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January 27, 2011

Citizens Ask Court to Find Burlington in Contempt for Using Taxpayer Funds

Gavel 3Two Burlington taxpayers are asking a Chittenden Superior Court judge to find the city of Burlington in contempt of a court order prohibiting certain use of general funds to support Burlington Telecom.

The motion was filed today on behalf of Fred Osier and Gene Shaver by their attorney Norm Williams of Gravel and Shea. In his complaint, Williams argues that more than $235,000 in city general fund dollars used to pay an outside consultants to restructure Burlington Telecom is verboten.

A February 2010 court order issued in this case, and agreed to by the city, prohibits the city from using any general fund dollars to prop up BT unless the money is repaid within 60 days. The city is also required to provide the court with accounting records to ensure that it's not in violation of the order.

The city paid more than $227,000 to Dorman & Fawcett to help BT restructure its operations and renegotiate its lease with CitiCaptial, among other things. The city also paid out more than $5000 to a broadband consultant to review BT's operations, and roughly $3000 to Langrock, Sperry and Wool for legal "defense" consultation as a result of state criminal investigations. These funds were all paid out of the city's general fund, not from BT's operational funds.

The consulting fees came to light after two city councilors and Seven Days requested a complete record of how much money the city has paid outside consultants and lawyers as a result of the various BT cases and investigations.

As of late December the city and BT paid out more than $625,000 to various consultants and attorneys. That figure was $500,000 as of late August.

Lawyers defending the city, and Chief Administrative Officer Jonathan Leopold, are being paid for by the city's insurance carrier, Traveler's. Late last month, Seven Days requested the city provide the amount of money paid to these attorneys. So far, the city has not revealed those numbers.

In advance of Williams' motion, the city, too, asked the judge to hold a status conference on the matter to determine if BT is truly in violation. Lawyers for the city claim that the nearly $230,000 paid to Dorman & Fawcett was for work done to protect the city and taxpayers, not BT.

"This consulting firm has been involved in negotiations with City Capital [sic] in an effort to restructure Burlington Telecom's lease agreement, negotiations with potential strategic and financial partners, and the possible development of an alternative governance structure for Burlington Telecom," noted Marc Heath of Downs, Rachlin and Martin to Williams in a January 18 letter.

"This work is directly related to protecting the interests of the CIty, and its taxpayers, and is not related to the operations of Burlington Telecom," added Heath. "As you are well aware, a key component of all of these negotiations is an attempt to secure repayment of the outstanding debit to hte City's cash management fund. Interfering with this effort would certainly not be in the best interest of the taxpayers of Burlington."

In his letter, Heath suggested the two sides request a status conference with Superior Court Judge Helen Toor. Williams replied via email that he would prefer to simply file a contempt motion to attract the judge's attention.

"We disagree that funds spent on a lease negotiation, for example, should come from the general fund as opposed to BT itself," wrote Williams in a January 19 email to Heath. "We do not believe the proper test can be whether it benefits the city. Frankly, that is the same kind of reasoning that led to the cash pool expenditures which have led the City into its current difficulties."

The city has 10 days to respond to Williams' motion.

Mayor Bob Kiss has called a special city council meeting for Thursday night, 6:30 p.m. in City Hall Auditorium to give the public an update on Burlington Telecom and the city's effort to salvage the public utility. Residents will be able to ask questions of the mayor, council and BT's current management team.

Yesterday Kiss and his administration rebutted a state-ordered review of BT's operations. That report, conduced by Larkin and Associates on behalf of the Department of Public Service, was highly critical of BT management and city officials for failing to maintain proper oversight over BT's spending and keeping the public fully apprised of BT's financial problems.

Kiss said the Larkin report contained numerous inaccuracies, false assumptions and in many cases lacked proof backing up its claims. As well, Kiss noted, the report failed to take into consideration the city's efforts to renegotiate its lease with CitiCapital, and it also didn't recognize the efforts by Dorman & Fawcett to restructure the utility and help it find new strategic and financial partners.

Read Williams' contempt motion (and attachments): Download DOCS-#466366-v1-Osier - BT - Motion for Contempt

Read Heath's request for a status conference (and attachments): Download BT Osier v. BT SC Request

Memo detailing financial costs incurred by Burlington Telecom: Download Memo_to_City_Council_-_BT_Professional_Services_Final

Ahhhh the problem... Kiss and Leopold have always blurred the distinction between the City and BT depending on what the conversation is regarding.

Hopefully the Judge will do more then give them a stern talking to.

Kiss and Leopold have been dancing and dancing around the issues using semantics and wording. We all know what the intent is. Helen needs to sit little Johnny and Bobby down and tell them enough is enough. For their outright disregard of a court order they are to be held for a period of 2 days without bail to mull over the choices they are making.

Heath is ridiculous trying to recover value out of BT doing so is like trying to put a primal scream back in the diaphragm of the wounded.

BT obviously has no assets. Citi Capital will demand every last penny owed for the use of their equipment.

Kiss and Leopold through their willful negligence and incompetent management of the city funds have placed us in a no win situation. It is time to end the Mexican standoff obviously they have just frittered more money down the drain. Heath should understand the untenable situation that a negligence defense is affording the idiots who sit in the Mayors and CAO's office at City Hall.

It would better serve the taxpayers if these esteemed lawyers, who like to get rich quick by defending a bunch of losers, would instead band together and take out the trash.

Heath is backing the wrong pig.

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