The former head of FCC Chairman Ajit Pai's Broadband Deployment Advisory Committee (BDAC) has been arrested on a charge of wire fraud for allegedly tricking investors into pouring money into a fiber-optic network.
Elizabeth Pierce is accused of "forg[ing] guaranteed revenue contracts to fraudulently induce investors to invest more than $250 million in a fiber optic cable network in Alaska," according to a press release issued last week by the US Attorney for the Southern District of New York.
Pierce was the first chair of the Federal Communications Commission's 29-member broadband committee, which has seen defections from municipal officials who say it has prioritized the interests of private Internet providers over those of cities and towns.
US Attorney Geoffrey Berman described the complaint against Pierce as follows:
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.
Pierce “did an excellent job”
Pai announced Pierce's appointment to the BDAC chair spot in April 2017, noting that the FCC had received more than 380 applications for positions on the committee. BDAC members include representatives from Comcast, AT&T, Sprint, and Google Fiber, as well as other broadband companies, industry groups, think tanks, and local governments.
The FCC said the committee's goal is to accelerate deployment of broadband "by reducing and removing regulatory barriers to infrastructure investment." Pierce complained that "the permitting process in Alaska took longer than building fiber cables from scratch and shipping them from Europe," according to The Center for Public Integrity.
Pai had to appoint a new chair in September 2017 after Pierce resigned from the BDAC for "personal reasons." Pai thanked Pierce for her service, saying that "She did an excellent job leading the BDAC through its first two public meetings. I am sorry to see her go and wish her all the best in her future endeavors."
City officials leave over industry favoritism
The chair swap was one of several changes to the BDAC in its short existence. San Jose Mayor Sam Liccardo quit the group in January 2018, complaining that "the industry-heavy makeup of BDAC will simply relegate the body to being a vehicle for advancing the interests of the telecommunications industry over those of the public."
For example, Liccardo told Pai in his resignation letter that one working group "created a draft model state code that included provisions to eliminate all municipal control over when, how, and whether to accept industry applications for infrastructure deployment." Separately, a draft municipal code was "dramatically" rewritten by an industry representative "in the 11th hour" in order to prioritize industry interests, he said.
New York City CTO Miguel Gamiño Jr. quit the advisory committee last month. About 75 percent of the BDAC members represent "large telecommunications and cable companies or interests aligned with those companies," and this has "skewed the drafting of the proposed recommendations towards industry priorities without regard for a true public-private partnership," he told Pai in his resignation letter.
Pierce was the CEO of Quintillion Subsea Operations when she was chosen to lead the FCC advisory group. Quintillion has since replaced her and continues to build an undersea fiber network that offers wholesale bandwidth services.
Contracts “were completely worthless”
Pierce, 54, would face a maximum prison sentence of 20 years if convicted on the one count of wire fraud.
The contracts allegedly forged by Pierce made it appear to investors that "other telecommunications companies that resell capacity to end users such as businesses and households… made binding commitments to purchase specific wholesale quantities of bandwidth from the Fiber Optic Company at specific prices," according to the US attorney's office.
The fake revenue agreements were supposedly worth more than $1 billion, but in reality "were completely worthless because Pierce had forged the counter-parties' signatures," the US attorney's office said in its announcement of the arrest. "Certain of the Fake Revenue Agreements never existed at all, while others were false versions of genuine revenue agreements that were more favorable to the Fiber Optic Company than the genuine agreements."
Pierce's scheme "began unraveling" after "a customer disputed invoices that it received from the Fiber Optic Company pursuant to one of the Fake Revenue Agreements," the arrest announcement said. "Shortly thereafter, Pierce abruptly resigned from the Fiber Optic Company."