(Reuters) — Federal and New York prosecutors on Thursday charged two former top executives of FTE Networks Inc. with several crimes including defrauding the network infrastructure company’s auditors and investors, inflating revenue, embezzling money for luxuries, and theft.
Former Chief Executive Michael Palleschi and former Chief Financial Officer David Lethem were each charged with securities and wire fraud, improperly influencing audits, identity theft and conspiracy, U.S. Attorney Audrey Strauss in Manhattan said.
The U.S. Securities and Exchange Commission filed related civil charges against Mr. Palleschi, 46, of Naples, Florida, and Wellesley Island, New York, and Mr. Lethem, 62, of Fort Myers, Florida.
Manhattan District Attorney Cyrus Vance separately charged both defendants with grand larceny, saying they stole more than $28 million from construction manager Benchmark Builders Inc. to make FTE’s finances look better and fund Mr. Palleschi’s spending.
Lawyers for the defendants could not immediately be located. FTE did not immediately respond to a request for comment. The New York-based company’s stock traded on the NYSE American market before being suspended in December 2019.
Federal prosecutors said that from 2016 to February 2019, the defendants used forgeries and fake board resolutions to mislead external auditors about more than $22 million of convertible notes that FTE sold, and kept liabilities for the notes off FTE’s balance sheet.
Authorities said Mr. Palleschi and Mr. Lethem also caused FTE to recognize more than $12 million of revenue it had not earned, and diverted corporate funds for salary increases, private jet use, luxury cars and other personal expenses.