Salesman and CEO of Former Downstate Telecommunications Business Indicted in Alleged $6 Million Financing Fraud Scheme
|U.S. Attorney’s Office June 06, 2014|
CHICAGO—During three telephone conference calls with an outside auditing firm and his own company’s CEO and CFO in November 2012 and January 2013, a sales representative for a downstate computer and telecommunications business posed as an employee of a global telecommunications company that the downstate firm had partnered with and, with his CEO’s alleged knowledge and participation, lied about the downstate company being owed millions of dollars by its larger international partner, according to a federal fraud indictment.
As a result, David Godwin, the chief executive officer, president, and board chairman of the former ContinuityX Solutions Inc. of Metamora, Illinois, and John Coletti, a ContinuityX sales representative, allegedly secured $6 million in November 2012 from two victim financing companies for ContinuityX based on the allegedly false assurances that its global marketing partner owed ContinuityX $12 million in receivables.
Godwin, 52, of Germantown Hills, Illinois, was charged with six counts of wire fraud, and Coletti, 53, of Canyon Country, California, was charged with four counts of wire fraud in an indictment returned yesterday by a federal grand jury in Chicago. The indictment also seeks forfeiture of approximately $6 million from both defendants. Both defendants will be ordered to appear for arraignment on a date to be determined in U.S. District Court in Chicago.
According to the indictment, an unnamed global telecommunications company entered into a joint marketing agreement with ContinuityX under which ContinuityX billed the larger company for computer and telecommunications services, including networked computer server space, which ContinuityX provided to the international firm’s customers. Godwin and Coletti allegedly falsely represented to the two victim financing companies in Atlanta and Baltimore, an auditing firm, and ContinuityX’s chief financial officer and investors, that ContinuityX was owed $12 million for services it provided to the global firm’s customers. Godwin allegedly caused ContinuityX to create false e-mails and invoices as part of the fraud scheme and knew that a signature was forged on a purchase order.
Godwin and Coletti together fraudulently arranged the conference calls in which Coletti posed as an employee of the global telecommunications partner to falsely assure auditors, ContinuityX’s CFO, and the two victim financing companies that the accounts receivable were legitimate and that payment was forthcoming, the indictment alleges.
To conceal the false invoices, Godwin allegedly fraudulently caused ContinutyX to file a Form 10-Q with the U.S. Securities and Exchange Commission in November 2012, which Godwin certified as CEO of ContinuityX, purportedly recognizing $4 million in revenue from the global telecommunications company that Godwin knew was false.
Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 million fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation. The Chicago office of the Securities and Exchange Commission cooperated with the investigation.
The government is being represented by Assistant U.S. Attorney Steven Dollear.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.