Bray pleads guilty to NTG fraud charge

Former CFO is 2nd officer to admit part in scheme

His `sin is one of omission'

4 accused of defrauding Mercantile, 2 other firm

February 28, 2003|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Thomas Bray, former chief financial officer of the now-defunct Network Technologies Group Inc., became the second company official to plead guilty to one count of fraud yesterday in the case of a Baltimore telecommunications firm that collapsed amid an accounting scandal.

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

"The statement of facts make it clear that Mr. Bray's sin is one of omission, not commission," Gerald C. Ruter, Bray's attorney, said after the defendant's appearance in U.S. District Court in Baltimore yesterday.

Bray faces up to 30 years in prison and a $1 million fine. A sentencing date was not set in court yesterday, and Bray was released on his own recognizance.

Bray 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., an investment company based in Hartford, Conn.

Michele Tobin, 47, former chief executive officer of NTG, pleaded guilty last week to one count of wire fraud as part of a plea agreement with the U.S. attorney's office.

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

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

Ruter said Bray signed financial documents that were prepared by others, and that he shouldn't have signed them.

"It was a mistake," Ruter said, adding that Bray is remorseful.

But Ruter said Bray's role was minor compared with those of the other three Network Technologies officers charged with fraud in the case.

Bray, 48, was hired as NTG's chief financial officer in the fall of 2000. By the time the company closed in July, he was earning $175,000 a year, according to the plea agreement

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

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

Prosecutors said in the plea agreement that the Abell Foundation lost about $2.25 million, Smith Whiley lost $1 million and Mercantile took a net loss of about $2.1 million from the line of credit it extended to NTG.

Bray should receive a lesser sentence if he continues to cooperate with authorities, and he is free to ask for more leniency at sentencing, the plea agreement says.

He 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. Beverly Baker, 51, NTG's former controller, and Victor Giordani Jr., 55, a founder and former chief operating officer, pleaded not guilty this month.

The troubles at NTG were exposed when turnaround specialist John M. Collard was brought in by the company's board of directors 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.

Bray and the other NTG officers were indicted last month, but talks about a plea agreement between Bray's attorney and the U.S. attorney's office apparently were under way for months. A letter from the U.S. attorney's office to Ruter is dated Nov. 27.

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