Former Quintillion CEO busted on wire fraud
Five years ago, Nome Internet users began to look forward to affordable and swift service through Quintillion, a company that would attach spurs to six communities connecting them to a submarine fiber optic cable from Japan to England, routed along Alaska’s northern coastline to serve Nome, Kotzebue, Utqiagvik (Barrow), Wainwright, Prudoe Bay, Point Hope and Shemya.
Quintillion would give the villages access to broadband speeds of 100 Gigabits per second, according to its claims, in contrast with the existing Nome and Barrow speeds of 0.006 Gigabits per minute. Nome folks cited examples of friends in the Lower 48 who paid $50 per month for unlimited broadband use, and looked forward to downloading movies and documentaries in a “whoosh” without triggering an 80-percent-monthly-use warning.
So far, Nome Internet surfers have not enjoyed the fruits of Quintillion’s promises in their households; however, the Port of Nome has benefitted from hosting cable-laying vessels to the tune of around $270,000 in user fees for a variety of vessel services over summer seasons 2016 and 2017, according to Joy Baker, port director.
While weather and ice conditions have delayed laying the subsea cable for several years, Quintillion announced the completion of subsea cable extending to Nome, Utqiagvik, Wainwright, Point Hope, Nome and Kotzebue following last summer’s work offshore Nome.
Nome Public Schools has connected to Quintillion through a supplier, and enjoys faster, cheaper service, according to NPS Superintendent Shawn Arnold. Most of NPS bandwidth is covered by state and federal grants, according to Arnold, but “using bandwidth from Quintillion through DRS Technologies has saved the governments a lot of money.”
Former Quintillion CEO Elizabeth Pierce, in meeting with locals, told them that Quintillion would be a middle provider, wholesaling broadband to any interested ISP. If the providers did not pass on the savings to households and businesses, Nome residents would see Quintillion vehicles rolling up and down streets with the company delivering service directly, Pierce vowed.
On April 12, the federal Dept. of Justice announced Pierce’s arrest in New York City on a charge of wire fraud, connected to perpetrating a multimillion dollar investment scheme. Between May 2015 and July 2017, Pierce had tricked two New York firms into investing over $250 million in Quintillion’s fiber optic project by luring them with sizable fake investment contracts that she had forged, according to the unsealed complaint. She has been charged on one count of wire fraud in the case and faces a maximum sentence of 20 years in prison, if convicted.
According to a release from DOJ, Pierce, 54, surrendered herself to FBI agents last Thursday. She appeared in court the same afternoon and was charged on one count of wire fraud. Pierce, who resides in Anchorage, has been released on bail.
“To realize her plan to build a fiber optic system that would service Alaska and connect it to the lower 48 states, Elizabeth Ann 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. As it turned out, those sales agreements were worthless because the customers had not signed them. Instead, as alleged, Pierce had forged counter-party signatures on contract after contract. As a result of Pierce’s deception, the investment companies were left with a system that is worth far less than Pierce had led them to believe,” U.S. Attorney Geoffrey S. Berman said in the DOJ release.
Pierce forged counter-parties’ signatures on approximately five contracts for sale of broadband capacity. A major investor, referenced to as Victim Firm 1, began an internal investigation of documents, which she sent or caused to be sent over the Internet from Anchorage to Manhattan, New York.
Pierce was the CEO of the telecommunications company Quintillion from 2014-August 2017, referenced in the complaint as “Fiber Optic Company,” based in Anchorage that built, operates and markets a 1,400-mile high-speed fiber optic cable system. The system has three segments—a subsea system that spans the Arctic, a land-based segment that runs north to south along the Dalton Highway, and a land based pre-existing system that Quintillion wholly or jointly owned or controlled with another telecommunications company.
The scheme came undone when a Quintillion staff member sent invoices to a telecommunications company in anticipation of a system sector becoming operational. That telecommunications company disputed the invoices as it had not yet ordered any capacity. Victim Firm-1, the major investor, began an internal investigation and discovered other fraudulent agreements. On July 16, as part of the investigation, a member of Victim Firm-1 accessed and took screen shots of a Google Drive Account that read “Elizabeth Pierce moved 78 items to the trash’ two days earlier. A search warrant allowed the federal investigation to recover and list the bogus agreements on the complaint.
Shortly after an interview with counsel for Quintillion and Victim Firm-1, near the end of July, Pierce resigned as Quintillion’s CEO, without explanation.
The contracts cited in the complaint involved a number of telecommunications companies, and started out thus, according to the 17-page DOJ complaint:
Beginning at least in or about early 2014, Pierce and others began soliciting substantial investment capital from Victim Firm-1 for the construction of the Fiber Optic System. By at least in or about April 2014, Pierce had informed Victim Firm-1 that the Fiber Optic Company had executed long-term contracts to sell bandwidth on the Fiber Optic System to at least two telecommunication companies, including Telco-1, once the system became operational. These contracts were expected to generate tens of millions of dollars in revenue during the system’s first year in service.
The revenue agreements contained certain standard provisions. Some were “take-or-pay contracts”, where a customer agreed to buy a predetermined amount of bandwidth regardless of its ability to sell that bandwidth to other telecommunications companies or to retail customers. These contracts provided guaranteed streams of future revenue to the Fiber Optic Company while shifting the risk of unsold excess capacity to the customer.
Pierce was the only person with authority to sign contracts and order forms on behalf of the Fiber Optic Company.
The federal court complaint follows up with an itemization of fake contracts and revenue statements forged by Pierce.
Arctic Slope Regional Corp. is a minority investor in Quintillion. ASRC in a press release applauded the Quintillion board for acting swiftly to self report the fraud to the DOJ.
“This will not impact our involvement in the Subsea Cable Project. Having the ability to link our communities to the rest of the world by fiber optic remains a singular world-changing benefit to the ASRC region, and we will continue to support Quintillion’s efforts to improve broadband capabilities across the Arctic,” Ty Hardt ASRC spokesman, said in the statement.
“The ongoing investigation has not impacted Quintillion’s operations nor the quality of its services,” the Quintillion statement said. “Quintillion became aware of the situation regarding the alleged actions of Ms. Pierce last year, took swift action and self-reported to the Department of Justice (DOJ). Quintillion has been cooperating fully with the authorities during this ongoing investigation.”