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FTE Networks executives charged with securities fraud conspiracy

FTE Networks executives charged with securities fraud conspiracy

SEC report on FTE Networks’ management team: Michael Palleschi as CEO and Chairman of the Board of Directors and David Lethem, CFO.

Source: SEC

The former top executives of FTE Networks, a former telecommunications company whose shares were delisted from the New York Stock Exchange last year, were separately indicted on Thursday by the federal and Manhattan prosecutors on a number of criminal charges.

The two men, Michael Palleschi and David Lethem, have also been sued by the Securities and Exchange Commission on a civil lawsuit for the same conduct that underlies the criminal charges against them in federal court.

Palleschi, the ex-CEO of FTE Networks, and Lethem, the company’s former chief financial officer, are charged in federal proceedings and SEC complaint of a comprehensive plan to fraudulently conceal FTE Networks’ deteriorating financial condition from 2016 to 2019.

The men are also accused in these cases of embezzling millions of dollars from the company to pay for the use of private jets, luxury cars, personal credit cards, unauthorized transfers, stock issues and unapproved salary increases.

The grand jury’s indictment received from Manhattan DA Cyrus Vance Jr.’s office allegedly stole more than $ 28 million in property trust from Manhattan-based Benchmark Builders as of November 2018.

The men allegedly diverted these assets from the company, which was a wholly owned subsidiary of FTE Networks, to repay millions in loans received from FTE. In this case, you are accused of serious first-degree theft.

Palleschi, a 46-year-old Naples, Florida resident, was arrested Thursday morning in New York state while Lethem, 62, was arrested in Florida.

They are due to appear in separate federal courts later on Thursday.

Palleschi was Chairman of the Board of Directors and CEO of FTE from 2014 to May 2019, while Lethem, of Fort Meyers, Florida, was CFO from June 2014 to March 2019.

The federal indictment accuses them of working with others in “a complex scheme to fraudulently misrepresent investors, lenders and accountants” that the company’s financial condition was better than it actually was.

The program, which allegedly ran from 2016 to 2019, included hiding the convertible and warrant features of the company’s $ 22 million convertible bonds and recognizing more than $ 12 million in fake revenue, the indictment said Grand jury that was unsealed on Thursday.

The obfuscation of the debt features eventually led FTE Networks to re-estimate a net loss of $ 92 million for 2017, the indictment reads.

This indictment states that Palleschi and Lethem, along with others, made these false statements and omitted key facts in financial documents “to mask a trend of rising RTD operating losses” and to avoid a fall in the company’s shares.

The indictment states that if FTE’s share price had fallen below certain levels, it would have resulted in debt clauses on the company and forced it into bankruptcy.

The two men are charged on six counts, including conspiracy to commit securities fraud, wire transfer fraud, improperly influencing the conduct of audits, and aggravated identity theft.

The case is being prosecuted by the US Attorney’s Office for the Southern District of New York, based in Manhattan.

“Palleschi and Lethem have instead chosen to lie about FTE’s finances to make the company appear financially healthier than it was, defrauding FTE’s shareholders and lenders,” said SDNY US attorney Audrey Strauss.

“Rather than being open to their investors, Palleschi and Lethem have chosen the easy way to make money by hiding the real financial health of RTD through fake documents and fake signatures.”

The SEC complaint accuses Palleschi and Lethem of directly violating or aiding and abetting violations of the anti-fraud, reporting, and proxy solicitation provisions of securities laws.

FTE Networks is currently renting out residential properties. The company’s current interim CEO, Michael Beys, is an attorney and former federal attorney in the US Attorney’s Office for the Eastern District of New York, the sister jurisdiction of the SDNY.

Beys said in an interview with CNBC on Thursday, “The company has partnered and will continue to work with SDNY and SEC.”

“We look forward to justice being served,” Beys said.

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“The company continues to move forward and hopefully brings back value for shareholders in the company,” he said. “We are the good guys and will continue to try to recover from the chaos that Palleschi and Lethem have left behind.”

Benchmark Builders, which was acquired by FTE Networks in 2017, said Thursday that executives from that company had alerted the Manhattan prosecutor’s office to the alleged crimes of Palleschi and Lethem.

“Today’s charges are the culmination of a difficult decision we made to protect our subcontractors and customers in late 2018 when we contacted the Manhattan District Attorney about the misuse of trust funds,” Benchmark Builders said in an email to CNBC .

