Broadband Company President Indicted on Federal Fraud Charges

Minneapolis - The owner, president, and chief executive officer of an Eden Prairie, Minnesota, wireless broadband company was indicted today by a federal grand jury. Stephen C. Gowdy, age 43, of Shakopee, Minnesota, was charged with two counts of mail fraud for allegedly defrauding the U.S. Department of Agriculture of more than $1.6 million in connection with a $4.2 million loan related to the expansion of wireless broadband service to rural Minnesota.

The indictment states that in 2002, Gowdy's company, Stonebridge Wireless, Inc., applied for a loan from the Rural Utilities Service ("RUS"), an agency of the U.S. Department of Agriculture. The purported purpose of the loan was to assist Stonebridge in providing wireless broadband service to rural communities around the state. RUS approved the loan in the amount of $4,252,000 and advanced the funds to the company through periodic payments made between May of 2003 and November of 2004.

The indictment alleges, however, that more than $1.6 million in payments were based on fraudulent invoices. Specifically, the indictment states that on five separate occasions, Gowdy created fictitious invoices from Mainstream Solutions, a Stonebridge vendor, totaling $1,670,756. On each occasion, he submitted the false invoice and a government financial statement to RUS with a request for payment. After RUS unknowingly approved payment of the fraudulent invoice and transferred the appropriate loan proceeds to Stonebridge, Gowdy paid Mainstream by check. As part of the scheme, Mainstream then returned the funds to Stonebridge. Gowdy used those funds for various business purposes, including covering the Stonebridge company payroll. In addition, he often added the funds to legitimately-obtained money, using the commingled result for personal purposes.

The indictment also alleges that in an attempt to deceive Stonebridge auditors, Gowdy falsified company books by recording the Mainstream payments to Stonebridge as consulting income. Moreover, he allegedly rebuffed the company auditors' initial requests for documentation relative to the consulting work. Ultimately, however, he admitted he could not provide documentation for the consulting work. As a result, the auditors informed the RUS of the apparent loan violations.

If convicted, Gowdy faces a maximum potential penalty of twenty years in prison and a $250,000 fine on each of the two counts filed against him. Any sentence will be determined by a judge.

This case is the result of an investigation by the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorney Hank Shea.

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An indictment is a determination by a grand jury that there is probable cause to believe that offenses have been committed by the defendant. The defendant, of course, is presumed innocent until he or she pleads guilty or is proven guilty at trial.