The former CEO of Quintillion, a fiber optics cable company in Alaska, has been sentenced in a New York federal court to 5 years in prison for defrauding investors in New York of more than $270 million. The company reported her behavior to federal authorities after discovering a pattern of fraud in 2017.
Elizabeth Ann Pierce had pled guilty earlier this year before the same federal judge who imposed the sentence today.
“Elizabeth Ann Pierce, the then-CEO of Quintillion, placed her ambition above the law. In order to raise over $270 million to build a fiber optic cable system in northern Alaska, she repeatedly lied to her investors and forged the signatures of her customers’ executives on fake revenue contracts. When her scheme started to unravel, she tried to delay exposure with yet more lies and forged documents. She will now serve five years in prison for her crime,” according to a statement made by U.S. Attorney Geoffrey S. Berman.
Pierce was, until the summer of 2017, the chief executive office of Quintillion, which built, operates, and markets a high-speed fiber optic cable system known as the “Quintillion System,” which includes a subsea fiber optic cable under the Arctic Ocean north of Alaska, and a land segment running north to south along the Dalton Highway. The two systems are connected to a land-based network, and the system is now connected to the Lower 48 through other existing networks.
Between May of 2015 and July of 2017, she induced two New York-based investment companies to provide more than $270 million of construction money the Quintillion System. She convinced the companies by providing them with eight forged broadband capacity sales contracts and related order forms under which Quintillion would obtain guaranteed revenue once the Quintillion System was built. The court calls these “fake revenue agreements.”
Under the fake revenue agreements, four telecommunications services companies made binding commitments to purchase specific wholesale quantities of capacity from Quintillion at specified prices.
The cumulative value of the fake revenue agreements was approximately $1 billion over the life of the agreements, which had been forged.
While some of the fake agreements never existed, 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 agreements, the customer purportedly agreed to buy from Quintillion increasing quantities of gigabits per second of capacity over a period of 20 years.
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, a fact that Pierce never disclosed to the investors.
Under another fake agreement, the customer purportedly agreed to buy a fixed, predetermined amount of capacity from Quintillion regardless of subsequent market conditions. In reality, that customer was not obligated to buy any capacity.
Pierce forged the agreements, and then went back to the companies and tried to negotiate agreements identical to the ones she had forged. She was generally unsuccessful. When Quintillion and the investment companies ultimately caught onto the fraud in mid-2017, they learned that the real contracts would generate only a fraction of the anticipated guaranteed revenue of the fake, forged agreements.
Pierce also swindled two individual investors out of a total of $365,000 by leading them to believe that they would acquire ownership interests in Quintillion when, in fact, she used half of one victim’s money and all of the other victim’s investment for her own personal benefit. These individuals have received no shares and none of their money back from PIERCE.
After the terrestrial system was built, Pierce attempted to prevent the discovery of the fake agreements by accelerating the timing of incoming payments under genuine agreements to make those payments appear to be based on the fake agreements.
She also sought to prevent Quintillion from invoicing one of the customers that had no real contract with Quintillion by fabricating email correspondence that gave the impression she was terminating a contractual relationship, when in fact no such relationship existed.
One of the customers of Quintillion disputed an invoice it received from Quintillion, and the unraveling of her scheme began. Pierce resigned and Quintillion reported its former CEO’s conduct to the Department of Justice.
Pierce, now age 55, lives in Austin, Texas. She’ll serve five years in prison, and three years of supervised release, and she has been ordered to forfeit $896,000 and all of her interest in Quintillion and property she owns in Texas.
Pierce is still subject to a yet-to-be determined restitution order to her victims.