SEC Charges North Carolina Executive With Fraud
Timothy Scronce, owner and CEO of TelWorx Communications, defrauded PCTEL Inc. and its shareholders by inflating TelWorx’s financials prior to its 2017 acquisition and continuing to falsify PCTEL’s books post-acquisition, leading to a settlement where he returned ill-gotten gains, paid a civil penalty, and was barred for 10 years from serving as a public company officer or director.
Timothy Scronce orchestrated a fraud by using false accounting entries to inflate TelWorx’s revenues and earnings in the months before PCTEL Inc. acquired his companies for cash and stock, causing PCTEL to overpay and misleading shareholders through fraudulent SEC filings. After the acquisition, Scronce, while employed by PCTEL, continued the deception by falsifying company records and circumventing internal controls, with assistance from former TelWorx employees Marc Mize and Michael Hedrick. Scronce settled with the SEC without admitting or denying guilt, agreeing to disgorge ill-gotten gains with interest, pay a civil penalty, and be barred for 10 years; Mize paid a $25,000 penalty, and Hedrick disgorged $25,000 plus interest while cooperating with the investigation.
Timothy Scronce, owner and CEO of TelWorx Communications LLC, defrauded PCTEL Inc. and its shareholders by manipulating TelWorx’s financial statements to artificially inflate revenues and earnings in the months leading up to the 2017 acquisition, which was structured as a cash-and-stock deal. These false financials were incorporated into PCTEL’s SEC filings, misleading investors and causing PCTEL to overpay for the assets. After the acquisition, Scronce continued the fraud while employed by PCTEL by recording fictitious transactions, falsifying books and records, and circumventing internal controls. Two former TelWorx employees, Marc Mize and Michael Hedrick, aided in the post-acquisition fraud: Mize helped record the bogus transactions and paid a $25,000 penalty, while Hedrick participated in the scheme, disgorged $25,000 plus prejudgment interest, and entered into a cooperation agreement with the SEC. Scronce settled the SEC’s charges without admitting or denying the allegations, agreeing to return all ill-gotten gains with interest, pay a civil penalty, and be barred for 10 years from serving as an officer or director of any public company. The SEC found that Scronce violated anti-fraud, books and records, and internal controls provisions of the Securities Exchange Act of 1934, and caused PCTEL’s violations of reporting and recordkeeping rules. The investigation, led by the SEC’s Chicago Regional Office and still ongoing, uncovered a coordinated effort to deceive investors through both pre- and post-acquisition financial manipulation.
Exhibits & Attached Documents (3)
Extracted insights
- $25K $25,000 $10K–$100K
- company assets of telworx communications llc
- person charges against him
- person fake transactions after acquisition
- person marc mize
- person Michael Hedrick
- company pctel inc.
- person pctel shareholders
- person robert burson
- agency sec charges
- agency sec order
- agency sec order requiring return of gains
- agency Securities and Exchange Commission
- person timothy scronce
- Securities And Exchange Commission Charged Timothy Scronce
- Timothy Scronce Agreed To Settle Charges Against Him
- Timothy Scronce Consented To SEC Order Requiring Return Of Gains
- PCTEL Inc. Acquired Assets Of TelWorx Communications LLC
- Timothy Scronce Used False Accounting Entries To Inflate TelWorx Quarterly Revenues And Earnings
- Timothy Scronce Defrauded Indirectly PCTEL Shareholders
- Timothy Scronce Falsified PCTEL Books And Records
- Marc Mize Settled SEC Charges
- Michael Hedrick Settled SEC Charges
- Michael Hedrick Entered Into Cooperation Agreement With SEC
- Robert Burson Said Scronce Used Accounting Gimmicks To Make TelWorx Appear More Valuable To PCTEL
- Timothy Scronce Compounded Deception By Recording Fake Transactions After Acquisition
- SEC Order Finds Timothy Scronce Violated Anti-Fraud Provisions Of Exchange Act
- SEC Order Finds Timothy Scronce Caused PCTEL Violations Of Books And Records Provisions
The Securities and Exchange Commission today charged the owner and chief executive of a North Carolina business with defrauding a publicly-traded telecommunications company and its shareholders during and after its acquisition of his business. The executive, Timothy Scronce, agreed to settle the charges against him without admitting or denying the SEC’s findings. Scronce consented to the SEC’s order requiring him to return his allegedly ill-gotten gains with interest, pay a civil penalty, and be barred for 10 years from serving as a public company officer or director. Bloomingdale, Ill.