Fix or Fraud?

Even if he had, says Fresia, it was far from clear to him what to do after the parent company declined to include his disclosure. "It's an interesting case study," he says, "As things are happening in a very unstable environment, how choices that seem to be the right moral, ethical thing to do [can be interpreted by regulators in] a very harsh complaint against you that says not only did you do this, you did it willingly."

This March, NorthWestern, parent of Expanets, settled an administrative proceeding with the SEC, and agreed to cease and desist from further violations of securities laws.

In April, the SEC settled charges against four former NorthWestern officers: former CEO Merle D. Lewis, former COO Richard R. Hylland, former CFO Kipp D. Orme, and former controller Kurt D. Whitesel.

And on Monday, the same day Fresia was charged, his boss, former Expanets CEO John Charters, consented — without admitting or denying the allegations in the commission's complaint against him — to the entry of a final judgment permanently enjoining him from violating or aiding and abetting violations of the provisions he allegedly violated. He also agreed to pay $50,000 in civil penalties.

All of the other executives in the case have settled, Fresia notes, for relatively small amounts, and Charters was not barred from being an officer or director of a public company.

But Fresia says he doesn't intend to settle. "For me at this point it is kind of a matter of principle. I feel like I did the right thing," he says. "The SEC has seemingly limitless resources. Most people never go to trial because it is easier to fold. I feel like it would be worth it to see if cooler heads prevail."

The SEC's complaint does request that Fresia be barred from acting as a director or officer of a public company. Asked by CFO.com if losing the case would end his finance career, Fresia says: "Not necessarily. More and more companies are going private." (His current company, ACT Teleconferencing, is currently in the midst of a going-private transaction.)

Adds Fresia: "If you saw the binder [I gave to the SEC], it's very well organized, has tabular time lines — and not just my words, [but] E-mails, reports — you would be saying the same thing. At some point, you can't fold to the threats."

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