FTE Networks Inc. CEO and CFO Charged by SEC | Goodman & Nekvasil P.A. May Recover Investor Losses
The Securities and Exchange Commission today charged the former CEO and CFO of FTE Networks Inc., a network infrastructure company formerly based in Naples, Florida, with conducting a multi-year accounting fraud. This alleged scheme involved inflating the company’s revenues for certain periods by as much as 108 percent, the misappropriation of millions of dollars of company funds for personal use, and concealing the then-NYSE listed publicly traded company’s issuance of almost $23 million in convertible notes.
According to the SEC’s complaint, Michael Palleschi and David Lethem, the former CEO and CFO respectively of FTE, directed the company to issue approximately $22.7 million in convertible notes with short-term maturities, steep interest rates, and market-price-based formulas for conversion into shares. As alleged, Palleschi and Lethem misled in-house accounting personnel and FTE’s outside auditor about certain material terms of the notes, which were not properly accounted for or disclosed in FTE’s financial statements. The complaint also alleges that Palleschi and Lethem inflated FTE’s revenue by directing FTE to improperly recognize revenue and related accounts receivable for nonexistent construction projects. According to the complaint, Palleschi and Lethem misappropriated millions of dollars of company funds to pay for personal expenses, including luxury car leases, private jet services, and unauthorized salary increases.
“As alleged in our complaint, the defendants engaged in an egregious scheme to fraudulently inflate FTE’s revenues to portray a false picture of the company’s financial condition while misappropriating millions of dollars for their personal use,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “We are committed to holding accountable executives who provide the public with materially false financial reports and those who loot companies for their own personal gain.”
The SEC’s complaint charges Palleschi and Lethem with directly violating or aiding and abetting violations of antifraud, reporting, and proxy solicitation provisions of the securities laws. The complaint seeks permanent injunctions, penalties, and officer-and-director bars against Palleschi and Lethem, disgorgement and prejudgment interest, and a clawback of equity-based compensation paid to Palleschi during the alleged fraud.
Separately, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Palleschi and Lethem for related misconduct.
Investors in FTE Networks Inc. May Recover their Losses with Goodman & Nekvasil, P.A.
If you invested in FTE Networks Inc., Goodman & Nekvasil, P.A. may help you. Goodman & Nekvasil, P.A., a St. Petersburg, FL law firm with a national practice representing victimized investors, has recovered more than $200 million dollars on behalf of victimized investors.
All our cases are handled on a purely contingency fee basis by Kalju Nekvasil, Esq., formerly regional counsel with the NASD, now known as FINRA. Kalju Nekvasil, Esq. has practiced in this area of the law for more than 35 years.
There is no charge for an evaluation of your case. Further, we handle our cases on a contingency fee basis. This means that unless we recover money for you, we charge no attorney’s fee. Unless you recover any money, you pay us nothing, not even the costs and expenses which the firm will advance on your behalf.
If you incurred investment losses with FTE Networks Inc. and would like your case evaluated by a securities attorney (again, there is no charge for an evaluation and all cases are handled on a purely contingency fee basis), please contact us.