdoor advertising giant, a former parent company of SFX/Live Nation and a festival promoter in its own right, is facing the prospect...of a debt default