Ex-BDAC Chair/Quintillion CEO Arrested for Alleged $250 Million Fraud With Alaska Fiber Project

“To realize her plan to build a fiber optic system that would service Alaska and connect it to the lower 48 states," Pierce allegedly "convinced two investment companies that she had secured signed contracts that would supposedly generate hundreds of millions of dollars in guaranteed future revenue from the system,” Berman said. “Those sales agreements were worthless because the customers had not signed them. ... Pierce had forged counterparty signatures on contract after contract.”

Quintillion became aware of the allegations last year and has been cooperating with authorities, the company said: “Quintillion values its partnerships with customers and investors and the alleged actions of Ms. Pierce are not aligned with how Quintillion conducts business.” The company will keep expanding its fiber network, it said. The FCC was unaware of any of the allegations until Thursday's announcement, said an official, declining to be identified and declining further comment. Aristotle President Elizabeth Bowles, who replaced Pierce as BDAC chair, didn’t comment.

Pierce allegedly presented false contracts of Alaska telecom companies to buy wholesale bandwidth from Quintillion, with the fake agreements valued at more than $24 million during the first year of the subsea system’s operation, about $10 million in the first year of the terrestrial system’s operation and about $1 billion over the life of the agreements, FBI Special Agent Sean Bartnik wrote in the complaint at U.S. District Court in Manhattan seeking a warrant for the arrest. Pierce forged signatures on the documents, the agent alleged.

Pierce told an investor in about April 2014 that her company had executed contracts with at least two telecom companies, but in early 2015, she informed the investment firm that one contract was in jeopardy, Bartnik alleged. Pierce said she was negotiating with the company’s expected customers for revenue contracts that together would bring comparable volume and value, he said: Her company “was under pressure to move forward with construction, especially of the Subsea System, before the onset of the Arctic winter.”

Needing to show a guaranteed revenue stream, Pierce allegedly “negotiated and attempted to negotiate take-or-pay contracts for the sale of capacity to other telecommunications companies on a wholesale basis.” When she failed, she produced and presented fraudulent contracts, the complaint alleged. Pierce tried negotiating a terrestrial contract with a third telco in 2015, and sent the investor a contract in May that year that she knew was false, the complaint said. “It was not until June 2017 that the Fiber Optic Company and TelCo-3 finally executed a genuine Terrestrial contract,” and it differed from the 2015 version in duration, pricing and coverage, the FBI agent alleged. Piece tried negotiating with a fourth telecom company in 2016 and similarly produced a fraudulently signed contract to the investor in May that year. In September 2016, Pierce emailed the investor a copy of a subsea contract with a fifth telco that was “materially different” from the genuine agreement with the company and “more favorable” to Pierce’s company, the complaint alleged.

The scheme unraveled when Quintillion sent invoices to one of the telecom companies and the company disputed the invoice because it hadn’t ordered any capacity, the complaint said. The investment firm opened an investigation and discovered other fraudulent agreements. During that probe, one investigator in June accessed and took screenshots of some of the allegedly fraudulent contracts in Pierce’s Google Drive account. The screenshots “depicted an activity log which read, ‘Elizabeth Pierce moved 78 items to the trash’ two days earlier.” Deleted files were recovered from Google pursuant to a search warrant, the complaint said.