NTG's ex-CEO pleads guilty to 1 count of fraud

Tobin could receive 30 years, $1 million fine

9 other charges to be dismissed

Accounting ruse blamed for investors' losses

February 21, 2003|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Michele Tobin, the former chief executive officer of now-defunct Network Technologies Group Inc., pleaded guilty yesterday to one count of fraud in the case of an accounting scheme that crumbled the Baltimore company.

As part of a plea agreement with the U.S. attorney's office, nine other counts of wire, mail and bank fraud against Tobin are scheduled to be dismissed at sentencing.

Tobin, 47, faces up to 30 years in prison and a $1 million fine. She is scheduled for a sentencing hearing May 16 and was released on her own recognizance.

Tobin and three other former company executives are accused of defrauding Network Technologies Group's lender, Mercantile-Safe Deposit and Trust Co., and two of its investors - Abell Venture Fund of Baltimore and Smith Whiley & Co., a Connecticut investment company.

A privately held company founded in 1996, Network Technologies Group installed cable for utility and telecommunications companies, including Comcast Corp., AT&T Corp. and WorldCom Inc.

The company inflated its accounts receivable that served as collateral for its line of credit with Mercantile, according to court documents. The company also provided false financial statements that a local brokerage firm then used to attract NTG investors, the documents say.

"When the company closed its doors, the Abell Foundation wound up losing approximately $2.25 million it had invested," the plea agreement says.

In the documents, prosecutors also said that Smith Whiley lost $1 million and Mercantile took a net loss of about $2.1 million from the line of credit it was extending to NTG.

According to the documents, Tobin agreed to plead guilty to charges that there was a fraud scheme, that she knowingly took part in it and that she used or caused the use of interstate wires (such as faxes or e-mails) to execute the scheme. She agreed to cooperate with federal law enforcement officials and to testify in court.

Defense and prosecuting attorneys agreed to disagree on the loss amount, as well as on Tobin's role in the offense and her abuse of trust, according to the plea agreement.

Andrew C. White, a Baltimore white-collar defense attorney and former federal prosecutor, said the fact that Tobin is pleading guilty to only one offense is insignificant because, in a fraud sentencing, the amount of the loss is key, not the number of charges.

The plea agreement says, however, that Tobin should receive a lesser sentence if she continues to cooperate. Some language included in the agreement also says that the defendant is free to ask for more leniency at sentencing, "and that is typically a signal to the court that the defendant should receive more than the recommended departure" from federal sentencing guidelines, White said.

In U.S. District Court in Baltimore yesterday, Chief U.S. District Judge J. Frederick Motz read to Tobin the terms of the plea agreement, and she replied that she understood them.

A slight woman, Tobin wore a black suit and a scarf wrapped around her head. When she left NTG at the end of June, she told employees it was because she had terminal cancer.

Tobin and the other NTG officers were each charged with 10 counts of mail, bank and wire fraud last month after an investigation of the company.

Her attorney, Wick Sollers, declined to comment after the hearing.

Beverly Baker, 51, NTG's former controller, and Victor Giordani Jr., 55, a founder and former chief operating officer, pleaded not guilty earlier this month. Thomas Bray, 48, NTG's former chief financial officer, is scheduled for an arraignment next week.

The plea agreement submitted to the court yesterday says that at the end of 2000, "Tobin and Baker agreed not to record some of the company's expenses in the company's books, to give the appearance that the company was performing better than it was."

The document later says: "In December, 2001, Ms. Baker and Ms. Tobin again kept payables off the company books, with the knowledge of others within the firm. This was done by intentionally not entering into the company's computer accounting system approximately $1 million in various expenses the company owed."

The troubles at NTG came to light after turnaround specialist John M. Collard was brought in July 1 to try to save the company. Collard, who owns Strategic Management Partners Inc. of Annapolis, uncovered accounting irregularities and closed the company July 12.

About 125 workers lost their jobs when NTG shut its Fells Point offices. Money that had been deducted from their paychecks to go into 401(k) accounts was never deposited there, and the employees did not receive health benefits for several weeks before the company closed, Collard has said.

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