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October 17, 2009

State Tells City: Stop Loaning Cash to Burlington Telecom

Kiss The Department of Public Service told the city of Burlington late Friday it wants a firm commitment from the Queen City that it will not loan Burlington Telecom another dime and will repay the $17 million already owed to city's checkbook.

The request came Friday in a filing by the department in the ongoing case before the Public Service Board. In that case, Burlington Telecom is seeking to amend its certificate of public good to operate for two reasons: One, it hasn't completed its build out within the timeframe it promised, and it has borrowed money from the city without repaying it in 60 days.

In fact, Burlington Telecom has borrowed about $17 million since early 2008. Neither the city council nor the city's board of finance explicitly agreed to loan the money. Instead, the decision to loan the money was made by Chief Administrative Officer Jonathan Leopold. 

Public Service Commissioner David O'Brien informed Seven Days via email Saturday that the request is necessary given the amount of money involved, and the city's failure to comply with its repayment condition for nearly two years.

"In our view they should not continue to violate the condition of their CPG, i.e. cause more harm, while the matter is investigated," said O'Brien.

"The department recognizes that this action may be difficult to effect," states the letter. "However, BT's violation of its CPG conditions is a serious offense and cannot be allowed to continue as the department investigates, and the board rules upon, BT's amended petition."

The state wants BT to repay the money, with interest, and promise not to borrow money from the city until all the outstanding debt is repaid.

The filing is the latest in an ongoing public feud between O'Brien and city officials regarding Burlington Telecom. Next week, two special meetings will be held in Burlington to talk about the troubles facing Burlington Telecom — one city council meeting and the other a public forum.

City officials say they received the DPS letter after the close of business Friday, and several hours after it was released to the media.

"The tone of urgency of the letter is ironic since the DPS has known about the City’s use of pooled cash since November 2008," said Mayor Bob Kiss. "This is a public relations ploy consistent with Mr. O’Brien’s inaccurate and unwarranted statements about BT’s finances. His remarks undermine public confidence in BT and increasingly appear to be a strategy to close BT down."

Burlington Telecom general manager Chris Burns said O'Brien's statements are "irresponsible. We're in an already competitive market with Comcast and he's only making our job harder."

Kiss noted that the city asked the PSB to review the condition related to the repayment of loaned money in light of the need to refinance BT and to resolve the condition regarding completion of the build out within the city.

Leopold said the city originally focused on the build out condition because in order to finance the next phase of Burlington Telecom's operations, the city needs to know exactly what the PSB defines as "passing by" all homes. The city said its initial CPG is not clear if"passing by" all homes includes laying fiber-optic cable along private rights-of-way inside condo associations. 

In filings before the PSB, the city estimates it will cost another $6 million just to pass by all homes (including the entrance to condo associations) and businesses in Burlington.

The city could refinance BT's debt right now, and repay the city, but it could cost $1.1 million in fees and penalties, said Leopold.

The city would, in all likelihood, need to seek additional financing once the PSB issues a ruling on the build out condition. That could end up costing the city more money in fees and penalties, said Leopold.

"By asking us to pay the money back now, it's just a short-term fix without looking at the long-term viability of the business," said Burns.

Kiss said the DPS and the city tried to work through BT's problems for months before petitioning the PSB to settle. He believes O'Brien's actions call into question the department's credibility in the case.

"The events of this past week raise serious concerns about the role of the DPS in this proceeding," said Kiss.


* * * * * * * * * * * * * * *

Here is the complete text of the letter filed Friday by the Department of Public Service:

"The Department has received a copy of BT's Amended Petition and Testimony dated September 30, 2009 and has conducted its initial review of these documents.  Understandably, the Department is deeply concerned about BT's violation of Condition 60.

"The Department requests that BT cease its violation of Condition 60 during the course of this proceeding.  Specifically, the Department is seeking a firm commitment from BT that it will re-pay all money withdrawn more than 60 days ago from the pooled cash management system back into that same system.  The repayment should include all interest charged against BT from the pooled cash account.  Furthermore, the Department requests BT's assurance that it will stop taking any money from the pooled cash system until it has paid back the currently overdue sum, and will thereafter fully comply with Condition 60 unless and until the PSB orders otherwise.

"The Department recognizes that this action may be difficult to effect.  However, BT's violation of its CPG conditions is a serious offense and cannot be allowed to continue as the Department investigates, and the Board rules upon, BT's Amended Petition."

Photo credit: Jordan Silverman.

"In fact, Burlington Telecom has borrowed about $17 million since early 2008. Neither the city council nor the city's board of finance explicitly agreed to loan the money. Instead, the decision to loan the money was made by Chief Administrative Officer Jonathan Leopold."

