SEATTLE - Two former software executives grossly overstated their company's revenue to attract more than $50 million in private investment, prosecutors said Wednesday, adding that the fraud was uncovered late last month when a worker found a set of cooked financial books as she was cleaning out a desk.

Paul Thomas Johnston, a founder and chief executive of Entellium Corp., and Parrish L. Jones, its chief financial officer, resigned Sept. 30 and were charged Wednesday with one count of wire fraud in U.S. District Court. Johnston wrote in his resignation e-mail that he was "deeply shamed and sorry" about what he had done.

Prosecutors said they don't know where all of the money went, but believe the bulk of it was put into the company.

Entellium spokesmen did not immediately return a call or an e-mail seeking comment. Assistant U.S. Attorney Carl Blackstone said about 40 of its 60 employees in Seattle were laid off Friday. The fate of 75 workers at the company's office in Malaysia was not immediately known.

Johnston and Jones were arrested at their homes Tuesday night and made initial court appearances Wednesday. A magistrate judge released Jones on bond, but Johnston, a citizen of the United Kingdom, will remain in custody pending a detention hearing set for Friday. Prosecutors said they believe he poses a flight risk.

The two were each represented by court-appointed lawyers for purposes of Wednesday's hearing, but given their finances, the judge ordered them to hire their own attorneys for future hearings. Neither court-appointed lawyer spoke with reporters after the hearing.

The privately held Entellium makes Web-based programs that help companies track sales and customer information. Most of its clients are U.S.-based, and include small-to-mid-sized manufacturing, technology and construction firms.

"We have both made a grave mistake (in) misrepresenting our revenue to the board," Johnston wrote to two of the company's directors in his resignation e-mail, which was cited in the federal complaint. "Looking back at the time we thought we would be able to right the wrong and correct our representation, but we have not been able to do this."

He added: "Clearly this is devastating news and something we both regret and are deeply sorry for. Our families are not aware of this and we are telling them now."

Johnston and Jones founded the company in 2004 and almost immediately began overstating revenues by $400,000 a month, according to Johnston's e-mail.

Since 2006, they claimed revenue of nearly $15.5 million, when in reality the company took in less than $3.8 million, FBI Special Agent Patrick Garry wrote in the complaint.