Former Entellium Corp. CEO Paul Johnston was deemed a flight risk and ordered to remain in detention Friday afternoon after a federal prosecutor revealed new details about his alleged financial misdeeds, saying Johnston used the company as his “personal piggy bank.”

Investigators have not been able to account for about $9.6 million in Entellium funds that were believed to be transferred to the company’s operations in Malaysia between 2005 and 2008, a federal prosecutor told U.S. Magistrate Judge Mary Alice Theiler during the hearing in U.S. District Court in Seattle.

Johnston, a 40-year-old citizen of the United Kingdom who earned $1.1 million in salary and bonuses between 2004 and 2008, also was given $100,000 in loans from the company without the board’s knowledge or approval, said Carl Blackstone, the assistant U.S. attorney prosecuting the case.

He also used a company credit card for personal expenses, including family travel to Asia, Las Vegas and San Francisco, Blackstone said.

“He not only falsified records of the company,” Blackstone said. “He took money he was not entitled to.” Johnston’s lawyer, Robert Gombiner, disputed the prosecutor’s characterizations. “The idea that Mr. Johnston has funds salted away … is grossly inaccurate,” Gombiner said.

He argued that his client wasn’t a flight risk, pointing out that Johnston has been in the U.S. for five years, has no criminal record or history of drug use. Even Blackstone conceded that Johnston was “not the typical defendant you see in a federal courtroom,” noting his two children, Mercer Island home and sports cars.

But the federal prosecutor convinced the judge that the former software CEO could not be trusted, arguing that Johnston once looked Entellium’s board members in their eyes and lied. “He has shown when only money is at stake, you can’t trust him,” said Blackstone. Upon entering the courtroom in prison garb, Johnston waved to his wife and mouthed the words, “I love you.”

He frequently consulted with his attorney during the proceedings. After the hearing, Johnston’s wife and attorney declined to comment. Johnston will be incarcerated pending indictment. If convicted of wire fraud, Johnston could face more than 10 years in prison and could be deported, said Blackstone.

The investigation continues, including questions about what happened to the money that went to Malaysia. “We haven’t found it yet,” said Blackstone. “We have no reason to believe that he stole the money. (But) the board and company are questioning everything because they are in a state of disbelief.”

The alleged fraud was discovered late last month after an Entellium employee found a set of financial records in the desk of a former vice president of sales, with revenue that appeared to be overstated. Blackstone said they have not interviewed that former employee, adding that they try to use some discretion about who they target.

"Clearly, Mr. Johnston was the mastermind," he said.

Over the past 10 days, Entellium has nearly collapsed. It started with the abrupt resignations of Johnston and Chief Financial Officer Parrish Jones last week. By last Friday, a massive layoff had occurred at the company's offices in downtown Seattle. And earlier this week, Johnston and Jones were arrested at their homes, making their first court appearance Wednesday.

Entellium's Web site was down for part of Friday, but was operating at the time of this post.

Backed with more than $50 million from Ignition Partners, Sigma Partners, West River Capital, Intel Capital and others, Entellium competed against Salseforce.com in the customer relationship management category. Questions have been raised about the auditing practices of Entellium, with accounting firm Moss Adams saying it never completed a full audit of the company.