NEW YORK — In light of an investigation into sales misconduct and other legal issues, Evolv, a security technology firm, has made a significant change in its leadership by dismissing its CEO. The board of directors announced on Thursday that Peter George has been relieved of his duties effective immediately, with Michael Ellenbogen, the current chief innovation officer, appointed as the interim CEO and president.
Details surrounding George’s termination remain unclear, but the company stated that the dismissal was made without cause, following a thorough period of evaluation and deliberation by the board. This decision comes shortly after Evolv revealed an ongoing investigation into its sales practices, cautioning shareholders against relying on recent financial disclosures. The board acknowledged the investigation while insisting that their review of leadership and performance had been underway for several months, predating awareness of any issues related to sales practices or financial reporting.
Last week, Evolv disclosed initial findings from the internal investigation, which indicated that some employees may have engaged in sales activities that involved additional terms not communicated to the accounting department. The company is currently scrutinizing whether this misconduct had any impact on their revenue recognition and other financial metrics, and if so, when upper management became aware of the discrepancies.
The extent of accountability is still being determined, but Evolv committed to taking the necessary corrective actions. As of their latest update, the internal committee estimated that the issues under investigation could have caused premature or inaccurate revenue acknowledgment amounting to between $4 million and $6 million by the end of June.
This is not the first instance of Evolv encountering legal challenges. Over the years, the company has dealt with multiple legal issues, including investigations by the Federal Trade Commission and the Securities and Exchange Commission concerning its marketing strategies. Earlier this year, a class-action lawsuit was filed by investors alleging that the company overemphasized the efficacy of its devices, with claims that “Evolv does not reliably detect knives or guns.”
Evolv, known for its AI-powered security screening technology, also attracted attention for implementing a pilot program that tested portable weapons scanners in several New York City subway stations during the summer. However, this initiative sparked criticism from civil rights advocates and raised questions about its effectiveness, as police data indicated that the scanners failed to detect any firearms and registered over 100 false alarms during a one-month timeframe.
Following the announcement of George’s ousting, Evolv’s stock price dropped nearly 10% on Thursday afternoon. The company further revealed that a succession planning committee had been formed in May to assess leadership performance and plan for an eventual CEO transition. According to Evolv, it has been actively seeking candidates to fill the CEO position and aims to announce a permanent replacement promptly.
In a recent statement, the board expressed that a change in leadership was vital “to enhance the company’s culture as we prepare for the next phase of growth.” Ellenbogen, who has stepped into the role of interim CEO, co-founded Evolv and previously held the CEO position for seven years. In August, the Massachusetts-based firm reported second-quarter revenues of $25.5 million, marking a 29% increase from $19.8 million in the previous year, although its upcoming earnings report is currently on hold due to the ongoing sales misconduct investigation.