ANCHORAGE (KTUU) - The former CEO of Quintillion, an Anchorage-based company specializing in subsea fiber optic cable systems, has been arrested on charges related to a "multi-million-dollar fraud scheme" that reportedly happened while she worked for the company.
Elizabeth Pierce, former CEO of Quintillion, has been arrested on April 12, 2018 for fraud charges.
In that scheme, former CEO Elizabeth Pierce, 54, is accused of defrauding two investment companies over the course of two years, tricking them out of hundreds of millions of dollars. The scheme allegedly started with Pierce lying to investors and forging signatures, and eventually unraveled when people looked harder at some of the invoices.
After they finished their investigation, federal authorities arrested Pierce Thursday morning in New York.
According to court documents filed by the Department of Justice, Pierce convinced two firms to invest upwards of $250 million in the construction, operations, and marketing of the fiber optic system.
Pierce was the chief executive of Quintillion up until her resignation in August of 2017. According to the charges, her alleged crimes spanned from May of 2015 to July of 2017, just one month shy of her resignation.
She allegedly defrauded the companies by using "fake revenue agreements." In order to convince the investment firms that the project had value, Pierce lied to them, saying funds had been invested in binding commitments to purchase bandwidth if the project was given the green light.
Those funds, according to prosecutors, ranged from millions, all the way up to the tune of $1 billion. Believing this, the companies decided to sign on to invest in the project.
However, unbeknownst to them, those "guaranteed revenue contracts," along with the telecom commitments they promised, never existed, prosecutors said in the documents. Not only were they fake, but Pierce allegedly forged the signatures herself.
Pierce is accused of presenting to investors a product that was extremely valuable, when in reality, that evaluation was allegedly made by Pierce herself, as she signed the signatures of companies, which made it appear valuable.
In 2017, months before her resignation, and nearly a full year before her criminal arrest, Pierce spoke with KTUU regarding the construction of the Quintillion project. At that time, she argued that "the fact that we did it with private funding, private industry just helps to make the case that Alaska doesn't have to live without essential broadband services."
The "private funding" Pierce mentioned, however, may have been at least partially ill-gotten, according to prosecutors, calling into question the actual viability of the fiber proposal.
Instead, U.S. District Attorney in New York Geoffrey Berman said, "Pierce had forged counterparty signatures on contract after contract. As a result of Pierce’s deception, the investment companies were left with a system that is worth far less than Pierce had led them to believe."
Some of the contracts Pierce is accused of forging did exist, though painted a less-than-favorable view of the company. However, many of them never existed to begin with, prosecutors said.
The whole fraud scheme began unraveling, authorities say, when a customer "disputed invoices that it received from the Fiber Optic Company pursuant to one of the Fake Revenue Agreements." Shortly after that, in the summer of 2017, Pierce abruptly resigned.
Pierce was allegedly contacted by that company, named in the indictment as Victim Firm 1, but ended the interview, rescheduling it for the next day, July 26, 2017. Pierce then canceled that meeting, after she "had purportedly taken ill," the documents state.
In the charging documents filed by the FBI, Pierce allegedly tried to delete some of the incriminating files prior to her departure from the company.
She allegedly "moved 78 items to the trash" of her Google Drive account, believing that data would be deleted. The FBI, however, recovered those trashed documents, including the fake revenue agreements.
The charges Pierce faces now are those of wire fraud, specifically, which carries with it a maximum sentence of 20 years in federal prison if she's convicted.
The company's vice president of external relations says the company reported the discovery to the Department of Justice last year when it became aware of Pierce's actions, and that it's been working with the prosecutors in the investigation.
"The day to day operations have not been impacted," Kristina Woolston, VP of external relations for Quintillion, told Channel 2 Thursday. "We brought on a new CEO last year and we've continued to build and now to operate this world-class fiber optic network in Alaska," she said.
George Tronsrue III was brought on as an interim CEO in August of 2017.
Woolston said the investigation isn't swaying investors' commitment to the company or the project itself, including its portion in Alaska.
Channel 2's Mike Ross contributed to this report.