Art by Mike Sullivan
March 4, 2021 6:00 AM PST

Not much was going right early last year at SoftBank-backed construction startup Katerra. Money was drying up, and board meetings sometimes erupted into shouting matches. Anxious about missing financial forecasts while the company was trying to raise more money from investors, at least one Katerra employee told others in its relatively small but profitable apartment renovations division to find a way to boost revenue.

Heeding the suggestion, the division prepared exaggerated updates on how much renovations work had been completed so far on certain building projects. Katerra employees then used the misleading project updates to front-load revenue by millions of dollars in financial reports submitted to investors, the company found in an investigation last summer, said four people familiar with the matter, including two with direct knowledge of the probe. Last August, a law firm hired by Katerra sent a letter to then-CEO Michael Marks saying that an investigation into the matter found that the company’s financial statements likely had been “intentionally misstated” during Marks’ tenure, according to a copy of the letter viewed by The Information.

A month before launching the accounting probe, Katerra’s board fired Marks on the grounds that under his watch Katerra had perennially missed financial goals and burned through the more than $2 billion the company had raised. There is no indication that Marks knew of the misleading financial reports. But according to interviews with 30 former employees and investors, Marks presided over a company that repeatedly stumbled on construction projects and failed to address warning signs that the business was failing.

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