FTE Networks Inc. was a public telecommunication company that manipulated earnings
by recording false revenue. Michael Palleschi, the former CEO, and David Lethem, the
former CFO were charged with multiple counts of fraud in July 2021 by the DOJ
(Mangan, 2021). FTE recording over $12 million in fake revenue during the course of the
fraud (Mangan, 2021). The revenue was inflated by recording it against construction
projects that were not real. Mr. Palleschi and Mr. Lethem were using the fake revenue to
cover up the fact the business was declining and, in an attempt, to keep stock prices up.
FTE had debt covenants that required the stock price to stay above a specific amount. If
the true financials had been reported the stock price would drop and FTE would have to
declare bankruptcy. Mr. Palleschi and Mr. Letham also decided to use company funds for
personal use by giving themselves raises, leasing luxury cars, and taking vacations on
private jets (SEC, 2021).
Mangan, D. (2021). Former executives of FTE Networks charged with securities fraud
and asset swindle, sued by SEC. CNBC. https://www.cnbc.com/2021/07/15/fte-
networks-executives-charged-with-securities-fraud-conspiracy.html
SEC. (2021). SEC Charges Executives of Network Infrastructure Company With
Accounting Fraud. https://www.sec.gov/news/press-release/2021-127
