November 2, 2006
Broadband
Company President Pleads Guilty to Federal Fraud Charges
Minneapolis
- The owner, president, and chief executive officer of an Eden Prairie,
Minnesota, wireless broadband company pled guilty in federal court
today to defrauding the U.S. Department of Agriculture of more than
$1 million. Stephen C. Gowdy, age 43, of Shakopee, Minnesota, pled
guilty to two counts of mail fraud related to this activity. He
entered his plea before U.S. District Court Judge Paul A. Magnuson.
Court documents
state 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. However, more than $1 million in payments were based on
fraudulent invoices. Specifically, on five separate occasions, Gowdy
created fictitious invoices from Mainstream Solutions, a Stonebridge
vendor. 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.
In an attempt
to deceive Stonebridge auditors, Gowdy falsified company books by
recording the Mainstream payments to Stonebridge as consulting income.
Moreover, he 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.
According to
court documents, Gowdy faces between thirty-three and forty-one
months in prison. The actual sentence will be determined by Judge
Magnuson. A sentencing date has not been set. Gowdy also has agreed
to sell his interest in any real estate, vehicles, bank accounts,
and other assets to satisfy his restitution obligation prior to
his sentencing.
This case was
the result of an investigation by the Federal Bureau of Investigation.
Assistant United States Attorney Hank Shea prosecuted the case.
|