Former broadband advisory head and Quintillion CEO, pleads guilty to bilking investors of $250 million

In Featured News by Wireless Estimator

While Elizabeth Pierce was heading the FCC's Broadband Deployment Advisory Committee, she is alleged to have been running a scam to have investors contribute more than $250 million to her company, partially based upon her forged documents.

While Elizabeth Ann Pierce was heading the FCC’s Broadband Deployment Advisory Committee, she had been running a scam to have investors contribute more than $250 million to her company, partially based upon her forged documents. She pled guilty to the charges Monday and will be sentenced May 16, 2019.

Elizabeth Ann Pierce, the former CEO of telecommunications company Quintillion based in Anchorage, Alaska, and FCC Chairman Ajit Pai’s pick to head the FCC’s Broadband Deployment Advisory Committee, pled guilty Monday in Manhattan federal court to wire fraud and aggravated identity theft in connection with a scheme to use forged guaranteed revenue contracts fraudulently to induce investors to pony up more than $250 million into her company for the construction of a fiber optic cable network in Alaska.

Her indictment was first reported in industry media by Wireless Estimator last April.

Manhattan U.S. Attorney Geoffrey S. Berman said: “As she admitted today, Elizabeth Ann Pierce engaged in a brazen, multi-year scheme to obtain over $250 million from investors by misrepresenting that she had guaranteed revenue contracts with multiple telecommunications services companies. But in fact, the defendant faked those contracts, forged other people’s signatures on them, and then lied to cover up her fraud.  She abused her executive position and is now being held accountable for her crimes.”

Pierce, age 55, now of Austin, Texas, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison, and eight counts of aggravated identity theft, each of which carries a mandatory 2-year term of imprisonment, of which at least 2 years must be consecutive to any term of imprisonment imposed on the wire fraud count.

Pierce is scheduled to be sentenced by U.S. District Judge Edgardo Ramos on May 16, 2019.

According to the complaint, the indictment, statements made in court, and publicly available documents:

Until July 2017, Pierce was the chief executive officer of Quintillion that built, operates, and markets a high-speed fiber optic cable system (the “Fiber Optic Cable System”).  This System consists of three segments: a subsea segment that spans the Alaskan Arctic; a terrestrial segment that runs north to south along the Dalton Highway; and a land-based network of fibers that connects the subsea and terrestrial segments.  The Fiber Optic Cable System is connected to the lower 48 states through other existing networks.

Between May 2015 and July 2017, Pierce engaged in a scheme to induce two investment companies to provide more than $250 million to construct the Fiber Optic Cable System by providing them with eight forged broadband capacity sales contracts and related order forms under which Quintillion would obtain guaranteed revenue once the Fiber Optic Cable System was built (the “Fake Revenue Agreements”).

Under the Fake Revenue Agreements, four telecommunications services companies appeared to have made binding commitments to purchase specific wholesale quantities of capacity from Quintillion at specified prices.  The cumulative value of the Fake Revenue Agreements was more than $24 million during the first year of the subsea segment’s operation, approximately $10 million during the first year of the terrestrial segment’s operation, and approximately $1 billion over the life of the Fake Revenue Agreements.  In reality, the Fake Revenue Agreements were completely worthless because Pierce had forged the counterparties’ signatures.

Certain of the Fake Revenue Agreements never existed at all, while others were falsified versions of genuine revenue agreements.  Pierce fabricated the terms of the false versions of the agreements to make them more favorable to Quintillion and, therefore, more appealing to investors than the genuine agreements.  For example, under one of the Fake Revenue Agreements, the customer purportedly agreed to buy increasing amounts of gigabits per second of capacity over a period of 20 years from Quintillion.

That agreement, if genuine, would have assured Quintillion hundreds of millions of dollars in future revenue.  In reality, negotiations over that deal had ended unsuccessfully, which fact Pierce never disclosed to the investors.  Under another Fake Revenue Agreement, the customer purportedly agreed to buy a fixed, predetermined amount of capacity from Quintillion regardless of subsequent market conditions.  In truth, that customer was not obligated to buy any capacity.

After the terrestrial system was built, Pierce attempted to prevent the discovery of the Fake Revenue Agreements by accelerating the timing of incoming payments under certain genuine agreements to make those payments appear to be based on the Fake Revenue Agreements.  Pierce also sought to prevent Quintillion and the investors from invoicing one of the customers that had no real contract with Quintillion by fabricating e-mail correspondence Pierce purportedly had with that customer.

Pierce’s scheme started to unravel when a customer disputed invoices that it received from Quintillion pursuant to one of the Fake Revenue Agreements.  Shortly thereafter, in the midst of Quintillion’s internal investigation, Pierce abruptly resigned.  Quintillion self-reported Pierce’s conduct to the Department of Justice.