NTG's ex-CEO pleads guilty to fraud
Tobin could receive 30 years, $1 million fine in plea on single count; 9
other charges to be dismissed; Accounting ruse blamed for investors'
losses
By Stacey Hirsh
Sun Staff
February 21, 2003
Michele
Tobin, the former chief executive officer of now-defunct Network Technologies
Group Inc., pleaded guilty yesterday to one count of fraud in the case of an
accounting scheme that crumbled the Baltimore company.
As part of a plea
agreement with the U.S. attorney's office, nine other counts of wire, mail and
bank fraud against Tobin are scheduled to be dismissed at
sentencing.
Tobin, 47, faces up to 30 years in prison and a $1 million
fine. She is scheduled for a sentencing hearing May 16 and was released on her
own recognizance.
Tobin and three other former company executives are
accused of defrauding Network Technologies Group's lender, Mercantile-Safe
Deposit and Trust Co., and two of its investors - Abell Venture Fund of
Baltimore and Smith Whiley & Co., a Connecticut investment company.
A
privately held company founded in 1996, Network Technologies Group installed
cable for utility and telecommunications companies, including Comcast Corp.,
AT&T Corp. and WorldCom Inc.
The company inflated its accounts
receivable that served as collateral for its line of credit with Mercantile,
according to court documents. The company also provided false financial
statements that a local brokerage firm then used to attract NTG investors, the
documents say.
"When the company closed its doors, the Abell Foundation
wound up losing approximately $2.25 million it had invested," the plea agreement
says.
In the documents, prosecutors also said that Smith Whiley lost $1
million and Mercantile took a net loss of about $2.1 million from the line of
credit it was extending to NTG.
According to the documents, Tobin agreed
to plead guilty to charges that there was a fraud scheme, that she knowingly
took part in it and that she used or caused the use of interstate wires (such as
faxes or e-mails) to execute the scheme. She agreed to cooperate with federal
law enforcement officials and to testify in court.
Defense and
prosecuting attorneys agreed to disagree on the loss amount, as well as on
Tobin's role in the offense and her abuse of trust, according to the plea
agreement.
Andrew C. White, a Baltimore white-collar defense attorney and
former federal prosecutor, said the fact that Tobin is pleading guilty to only
one offense is insignificant because, in a fraud sentencing, the amount of the
loss is key, not the number of charges.
The plea agreement says, however,
that Tobin should receive a lesser sentence if she continues to cooperate. Some
language included in the agreement also says that the defendant is free to ask
for more leniency at sentencing, "and that is typically a signal to the court
that the defendant should receive more than the recommended departure" from
federal sentencing guidelines, White said.
In U.S. District Court in
Baltimore yesterday, Chief U.S. District Judge J. Frederick Motz read to Tobin
the terms of the plea agreement, and she replied that she understood
them.
A slight woman, Tobin wore a black suit and a scarf wrapped around
her head. When she left NTG at the end of June, she told employees it was
because she had terminal cancer.
Tobin and the other NTG officers were
each charged with 10 counts of mail, bank and wire fraud last month after an
investigation of the company.
Her attorney, Wick Sollers, declined to
comment after the hearing.
Beverly Baker, 51, NTG's former controller,
and Victor Giordani Jr., 55, a founder and former chief operating officer,
pleaded not guilty earlier this month. Thomas Bray, 48, NTG's former chief
financial officer, is scheduled for an arraignment next week.
The plea
agreement submitted to the court yesterday says that at the end of 2000, "Tobin
and Baker agreed not to record some of the company's expenses in the company's
books, to give the appearance that the company was performing better than it
was."
The document later says: "In December, 2001, Ms. Baker and Ms.
Tobin again kept payables off the company books, with the knowledge of others
within the firm. This was done by intentionally not entering into the company's
computer accounting system approximately $1 million in various expenses the
company owed."
The troubles at NTG came to light after turnaround
specialist John M. Collard was brought in July 1 to try to save the company.
Collard, who owns Strategic Management Partners Inc. of Annapolis,
uncovered accounting irregularities and closed the company July 12.
About
125 workers lost their jobs when NTG shut its Fells Point
offices. Money that had been deducted from their paychecks to go into 401(k)
accounts was never deposited there, and the employees did not receive health
benefits for several weeks before the company closed, Collard has said.
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