“We invested our own personal resources in the company to protect the subcontractors and their workers and parted ways with RTD almost 2 years ago,” the company said.

“Not a single subcontractor or customer was affected by these events, and not a single worker missed a paycheck. Construction in this city can be tough business, but we’ve always put integrity first and that’s what led to today’s events. We We are pleased to have this behind us and will work with a new focus on customer care.

The SEC lawsuit calls for permanent injunctions, penalties, and a ban on both men from acting as officers and directors of public companies, as well as “skip and prejudice interest and a recovery of the stock-based compensation paid to Palleschi during the alleged fraud.” said the SEC.

Eric Bustillo, director of the SEC’s Miami regional office, said: “The defendants have engaged in an outrageous scheme to fraudulently increase RTD revenues in order to misrepresent the company’s financial position while holding millions of dollars Abusing dollars for their own personal use. “

“We pledge to hold executives accountable who provide materially false financial reports to the public and those who rob companies for their personal gain,” said Bustillo.

FTE, based in New York and Naples, Fla., Had previously traded its shares on the OTCQX over-the-counter market, but was trading on the NYSE US market in December 2017.

It was suspended from trading on the NYSE two years later and delisted on May 21, 2020.

A press release released in late 2019 said the company was notified of delisting because the NYSE found that FTE or its management were engaged in “business that the exchange believed to be contrary to the public interest.”

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Business

How a Jeopardy! Contestant’s Hand Gesture Turned A part of a Conspiracy

How a Jeopardy! Contestant's Hand Gesture Became Part of a Conspiracy

“Thank you for calling in with a Jeapardy concern [sic] The candidate will blink, which you think is a white power hand sign, ”wrote Aaron Ahlquist of the ADL according to a text sent to the group by the candidate who emailed the group to the group. “We checked the tape and it looks like he’ll just hold up three fingers when they say he’s a three-time champion. We do not interpret his hand signal as an indication of an ideology. However, we are grateful for raising your concerns and please do not hesitate to contact us in the future should this be necessary. “

The ADL’s response sparked anger among former candidates who signed the letter.

“Does anyone else feel gas-lit?” asked a two-time champion according to the screenshots. “We saw it. We know we did. But a lot of people (including the goddamn ADL) tell us we didn’t. This is classic gas lighting. “

I want to reiterate that these are some nice, thoughtful people. I found them mostly on LinkedIn, where they have well-curated profiles and avatars of themselves against the blue background of the show. The signatories of the letter I spoke to seemed convinced that Mr. Donohue was showing a white power sign. They were especially concerned that the producers had missed it – and that the show, which hangs on the death of legendary host Alex Trebek, could be “in decline,” as a 2007 Northern Canadian champion Brett Chandler told me.

Mr. Chandler was one of several letter signers I spoke to who remained convinced that the other traces of Mr. Donohue’s online presence, as well as his use of the word “gypsy” in an earlier episode, meant that he was sending a coded signal . Many said so, although they recognized how unlikely it seemed.

“He didn’t know he was going to win three so the logic falls a little apart,” said Chandler.

The main co-authors of the letter asked not to be named because they feared harassment on social media. One, a lawyer, said in a LinkedIn message that the “overall point of the letter is that production workers should have averted this controversy” by working out the gesture. This interpretation requires a fairly careful reading of the letter, which began with a focus on Mr. Donohue and included speculation about the meaning of a photo of Frank Sinatra on his personal Facebook page.

I should reiterate that these are smart people who have generally been more polite than the journalists who are reluctant to take my calls most weeks. And that’s the point here in my opinion. In the candidate’s investigation into Mr Donohue, all the signaling traits of a normal social media hunt had gone wrong – mostly that you were drawing your conclusion and looking for evidence. And they followed the deep partisan grooves of contemporary politics, in which the Liberals believed the absolute worst of a Trump supporter. But they also contained a thread of real conspiracy thinking – not only that racism is a source of Trumpian politics, but that apparently ordinary people communicate using secret signals. It reflects a deep alienation among Americans in which our warring tribes blink each other through the fog for mysterious and absurd signs of malice.

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Politics

NAACP sues Trump, Giuliani, alleging conspiracy to incite Capitol riot

NAACP sues Trump, Giuliani, alleging conspiracy to incite Capitol riot

President Donald Trump looks on at the end of his speech during a rally to contest the certification of the results of the 2020 US presidential election by the US Congress on January 6, 2021 in Washington, USA.

