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Entellium Chief Executive Officer Paul Johnston and Finance Officer Parrish Jones were arrested and charged with inflating company records in a scheme that brought in more than $50 million in investments, the Seattle Times reported Thursday.

The company produces software to help small businesses with customer relations and, until last week, employed 135 people in Seattle and Malaysia, the Times reported.

Authorities say the executives told the company's board of directors in 2006 that revenues stood at $4 million, when they were really about $580,000. Similarly, in 2007, the company announced revenues of $63 million were, in reality, $1.4 million.

Both Johnston and Jones have resigned and the company has laid off two-thirds of its workers, the Times said.

"We have both made a grave mistake to misrepresenting our revenue reporting to the board", Johnston in an e-mail last week. "Looking back ... we thought we would be able to right the wrong ... but we have not been able to do this."

"Clearly, this is devastating news and something we are both regret (sic) and are deeply sorry for", Johnston wrote.

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