|NTG's CFO admits guilt in fraud||
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|OTHER BUSINESS NEWS|
|NTG's CFO admits guilt in fraud|
|February 28, 2003
By KATHLEEN JOHNSTON JARBOE, Daily Record Business Writer
|The former chief financial officer of defunct Network Technology Group Inc.
yesterday pleaded guilty to one count of wire fraud for his part in using
doctored financial statements to get capital for NTG.
While yesterday’s court hearing formalized the plea by 48-year-old Thomas Bray, it was actually made much earlier — before he was indicted.
The U.S. Attorney’s Office extended a plea offer to him on Nov. 27, at which time he had two weeks to respond.
Bray and his attorney signed the agreement two days after the Dec. 11 deadline. His indictment was announced on Jan. 22.
Three other top executives were indicted with Bray. Two of those officers, including Victor Giordani Jr., the former chief operating officer, and Beverly Baker, the former controller, pleaded not guilty earlier this month.
Michele Tobin, the former chief executive officer, pleaded guilty to one count of fraud last week and is awaiting sentencing.
Prosecutors agreed to drop the other nine charges of bank, wire and mail fraud against Bray in exchange for his guilty plea.
Under the deal, Bray agreed to an 11-page statement of facts that was similar to the one Tobin agreed to last week.
The document alleges that NTG executives either hid expenses from its financial books or knew about the alterations. It also alleges that Tobin instructed some NTG employees to inflate accounts receivables.
These altered financials were then used to lure investors to the Baltimore telecommunication services company in the spring of 2002 by making NTG look more profitable than it was. Smith Whiley & Co. of Hartford, Conn. and The Abell Foundation of Baltimore pledged $1 million and $750,000, respectively, after receiving the false financial statements in 2002.
The false financials also were submitted to its bank lender, Mercantile-Safe Deposit and Trust Co. of Baltimore, so NTG could continue borrowing from the bank despite its troubled finances. Mercantile lost more than $1 million when NTG collapsed in July shortly after the scheme was discovered.
While Bray declined to comment, his lawyer said Bray was sorry for his actions and had a lesser role in the scheme than other indicted officers.
“Mr. Bray’s sin is one of omission, not commission,” said Gerald C. Ruter.
Bray signed falsified documents given to the bank to secure more lending, but didn’t prepare them, according to the statement of facts.
Bray also went along with a scheme to stop Mercantile from taking overdue loan payments from NTG’s bank account by shifting incoming revenue to a separate account at Allfirst Financial Inc. The scheme allegedly was concocted by Tobin, Baker and Giordani around February of 2002, according to the document.
Bray started at NTG in the fall of 2000.
It took Bray a while to get up to speed with what was happening within the company, Ruter said.
The first efforts to alter NTG’s books began in December of 2000 by Tobin and Baker, according to the statement of facts.
When he started, Bray was paid $150,000 per year. That salary increased to $175,000 by the time the company folded.
Bray knew he shouldn’t have signed the false documents and was “remorseful” that he had, Ruter said.
Bray helped investigators and a turnaround specialist hired to guide the company in its last days to decipher NTG’s finances, Ruter said.
The specialist, John M. Collard of Strategic Management Partners Inc. in Annapolis, discovered the fraud initially.
He has said Bray assisted him in understanding NTG’s books and settling its accounts after the discovery.
Bray seemed just as surprised as Collard at some of the findings, Collard said.
Prosecutors declined to comment.
Bray could face up to 30 years in jail, a $1 million fine and restitution obligations for the wire fraud plea, but likely will receive some leniency for his cooperation, according to federal sentencing guidelines.
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