Medidata stung by $4.8M wire transfer fraud

Medidata ($MDSO) has promised to review its financial controls after fraudsters made away with $4.8 million. Midlevel employees in the eClinical company's finance department reportedly made the transfer to an overseas bank account after receiving a request for $4.8 million.

An internal audit committee has called in outside advisers to help with an investigation into the incident, which is expected to result in Medidata recording a $4.8 million charge in the third quarter. In the longer term, Medidata hopes to recoup the funds from its insurance, but there is no guarantee it will succeed. Medidata has also informed federal law enforcement agencies of the fraudulent wire transfer.

Importantly for a company entrusted with storing valuable data in the cloud, no customer information was involved in the incident and Medidata's systems were unaffected. Medidata thinks its internal controls are up to scratch but said it has already implemented additional safeguards. More changes could follow the outcome of the audit committee's investigation. Beyond the near-term expenses, Medidata doesn't see the incident having a material effect on its business.

Michael Capone--Courtesy of ADP

Medidata learnt of the wire transfer days before it officially hired Michael Capone to fill the newly created role of chief operating officer. Capone is joining Medidata from ADP ($ADP)--a Fortune 500 provider of business services--where he worked as CIO. Analysts welcomed the hire.

"While there are many factors pharma clients deliberate in their purchasing decisions, it's hard to imagine a respected and articulate C-level Fortune 500 executive not making a material impact and add credibility as large global pharma clients deliberate long-term drug development IT platform strategies," Citi analyst Garen Sarafian wrote in a note to investors.

- read the fraud filing
- here's news of the hire