E-Commerce Company Pleads Guilty To Antitrust Charge

Gennex Media and its President Sentenced for Conspiracy To Fix Prices of Promotional Products Sold Online

Gennex Media LLC (aka Brandnex.com and PMGOA) pleaded guilty and was sentenced today for conspiring to fix prices for customized promotional products sold online to customers in the United States.  Gennex Media’s president, Akil Kurji, was also sentenced today for his role in the conspiracy.

According to the felony charges filed on Nov. 1, 2018, and the plea agreement filed today in the U.S. District Court for the Southern District of Texas in Houston, Gennex Media, its president, Akil Kurji, and their co-conspirators agreed to fix the prices of customized promotional products sold online from May 2014 until at least June 2016.  The customized promotional products subject to the conspiracy included wristbands, lanyards, temporary tattoos, and buttons.  The defendants and their co-conspirators used social media platforms and encrypted messaging applications, such as Facebook, Skype, and Whatsapp, to reach and implement their illegal agreement.  In addition to pleading guilty, Gennex was sentenced to pay a $752,717 criminal fine.  Kurji was sentenced to eight months in custody, a $20,000 criminal fine, and three years of supervised release.

“Today’s guilty plea and sentencings demonstrate the Division’s commitment to uncovering and prosecuting collusion that affects the online marketplace,” said Assistant Attorney General Makan Delrahim of the Department of Justice’s Antitrust Division.  “We will continue to hold companies and their top executives accountable, seeking significant criminal fines and prison terms for those who violate the antitrust laws at the expense of everyday Americans.” 

“The Department of Justice’s simple message is don’t collude to fix prices,” said U.S. Attorney Ryan K. Patrick for the Southern District of Texas.  “If you are caught doing this, not only will you likely face large fines, but you could end up in federal prison.  Fixing prices hurts consumers and market competitors, whether the conspiracy involves small, logo branded items or million dollar pieces of equipment.”

“The guilty plea and sentencing handed down today should serve as a warning to those who would corrupt America’s business markets that the FBI and its partners will pursue justice for our consumers,” said Perrye K. Turner, Special Agent in Charge of FBI’s Houston Field Office.  “Such conduct will not be tolerated and there are harsh consequences for companies and their executives who violate competition law.”

To date, 11 defendants have been charged in the investigation into the online customized promotional products industry.  Of those defendants, five individuals and four companies have pleaded guilty.  The corporate guilty pleas in the investigation have resulted in criminal fines totaling almost $10 million.

This prosecution arose from an ongoing federal antitrust investigation into price fixing in the online promotional products industry, which is being conducted by the Antitrust Division’s Washington Criminal I Office, with the assistance of the U.S. Attorney’s Office for the Southern District of Texas and the FBI’s Houston Field Office.  Anyone with information on price fixing or other anticompetitive conduct related to other products in the customized promotional products industry should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258 or visit www.justice.gov/atr/contact/newcase.html.

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Former CEO Of Alaska-Based Fiber Optic Cable Company Sentenced To 5 Years In Prison For Defrauding Investors Of More Than $270 Million

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ELIZABETH ANN PIERCE, the former chief executive officer (“CEO”) of Quintillion, a telecommunications company in Alaska, was sentenced today in Manhattan federal court to 60 months in prison for defrauding investors in New York of more than $270 million during her time as CEO.  PIERCE previously pled guilty before U.S. District Judge Edgardo Ramos, who imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Elizabeth Ann Pierce, the then-CEO of Quintillion, placed her ambition above the law.  In order to raise over $270 million to build a fiber optic cable system in northern Alaska, she repeatedly lied to her investors and forged the signatures of her customers’ executives on fake revenue contracts.  When her scheme started to unravel, she tried to delay exposure with yet more lies and forged documents.  She will now serve five years in prison for her crime.”

According to the Complaint, the Indictment, statements made in court, and publicly available documents:

Until July 2017, PIERCE was the chief executive officer of Quintillion, a telecommunications company based in Anchorage, Alaska, that built, operates, and markets a high-speed fiber optic cable system (the “Quintillion System”).  The Quintillion System consists of three segments: a subsea segment that spans the Alaskan Arctic, a terrestrial segment that runs north to south along the Dalton Highway, and a land-based network of fibers that connects the subsea and terrestrial segments.  The Quintillion System is connected to the lower 48 states through other existing networks.

