Victor Bozzo, previously holding the titles of CEO and CCO, and Edward O’Donnell, the ex-CFO of Pareteum Corporation, have been indicted for allegedly manipulating the publicly traded telecom company’s reported revenue. The indictment was unsealed by Damian Williams, U.S. Attorney for the Southern District of New York, and James Smith, the FBI’s New York Field Office Assistant Director.
The charges against Bozzo and O’Donnell include conspiracy, securities fraud, falsifying SEC filings, and illicitly influencing audit conduct. The duo allegedly inflated Pareteum’s revenue by significant margins. Both were taken into custody and are set to appear before U.S. Magistrate Judge Ona T. Wang. The case will be overseen by U.S. District Judge Arun Subramanian.
Stanley Stefanski, Pareteum’s ex-Controller, has also been implicated. Stefanski admitted guilt before U.S. District Judge Andrew L. Carter on September 14, 2023, for his role in the fraudulent scheme and other related offenses. He is now collaborating with authorities.
U.S. Attorney Damian Williams commented on the matter, stating that Bozzo and O’Donnell, along with their associates, allegedly inflated Pareteum‘s revenue to enhance the company’s profitability. This alleged manipulation allowed them to secure unearned performance bonuses. Williams emphasized that their alleged deceptive practices have now been exposed.
The indictment details the alleged scheme where senior executives at Pareteum, including Bozzo and O’Donnell, misleadingly recognized revenue based on non-binding purchase orders. These orders did not mandate any payment obligations from customers. The executives were aware that Pareteum often recognized revenue prematurely, even before delivering services to clients. To hide these dubious accounting practices, they allegedly misled independent auditors.
The inflated revenue figures made Pareteum appear to be achieving aggressive growth targets, aiming to boost the company’s stock price. However, this growth was allegedly only attainable due to the fraudulent activities orchestrated by the accused.
The indictment further alleges that the accused recognized revenue from non-binding contracts. Bozzo and O’Donnell were aware that these purchase orders were not sales contracts, as they typically reflected future sales intentions. Despite this, Pareteum’s executives, in violation of standard accounting principles, recognized full projected revenue based on these orders, even when they knew that the company couldn’t fulfill its performance obligations. As a result of these alleged malpractices, Pareteum reportedly recognized and reported over $40 million of unearned revenue to investors from 2018 to mid-2019.
