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TierOne loses $19 million federal grant over CEO's fraud allegationsSep 04, 2010 (The Dallas Morning News - McClatchy-Tribune Information Services via COMTEX) -- A Dallas-based telecommunications company has had a $19 million federal grant rescinded after government officials learned the company's chief executive had been accused of securities fraud. TierOne Converged Networks Inc. was awarded the grant money -- part of the federal stimulus program -- on Aug. 18 to spread wireless access among 65 rural cities scattered across 11 Texas counties. But the U.S. Department of Agriculture's Rural Utilities Service informed the company this week that it was rescinding the money. "In light of recent information and disclosure by TierOne to RUS, we are rescinding our prior announcement of our intent to offer an award to TierOne," said spokesman Bart Kendrick. TierOne said Friday it has asked the agency to rethink its decision after the company replaced CEO and president Kevin M. Weaver. Company spokesman David Margulies said Weaver left the company this week and was replaced by Glen Harstad, who brings with him new investment to the company. TierOne also added a new outside board member, Tom Currier of MetroPCS. Weaver was named in a Securities and Exchange Commission lawsuit filed in April that alleged he failed to disclose material facts in stock offerings and failed to properly register stock offerings. Weaver had also been named in a Texas State Securities Board enforcement action for similar problems with TierOne stock offerings. The SEC suit alleged that Weaver had failed to tell prospective investors that he had been found liable for damages in an arbitration case before the National Association of Securities Dealers (now called the Financial Industry Regulatory Authority) and that he had been barred from the association. Weaver had filed for bankruptcy protection in Colorado in 2005 and owed $938,000 to creditors, the SEC suit and securities board action said. The suit also said Weaver exaggerated TierOne's market position and the proprietary nature of its software as it talked with investors. Without admitting or denying the SEC allegations, Weaver and TierOne chief financial officer Ronald Celmer each paid $25,000 civil penalties and agreed not to break securities laws in future investment presentations. The company also agreed to court monitoring of how it raised money in the future. Agriculture Department officials couldn't address whether the agency would reconsider the decision. Margulies said TierOne, which has 5,000 current customers, will argue that it is still best prepared to use the federal money to expand broadband access in Texas because its current network would allow the enhanced access at low cost. To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com. Copyright (c) 2010, The Dallas Morning News Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com, e-mail [email protected], or call 866-280-5210 (outside the United States, call +1 312-222-4544). |