Between May 2015 and July 2017, PIERCE engaged in a scheme to induce two New York-based investment companies to provide more than $270 million to construct the Quintillion System by providing them with eight forged broadband capacity sales contracts and related order forms under which Quintillion would obtain guaranteed revenue once the Quintillion System was built (the “Fake Revenue Agreements”).  Under the Fake Revenue Agreements, four telecommunications services companies appeared to have made binding commitments to purchase specific wholesale quantities of capacity from Quintillion at specified prices.  The cumulative value of the Fake Revenue Agreements was approximately $1 billion over the life of the Fake Revenue Agreements.  In reality, the Fake Revenue Agreements were completely worthless because PIERCE had forged the counterparties’ signatures.

Certain of the Fake Revenue Agreements never existed at all, while others were falsified versions of genuine revenue agreements.  PIERCE fabricated the terms of the false versions of the agreements to make them more favorable to Quintillion and, therefore, more appealing to investors than the genuine agreements.  For example, under one of the Fake Revenue Agreements, the customer purportedly agreed to buy from Quintillion increasing quantities of gigabits per second of capacity over a period of 20 years.  That agreement, if genuine, would have assured Quintillion hundreds of millions of dollars in future revenue.  In reality, negotiations over that deal had ended unsuccessfully, a fact that PIERCE never disclosed to the investors.  Under another Fake Revenue Agreement, the customer purportedly agreed to buy a fixed, predetermined amount of capacity from Quintillion regardless of subsequent market conditions.  In truth, that customer was not obligated to buy any capacity.

Over the course of the scheme, PIERCE tried to cover up her fraud, by continuing to negotiate with the telecommunications companies in hopes of reaching agreements identical to the ones she forged.  Her efforts were mostly unsuccessful.  PIERCE completely failed to secure any revenue contract with one of those telecommunications companies, and the agreements she reached with the other three companies contained less favorable terms for Quintillion than the Fake Revenue Agreements, such as a smaller mandatory capacity purchase commitment, or no commitment at all.  PIERCE hid these genuine, but inferior, contracts from the investment companies and her own staff.  When Quintillion and the investment companies ultimately discovered the fraud in mid-2017, they learned that the real contracts PIERCE actually negotiated would generate only a fraction of the anticipated guaranteed revenue of the Fake Revenue Agreements she forged.

As part of PIERCE’s overall scheme, she also swindled two individual investors (together, the “Individual Victims”) out of a total of $365,000.  PIERCE led these individuals to believe that they would acquire ownership interests in Quintillion when, in fact, she used half of one victim’s money and all of the other victim’s investment for her own personal benefit.  These individuals have received no shares and none of their money back from PIERCE.

After the terrestrial system was built, PIERCE attempted to prevent the discovery of the Fake Revenue Agreements by accelerating the timing of incoming payments under certain genuine agreements to make those payments appear to be based on the Fake Revenue Agreements.  PIERCE also sought to prevent Quintillion from invoicing one of the customers that had no real contract with Quintillion by fabricating email correspondence that gave the impression she was terminating a contractual relationship, when in fact no such relationship existed.  PIERCE’s scheme started to unravel when another customer disputed invoices that it received from Quintillion pursuant to one of the Fake Revenue Agreements.  Shortly thereafter, in the midst of Quintillion’s internal investigation, PIERCE abruptly resigned.  Quintillion self-reported PIERCE’s conduct to the Department of Justice.

*                *                *

In addition to her term of imprisonment, PIERCE, age 55, now of Austin, Texas, was sentenced to three years of supervised release, and was ordered to forfeit $896,698.00 and all of her interests in Quintillion and a property in Texas.  PIERCE will also be subject to a restitution order to her victims to be entered at a later date.

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation.

This case is prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Sarah Lai and Vladislav Vainberg are in charge of the prosecution.