We study a principal-agent relationship in which the agent has private information about the future profitability of the relationship or a currently operated project, but is biased in favor of continuing the project. When the principal retains liquidation rights over the relationship or project and must introduce distortions in the liquidation policy itself in order to elicit the agent's private information. The optimal policy consists of a threshold which, if the profitability falls below, triggers liquidation. When the agent reports a higher growth rate of the projects profitability, the optimal threshold will be either decreasing over time and approach the principal’s first-best level (i.e., the distortions from eliciting the agent’s information are temporary) or will be increasing and divergent over time (i.e., liquidation at later times takes place at unboundedly inefficient levels). A simple condition on the relative profitability of the project across agent types tells us when the distortions are temporary or permanent. These results are robust to the use of transfers (e.g., wage payments) provided that a limited liability condition is respected for the agent. They are also robust to the use of direct auditing methods to assess profitability. The model provides a tractable way to analyze contractual distortions in the pretense of private information, and in particular, shows that contracts simultaneously front- and back-loaded across a menu of options in the same principal-agent relationship.