-based PCTEL Inc. acquired assets of TelWorx Communications LLC and three related telecommunications companies owned or controlled by Scronce for cash and a stock-based earn-out. According to the SEC’s order, Scronce used false accounting entries to inflate TelWorx’s quarterly revenues and earnings in the months leading up to the purchase to inflate the price PCTEL paid for the companies. Scronce indirectly defrauded PCTEL’s shareholders because TelWorx’s false financial statements were incorporated into an SEC filing made by PCTEL. After the asset purchase was completed, while employed by PCTEL, Scronce continued to conceal his fraudulent activities. He falsified PCTEL’s books and records and circumvented the company’s internal controls by recording bogus transactions In separate settled administrative proceedings instituted today, the SEC charged two former TelWorx employees who worked with Scronce at PCTEL after the asset purchase: senior vice president Marc Mize and controller Michael Hedrick. The SEC’s orders find that Mize played a role in recording the bogus transactions after the asset purchase and that Hedrick participated in the fraud and recorded bogus transactions. Mize and Hedrick settled the SEC’s charges without admitting or denying the SEC’s findings. Mize agreed to pay a $25,000 penalty and Hedrick agreed to disgorge $25,000 plus prejudgment interest. Hedrick entered into a cooperation agreement with the SEC. “Scronce used accounting gimmicks to make TelWorx appear more valuable to PCTEL than it actually was,” said Robert Burson, Associate Regional Director of the SEC’s Chicago office. “Scronce compounded his deception by recording fake transactions even after the acquisition was complete.” The SEC’s order instituting a settled administrative proceeding against Scronce finds that he violated the anti-fraud, books and records, and internal controls provisions of the Securities Exchange Act of 1934. The SEC’s order also finds that he caused PCTEL’s violations of the books and records and reporting provisions of the Exchange Act. The SEC’s order against Hedrick finds that he caused Scronce’s violations of the anti-fraud provisions of the Exchange Act and violated the books and records and internal controls provisions. The order also finds that Hedrick caused PCTEL’s violations of the books and records and reporting provisions. The SEC’s order against Mize finds that he violated the books and records and internal controls provisions and caused PCTEL’s violations of the books and records provisions of the Exchange Act. The SEC’s investigation, which is ongoing, has been conducted by Jen Peltz, Nicholas Eichenseer, Luz Aguilar and Robert M. Moye and supervised by Paul Montoya of the Chicago Regional Office.
The Securities and Exchange Commission today charged the owner and chief executive of a North Carolina business with defrauding a publicly-traded telecommunications company and its shareholders during and after its acquisition of his business. The executive, Timothy Scronce, agreed to settle the charges against him without admitting or denying the SEC’s findings. Scronce consented to the SEC’s order requiring him to return his allegedly ill-gotten gains with interest, pay a civil penalty, and be barred for 10 years from serving as a public company officer or director. Bloomingdale, Ill.-based PCTEL Inc. acquired assets of TelWorx Communications LLC and three related telecommunications companies owned or controlled by Scronce for cash and a stock-based earn-out. According to the SEC’s order, Scronce used false accounting entries to inflate TelWorx’s quarterly revenues and earnings in the months leading up to the purchase to inflate the price PCTEL paid for the companies. Scronce indirectly defrauded PCTEL’s shareholders because TelWorx’s false financial statements were incorporated into an SEC filing made by PCTEL. After the asset purchase was completed, while employed by PCTEL, Scronce continued to conceal his fraudulent activities. He falsified PCTEL’s books and records and circumvented the company’s internal controls by recording bogus transactions In separate settled administrative proceedings instituted today, the SEC charged two former TelWorx employees who worked with Scronce at PCTEL after the asset purchase: senior vice president Marc Mize and controller Michael Hedrick. The SEC’s orders find that Mize played a role in recording the bogus transactions after the asset purchase and that Hedrick participated in the fraud and recorded bogus transactions. Mize and Hedrick settled the SEC’s charges without admitting or denying the SEC’s findings. Mize agreed to pay a $25,000 penalty and Hedrick agreed to disgorge $25,000 plus prejudgment interest. Hedrick entered into a cooperation agreement with the SEC. “Scronce used accounting gimmicks to make TelWorx appear more valuable to PCTEL than it actually was,” said Robert Burson, Associate Regional Director of the SEC’s Chicago office. “Scronce compounded his deception by recording fake transactions even after the acquisition was complete.” The SEC’s order instituting a settled administrative proceeding against Scronce finds that he violated the anti-fraud, books and records, and internal controls provisions of the Securities Exchange Act of 1934. The SEC’s order also finds that he caused PCTEL’s violations of the books and records and reporting provisions of the Exchange Act. The SEC’s order against Hedrick finds that he caused Scronce’s violations of the anti-fraud provisions of the Exchange Act and violated the books and records and internal controls provisions. The order also finds that Hedrick caused PCTEL’s violations of the books and records and reporting provisions. The SEC’s order against Mize finds that he violated the books and records and internal controls provisions and caused PCTEL’s violations of the books and records provisions of the Exchange Act. The SEC’s investigation, which is ongoing, has been conducted by Jen Peltz, Nicholas Eichenseer, Luz Aguilar and Robert M. Moye and supervised by Paul Montoya of the Chicago Regional Office.