The former CEO of Alaska fiber optics company Quintillion Networks was arrested and charged with defrauding two New York investment firms out of $250 million, the U.S. attorney for the Southern District of New York announced Thursday.
“To realize her plan to build a fiber optic system that would service Alaska and connect it to the lower 48 states, Elizabeth Ann Pierce allegedly convinced two investment companies that she had secured signed contracts that would supposedly generate hundreds of millions of dollars in guaranteed future revenue from the system,” U.S. Attorney Geoffrey Berman said in a statement.
According to prosecutors, between May 2015 and July 2017, Pierce perpetuated a scheme against the two unnamed investment firms—a Manhattan private equity firm and a subsidiary of a French corporate and investment bank. To convince the firms to invest, prosecutors say Pierce presented forged contracts with two telecommunication companies.
The agreements appeared to show commitments to buy wholesale bandwidth on the new fiber optic network Pierce’s company was building in Alaska. Over the life of the agreements, the deals appeared to be worth approximately $1 billion.
In reality, some of the agreements never existed at all, while others were false versions of real agreements that were more favorable to Quintillion than the genuine agreements.
Under one of the fake agreements, the customer supposedly agreed to buy increasingly more gigabits per second of capacity over a period of 20 years from Quintillion. That contract would have assured Quintillion of hundreds of millions of dollars in future revenue, if it were genuine. In reality, negotiations over that deal ended unsuccessfully, and Pierce never disclosed that fact to the investors.
Under another fake deal, the customer had purportedly agreed to buy a fixed, predetermined amount of capacity regardless of subsequent market conditions. In actuality, that customer was not obligated to buy any capacity, according to prosecutors.
In April 2017, prosecutors say a Quintillion staff member sent an invoice to one of the telecommunication companies that was supposedly in a deal. The company then disputed the invoices, since it hadn’t actually ordered in capacity in the network. This launched an investigation by one of the firms allegedly defrauded. In July, an employee at the firm discovered Pierce had deleted documents in support of the fake agreements she’d shared online, according to prosecutors.
Pierce resigned as CEO in August 2017. She is charged with a single count of wire fraud, and faces up to 20 years imprisonment.
Lowther Walker name attorney Joshua Sabert Lowther is representing Pierce. He did not respond to a request for comment.
In a statement, Quintillion said it took “swift action” when it learned of the allegations against Pierce last year, and self-reported to the Department of Justice. The company has been cooperating with investigators, and said Pierce’s alleged conduct is “not aligned with how Quintillion conducts business.”