A vote of no confidence of CAO is a starting point, followed by a City Council authorized independent audit and business valuation. CAO must be removed from the management of BT. Then let the forensics and business planning begin. Godspeed.

What kind of steward allows a 17 million dollar loan without a assurances/collateral to the lender and due diligence of business feasibility???! The answer is when the borrower and lender are one in the same. Ouch!!!

Resignations are in order and impeachment proceedings shall commence. Let the crooks pay for their own attorneys once they are removed form their posts.

The public trust has been violated. CAO Leopold has obfuscated at best, possibly worse. Mayor Kiss does not have the leadership skills that his job demands. (I am sorry and embarrassed that I voted for him - twice.) At the very least, the CAO needs to step down. And, somehow, he needs to be barred from any future ownership stake and/or managerial position at Burlington Telecom.

Shay, you're doing an outstanding job reporting this story.

I am not embarrased twice that i did not vote for bob kiss, but that is not important.
What is important is that this administration is showing more financial problems than spiro agnew and now looks to be showing more coverups than richard nixon. kiss and Leopold must go and now.

The problems appear to run deeper than just the misappropriated funds that were used from the city's pooled cash.

Not only has Jonathan Leopold drained 17 million dollars from the city's pooled cash for BT. He failed to provide accounting for the draw down to the independent auditors report that Moody s uses to rate the Bond rating for the city.

Has the cover up extended to the Bond rating? Are we liable for the extra vigorish to the issuers and the holders of the bonds? Has the malfeasance opened up the city to lawsuits from said Bond issuers and Holders of Burlington's bonds the SEC and the Municipal Bond Rulemaking Board?

The paper trail, the independent audit the bond rating etc show none of the loans to BT.. this appears to be a serious case of fraud. Not just a bullying tactic of Jonathan Leopold and Bob Kiss.

"I am not embarrased twice that i did not vote for bob kiss, but that is not important."

The problem is that you could "not vote for Bob Kiss twice" in the same election, and they guy still wins!

The IRV system was designed and installed by the Progs to make sure that the Prog wins no matter how many people don't vote for him.

I am not sure why more Burlington residents are not supporting a better alternative to Comcastic... BT is a good value and provides more reliable service for a lesser cost than the company which puts a lot of campaign cash into the Douglas administrations hands.... which is maybe WHY PSB is looking down on the efforts to expand beyond our city, and provide more competition....well, really ANY competition since comcast is the only option for many folks who cant use a dish....lets not get into Fairpoint and their let down service wise.

Why should your internet be any different than your fire or police or water or any other service that is essential to our lives these days... Buy LOCAL...

To Bob:
We do support BT, which is why it's so painful to see it being run into the ground by the City's CAO. Let's get it out of his hands and under competent management. The question we shall learn is, is it too late! Reconciliation has an accountability part and a moving forward part. BT and the citizens of Burlington need both!!!

"I am not sure why more Burlington residents are not supporting a better alternative to Comcastic"

Uh... besides the fact that it's not "better" by any definition... because they stole $17m of taxpayer money to keep it alive, want to steal more, and have no reasonable hope of survival no matter what?

the coating on teflon bob is wearing thin. he and leopold must go

One of the posters mentions supporting Burlington Telecom in an effort to "Buy Local".
Hey, I'm all for it. But, if it can't survive, it won't be because the community isn't behind it.
More important, Burlington Telecom isn't the only victim in this new example of mismanagement by Leopold and "puppet mayor" Kiss. Botched hotel deals, election tampering and now, this? And, these are the guys we're going to trust to follow through with Moran? It's laughable.
Hold these boys accountable, Burlington citizens, and yourselves, too. Don't forget, you voted for one of them.

IF council won't act, how about a petition to recall the election due to NO CONFIDENCE. Kurt Wright was going door to door today collecting signatures to repeal IRV. Take it one step further Kurt and ask for a recall!

O'Brien has no credibility. He's a captain of industry appointed by a governor that has not use for Burlington's progressive politics or it's publicly owned utilities. They want BT to fail and they'll make damn sure it does. The city says O'Brien knew of this in November of '08. And only now he's screaming about it? He's screaming that laws have been broken and that there will be an investigation. Unless you have done an investigation, how can you in any way appropriately state that laws have been broken. This is a hatchet job first and foremost. What Kiss is guilty of is not taking the pinheads to task every time they try to undermine him.

"Unless you have done an investigation, how can you in any way appropriately state that laws have been broken."

