FTE Networks’ Former Top Executives Accused of Fraud, Theft (2)

Two former top executives of FTE Networks Inc., which was a builder of telecommunications systems and invested in residential real estate, face charges that they schemed to inflate the value of the company’s shares and steal corporate funds.

Michael Palleschi, the former chief executive, and David Lethem, the ex-chief financial officer, were arrested and charged with fraud tied to the issuance of $22 million in notes to private lenders from 2016 to early 2019, prosecutors said. The charges include conspiracy, securities fraud and wire fraud in an indictment unsealed Thursday in Manhattan federal court.

The Securities and Exchange Commission also filed a civil lawsuit in federal court in Florida. The company’s shares have been delisted.

Prosecutors claim Palleschi, 46, and Lethem, 62, embezzled money from FTE Networks, which they used to fly on private jets, buy luxury cars and to pay off personal credit cards.

Palleschi and Lethem were separately charged in Manhattan state court with stealing more than $28 million in construction-trust assets from Benchmark Builders Inc., a construction management and contracting firm, beginning in November 2018.

Douglas Molloy, a lawyer for Lethem, declined to comment on the allegations. Steven Munson, who represents Palleschi, didn’t return phone and email messages seeking comment.

Benchmark Builders, which was acquired by FTE in 2017, said in a statement that its executives contacted state prosecutors in late 2018 about the misuse of trust fund money. Benchmark separated from FTE almost two years ago and invested personal money into the business to protect subcontractors and their workers, according to the statement.

“Not a single subcontractor or client was impacted by these events and not a single worker missed a paycheck,” Benchmark said.

The cases are: U.S. v. Palleschi, 21-cr-00454, U.S. District Court, Southern District of New York (Manhattan); SEC v. Palleschi, 21-cv-00530, U.S. District Court, Middle District of Florida (Ft. Myers).

(Adds Benchmark Builders statement in seventh paragraph.)

To contact the reporter on this story:
Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Steve Stroth

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