Third ex-telecom executive charged with defrauding investors | USAO-SDNY

Damian Williams, United States Attorney for the Southern District of New York, and Michael J. Driscoll, Deputy Director in Charge of the New York Bureau of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an indictment accusing ANTHONY SIROTKA, the former Chief Executive Officer of FTE Networks, Inc. (“FTE”), as well as the company’s former Chief Executive Officer, Michael Palleschi, and former Chief Financial Officer, David Lethem, conspiracy, securities fraud, wire fraud, improper influence on the conduct of an audit and aggravated impersonation. These charges stem from a years-long scheme to inflate FTE’s revenue and conceal debts and expenses. SIROTKA was arrested this morning and is due in federal court in Manhattan today. Palleschi and Lethem had previously been arrested on the basis of an indictment charging them with the same crimes.

US Attorney Damian Williams said: “As alleged, Anthony Sirotka conspired with his co-defendants to lure investors with false statements about FTE’s financial condition and to make the business appear more profitable than it was. Sirotka helped mislead FTE listeners and the investing public, and now faces serious criminal charges for his alleged conduct.

According to the allegations in the indictment unsealed today in Manhattan federal court:[1]

FTE was a telecommunications company based in Naples, Florida and Manhattan. Since December 2017, its shares have been trading on the American market NYSE. SIROTKA has served as the company’s Chief Administrative Officer, Senior Vice President of Business Development and Director of Business Development. Along with Palleschi and Lethem, among others, SIROTKA led FTE to recognize over $13 million in fraudulent revenue. This fraudulent revenue included more than $10 million in “unbilled” revenue that the defendants represented that FTE had earned from services it had allegedly provided to a large customer who would not yet be accepting bills for those services. . FTE has never provided such services. In addition, defendants caused FTE to record approximately $2.6 million as an account receivable for which there was no substantiation. When FTE auditors said the debit account should be written off, SIROTKA and his co-conspirators created a fake email from a client representative saying the client would ‘expedite payments’ for more than 1.5 million dollars for projects completed by FTE in 2016 and 2017. The defendants had this fake email sent to FTE’s auditors so that FTE could continue to account for the claim.

Due to defendants’ fraudulent recording of revenue, FTE’s financial statements overstated the company’s accounts receivable by 18% to 120% for each of the quarters of 2017 and 2018 and by approximately 477% for 2016.

In a separate action, the United States Securities and Exchange Commission (“SEC”) has filed civil lawsuits against SIROTKA. The SEC previously filed civil charges against Palleschi and Lethem.

* * *

SIROTKA, 55, of New York, New York, is charged with one count of conspiracy to commit securities fraud, wire fraud, misrepresentation in SEC filings and inappropriate influence on the conduct of audits, punishable by up to five years in prison. ; one count of securities fraud, which carries a maximum sentence of 20 years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of improperly influencing the conduct of audits, which carries a maximum sentence of 20 years in prison; and one count of aggravated impersonation, which carries a mandatory minimum sentence of two years in prison.

The potential minimum and maximum sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr Williams praised the FBI’s investigative work and thanked the SEC for its assistance.

This matter is being handled by the Bureau’s Securities and Commodities Fraud Task Force. Assistant US Attorneys James McMahon and Daniel Loss are in charge of the prosecution.

The counts in the indictment are charges only and the accused are presumed innocent until proven guilty.

[1] As the introductory sentence indicates, the entire text of the Indictment is allegation only, and each fact described herein is to be treated as an allegation.

Sean B. Jackson