Jim Bourg | Reuters

The NAACP and Rep. Bennie Thompson, D-Miss., Chairman of the House Homeland Security Committee, sued former President Donald Trump, his lawyer Rudy Giuliani and two right-wing groups on Tuesday for plotting to incite the fatal Jan 6 Riots in the US Capitol.

The lawsuit, which is likely to include other Democratic lawmakers, cites the Ku Klux Klan Act of 1871, which accused the defendants of conspiring to prevent Congress from electing Joe Biden to confirm to president.

This law was passed 15 years after the end of the civil war in response to the violence of the racist KKK and its intimidation of South Congressmen.

In addition to Trump and Giuliani, defendants in the U.S. District Court in Washington, DC include the Proud Boys and Oath Keepers groups, members of which were known to be among the thousands of people who broke into the Capitol last month.

The lawsuit comes three days after Trump was acquitted of instigating the uprising in his second Senate impeachment trial. Only seven Republicans voted to condemn Trump.

Trump had said without evidence for months before election day that the 2020 presidential contest would be fraudulent. He spent two months after his loss to Biden falsely claiming that he won the election and that there was widespread election rigging that passed the official results on to the Democrats.

On January 6, shortly before the Capitol invaded, Trump, Giuliani, and other speakers at a rally outside the White House encouraged supporters to oppose the confirmation of Biden’s victory by a joint congressional session, which is usually a formality.

In a press release announcing the lawsuit, the NAACP said: “The uprising was the result of a carefully crafted plan by Trump, Giuliani, and extremist groups like the Oath Keepers and Proud Boys, all of whom shared the common goal of using intimidation. Harassment and Threats to Stop Electoral College Certification. “

“They succeeded in carrying out their plan. After seeing the Capitol police barricade the doors of the house’s chamber with furniture, Congressman Thompson and other lawmakers put on gas masks and were taken to the Longworth House office block to take them.” More than 200 other representatives, employees and staff members sought protection. “

The lawsuit accuses the defendants of a coordinated plan to undermine the democratic electoral process and block the legal votes on millions of ballots cast by black Americans.

“January 6th was one of the most shameful days in our country’s history and was instigated by the president himself,” Thompson said in a statement.

“His joyful support of violent white supremacists resulted in a rupture of the Capitol that put my life and that of my colleagues in grave danger. It is a coincidence that the outcome was no more fatal. While the majority of Republicans in The Senate have a responsibility to holding the president accountable has been given up. We must hold him accountable for the uprising he has so obviously planned. “

Thompson added that the failure to hold the defendants accountable “invites this kind of authoritarianism to the right-wing anti-democratic forces so intent on destroying our country.”

Jason Miller, a Trump spokesman, said in a statement: “President Trump was acquitted in the recent Democratic witch hunt and the facts are irrefutable.”

“President Trump did not plan, produce or organize the January 6 rally on the Ellipse. President Trump did not instigate or conspire violence in the Capitol on January 6,” Miller said.

He added that House Speaker Nancy Pelosi, D-Calif., “And Washington, DC Mayor Muriel Bowser, have to answer questions about why they turned down additional Security and National Guard assistance in the run-up to Jan. 6. “

Giuliani did not immediately respond to a request for comment.

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Politics

5 charged with conspiracy, some marched with Proud Boys

5 charged with conspiracy, some marched with Proud Boys

The photo is included in a U.S. District Court criminal complaint citing William Chrestman, who participated in the U.S. Capitol Riot on January 6, 2021.

Source: US Department of Justice

Federal authorities arrested five people Thursday for conspiracy related to the January 6 uprising at the Capitol, several of whom were seen accompanied by members of the far-right Proud Boys group.

The five are accused of acting together to prevent police officers in the Capitol from controlling the crowd of Trump supporters and to impede an official congressional process that day.

A member of this group, William Chrestman, is accused of hitting a wooden ax handle or club when he yelled at Capitol police officers trying to guard the complex: “You shoot and I’ll take your f —— a– out! “

The other people charged in the case are Christopher Kühne, Louis Enrique Colon, Felicia Konold and Cory Konold.

The Konolds, who are siblings, are from Tucson, Arizona while the other defendants are from the Kansas City area.