Because they admitted it, genius.

"Because they admitted it genius"

Uh, actually that not true, but why let the truth get in the way? We need to take down Progressives and if BT goes with it, who cares? It most important that Kurt Wright be mayor.

"Uh, actually that not true"

Actually, it is. You should try reading up on this issue. City Charter, Condition 60, little things like that.

A. There is no recall of officials in Vermont.
B. This isn't a defense of Kiss or Leopold,just a question: Does O'Brien really have any credibility after the Fairpoint debacle?

To burlap city officals:
theres this funny thing called “Federal Law” its
gobbldee gook which 4 most part nobody understands
(callme nobody thats Mr.Nobody2u)
true story: ya know VPOUS Biden then senator Biden in 1988
AKA gafr joe well he sponsored a bill: (cmchoatelaw.com)
”...honest services fraud is defined in 18 U.S.C. § 1346:
...includes a scheme or artifice to deprive another
of the intangible right of honest services..”
joe sez:”..a new public corruption statute that will be
used to bring charges against anyone
who attempts to deprive the citizens of the United States
or of any State of the honest services
of a public official,
or against anyone who attempts to corrupt
the election process..”

all ye trekies out there in cyber space:

PLESES send emails to:
usavt.ContactUs1@usdoj.gov
AskDOJ@usdoj.gov
senator_leahy@leahy.senate.gov

ask the US attorney to get his grand jury ON!

Different public sectors have the credit crunch issues with advanced loans and liquidity positions , hence imposition of new laws are way to solve issues .

"O'Brien has no credibility. He's a captain of industry appointed by a governor that has not use for Burlington's progressive politics or it's publicly owned utilities. They want BT to fail and they'll make damn sure it does. The city says O'Brien knew of this in November of '08. And only now he's screaming about it? He's screaming that laws have been broken and that there will be an investigation. Unless you have done an investigation, how can you in any way appropriately state that laws have been broken. This is a hatchet job first and foremost. What Kiss is guilty of is not taking the pinheads to task every time they try to undermine him."

@yeahokay: try this:

"Kiss has no credibility. He's an inexperienced nobody who has nothing going for him except his Prog dogma, assured of election by a crazy, convoluted system of voting pushed through by Progs to assure that their candidate always wins. Progs want BT to succeed no matter how financially non-viable it is, because it was a Prog idea (so it must be the truth, right?). Kiss/Leopold say O'Brien knew of the $17M unauthorized loan of Burlington taxpayer money in November of '08, but they haven't actually produced a single shred of evidence to prove they made the disclosure. Moreover, disclosing an illegal act doesn't make it "okay." And now Leopold is screaming that his adversaries' charges against him are unfounded? He's screaming that no laws have been broken and that there is no need for an investigation? 'Even though I violated both BT's CPG and the Burlington City Charter, there need be no investigation. This is all a politically-motivated hatchet-job against poor little old me, Jonathan Leopold, first and foremost!' What O'Brien is guilty of is trusting the arrogant Leopold and the clueless Kiss that they would actually follow the law."

city charter, Section 438 (c)(1),
directs the Public Service Board to ensure that all of BT's costs be
"borne by the investors ...
and in no event are borne by the
city's taxpayers, the state of Vermont,
or are recovered in rates from electric ratepayers."
and
24 V.S.A. App. § 3-51. Ordinance enforcement
(a) The violation of an ordinance,
regulation or by-law adopted by the city,
... may be prosecuted as a criminal or civil action
#2: how can it be that the $17 million does
not include taxpayer or electric ratepayers money?
#3: should violation of above be pursued as a criminal matter?

city charter, Article 26, Section 70,
says department heads can’t spend money
or incur any obligation unless the money
has been previously budgeted
and shall not at any time expend any money
or incur any obligation in excess of such appropriation
#Given charter provision, how was $17million possible
Burlington CAO knew combined $33+$17 million in debt wld be
UNSERVICEABLE under any scenario. And that is
(cmchoatelaw.com)
”...honest services fraud is defined in 18 U.S.C. § 1346:
...includes a scheme or artifice to deprive another
of the intangible right of honest services..”
biden:”..a new public corruption statute that will be
used to bring charges against anyone
who attempts to deprive the citizens of the United States
or of any State of the honest services
of a public official,
or against anyone who attempts to corrupt
the election process..”
the reason I think RICO statues apply is that mayor Kiss
and Burns had to be aware of the problems paying the $33million
and an additional $17million in debt was crazy.
BT is bankrupt! debt is growing faster than revenue!
there is also possible misrepresentation to
SEC and bond rating agencies.

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