Photo contained in a US District Court criminal complaint listing Christopher Kühne as a participant in the US Capitol Riot on January 6, 2021.

Source: US Department of Justice

The defendants are charged with conspiracy, civil disorder, obstruction of official process, trespassing on restricted grounds, and disorderly conduct on the grounds of the Capitol.

Chrestman is also accused of threatening to attack a federal law enforcement officer.

According to a criminal complaint containing still images of the defendants during the riot, investigators believe that “there may be more people involved in this conspiracy than” these defendants, “and the investigation is ongoing.”

The complaint said the five defendants were “not only close to each other during the riot, but also appeared to be gesticulating and communicating with each other before and during the Capitol to coordinate their efforts”.

The complaint does not state that the five people are members of the Proud Boys.

Photo included in a U.S. District Court criminal complaint listing Louis Enrique Colon as a participant in the U.S. Capitol Riot on January 6, 2021.

Source: US Department of Justice

However, it is noted that several of the defendants were in the vicinity of Proud Boy members that day.

It is also said that Felicia Konold claimed on video that she was “recruited into a Kansas City chapter” and displayed a challenge-type coin that “appears to have markings referring to them as Kansas City Proud Boys.” . “

The accused are the youngest of dozens of people charged with the riot. This disrupted a joint session of Congress that day to confirm the election of Joe Biden as president.

Former President Donald Trump is currently on trial in the Senate after being charged with incitement to insurrection by repeatedly making false allegations of electoral fraud and calling on supporters to oppose the confirmation of Biden’s victory.

Photo included in a U.S. District Court criminal complaint listing Felicia Konold as a participant in the U.S. Capitol Rising on January 6, 2021.

Source: US Department of Justice

The Proud Boys, a Western chauvinist group that supported Trump, encouraged members to take part in the January 6 demonstrations in Washington, including a Trump rally held immediately before the uprising.

Chrestman and Felicia Konold were seen marching near the Capitol with a large group of proud boys, including organizers of that group previously charged with riot-related crimes, Joseph Biggs and Ethan Nordean.

Chrestman was also featured in an open source video interacting with Proud Boys and communicating with Nordean near the Capitol before it was attacked.

The photo is included in a U.S. District Court criminal complaint identifying participants in the U.S. Capitol Riot on January 6, 2021. The participants circled in red are Christopher Kühne (L), Louis Enrique Colon (C) and William Chrestman (R).

Source: US Department of Justice

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Politics

Two Proud Boys members indicted for conspiracy in U.S. Capitol riots

Two Proud Boys members indicted for conspiracy in U.S. Capitol riots

Members of the right-wing extremist group Proud Boys make “OK” hand gestures indicating “white power” as supporters of US President Donald Trump gather in front of the US Capitol to oppose the certification of the results of the 2020 US presidential election United States Protest Congress in Washington, USA, January 6, 2021.

Jim Urquhart | Reuters

Two members of the far-right nationalist group, the Proud Boys, were tried in federal court Friday for conspiring to obstruct law enforcement and other charges related to their participation in the January 6th deadly riot at the Capitol.

Dominic Pezzola, 43, from Rochester, New York, and William Pepe, 31, from Beacon, New York, were initially prosecuted and arrested earlier this month, according to a press release from the US Department of Justice.

The men were charged with conspiracy, disorder, unlawful entry into buildings or properties, and disorderly and disruptive behavior in buildings or properties on Friday in federal court in DC.

Pezzola is also charged with obstructing an official trial; additional number of riots and aiding and abetting riot; Theft of US personal property; attack, resist, or hinder certain officers; Destruction of state property; and engage in physical violence in a confined building or site.

Pepe was a Metro Transit Authority employee who, according to an affidavit, used a sick day to travel to DC for the planned riot. The agency suspended him.

Pezzola, a retired U.S. Marine, was filmed using a police sign to break a window and break through the Capitol. Witnesses also told authorities that Pezzola, known to some as “Spaz,” said he would have killed Vice President Mike Pence and House spokeswoman Nancy Pelosi if he had the chance, according to an affidavit.

Prosecutors also said that Pezzola posted a video on social media smoking a cigar in the Capitol and saying, “Victory smoke in the Capitol, guys.”

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Business

Boeing to pay greater than $2.5 billion to settle prison conspiracy prices over 737 Max

Boeing to pay more than $2.5 billion to settle criminal conspiracy charges over 737 Max

An employee works near a Boeing 737 Max aircraft at the Boeing 737 Max manufacturing facility in Renton, Washington, the United States, on December 16, 2019.

Lindsey Wasson | Reuters

Boeing agreed to pay more than $ 2.5 billion to settle criminal complaints with the U.S. Department of Justice that the company accused of hiding information about its 737 Max plane, which was involved in two crashes the Federal Prosecutor announced on Thursday that 346 people were killed.

Prosecutors said Boeing had “knowingly and intentionally” conspired to defraud the United States by undermining the Federal Aviation Administration’s ability to assess the aircraft’s safety.

Boeing admitted that two 737 aeronautical pilots “fooled” the FAA about the capabilities of a flight control system on the aircraft, software that was later implicated in the two crashes, the Justice Department said. The deferred law enforcement arrangement closes the DOJ’s roughly two-year investigation and drops all charges after three years if there are no additional violations.

The $ 2.51 billion fine consists of a $ 243.6 million fine, a $ 500 million fund for family members of accident victims and $ 1.77 billion for Airline customers. The company said it had incurred a large portion of these costs in previous quarters and expects fourth quarter 2020 earnings to be charged at $ 743.6 million to cover the remainder.

“The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and misleading behavior by employees of one of the world’s leading manufacturers of commercial aircraft,” wrote Assistant Attorney General David P. Burns of the Department of Justice’s Criminal Division in a release. “Boeing employees chose the win over openness path by hiding essential information about the operation of their 737 Max aircraft from the FAA and trying to cover up their deception.”

The crashes plunged Boeing into its worst crisis ever, sparked the creation of its best-selling aircraft worldwide, conducted numerous investigations and damaged the reputation of one of the largest aircraft manufacturers in the world.

Last month, the FAA approved software and other security changes Boeing had made to the planes and gave airlines permission to fly them again.

The company admitted the wrongdoing and waived a trial under its contract with the DOJ to settle the charges. The agreement also did not include top executives, as the misconduct was neither pervasive nor senior executives.

“This is an essential solution to a very serious matter, and I firmly believe that it is the right thing for us to enter into this resolution – a move that properly recognizes that we have failed to live up to our values ​​and expectations”, said CEO Dave Calhoun in a note to Boeing employees.

Boeing shares fell about 1% after close of trading.

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Health

A pharmacist accused of sabotaging vaccine doses is a conspiracy theorist, the police say.

A pharmacist accused of sabotaging vaccine doses is a conspiracy theorist, the police say.

A pharmacist arrested for deliberately sabotaging more than 500 doses of the Covid-19 vaccine in a Wisconsin hospital was “a licensed conspiracy theorist” who believed the vaccine could harm people and “alter their DNA”, so the police in Grafton, Wisconsin, where the man was employed.

Police said Steven Brandenburg, 46, who worked the night shift at Aurora Medical Center in Grafton, twice removed a box of Moderna vaccine from the refrigerator for 12 hours, rendering it “unusable.” .

“Brandenburg admitted to having done this on purpose, knowing that it would reduce the effectiveness of the vaccine,” said police.

The attempt to destroy valuable doses of the vaccine came over the holidays as the state worked to quickly deliver vaccines to the health front. As of Saturday, the state had received 159,800 doses of vaccines and administered 64,657, according to the Centers for Disease Control and Prevention. Although the Moderna product is sometimes described as a “genetic” vaccine, it does not alter a person’s genes in any way.

The vials, which held 570 doses of vaccine and were valued at $ 8,000 to $ 12,000 according to prosecutors, were discovered on Dec. 26. Five days later, Mr Brandenburg was arrested for crimes of reckless endangerment and property damage, although prosecutors said Monday the charges could be dropped on a single misdemeanor if the vials, which have yet to be tested, are still usable.

Prosecutor Adam Gerol said Mr. Brandenburg was “quite cooperative and admitted everything he did”. He said that, according to employees, Mr. Brandenburg had already brought a gun to work twice.

In a decision signed on Monday, a family court temporarily granted his wife Gretchen Brandenburg sole custody of the two daughters of Mr Brandenburg and determined that the children were in “immediate danger of physical or mental harm”.

Ms. Brandenburg filed for divorce last June. At a hearing in July, her lawyer testified that his client was afraid of Mr. Brandenburg’s temper.