Leopold, City Officials Defend Burlington Telecom Expense Payments
In a Burlington courtroom today, Burlington Chief Administrative Officer Jonathan Leopold defended his decision to charge city taxpayers — rather than Burlington Telecom subscribers — for some of the costs associated with restructuring the embattled municipal telecom.
"To preserve this asset [BT] and ensure recovery of taxpayer funds, it is in my opinion that the money was appropriately charged to the general fund," Leopold said during his 20-plus minutes on the witness stand in Vermont Superior Court in Burlington.
Two Burlington residents — former city councilors Gene Shaver and Fred Osier — have sued the city in an effort to force Burlington Telecom to repay the $16.9 million BT was loaned from the city cash pool, in violation of its state license agreement.
Monday's hearing was called to determine whether city officials violated a court order last February barring them from spending money on Burlington Telecom-related expenses and not charging the costs to BT within 60 days.
At issue in today's hearing was roughly $354,000 paid to a variety of consultants out of the city's general fund. In all, the city and BT has racked up close to $1 million in legal and consulting fees since July 1, 2009. Of that, more than $620,000 has been paid for out of Burlington Telecom revenues. In December, the costs hovered around $625,000.
A key recipient of that $354,000 was Dorman & Fawcett, which was paid more than $275,000 for a variety of services. Those services included renegotiating BT's lease with CitiCapital, talking with the ratings agency Moody's, and seeking new investors for the struggling telecom pursuant to the suggestions laid out by the Blue Ribbon Committee on Burlington Telecom.
Under questioning from the plaintiffs' attorney, Bob Hemley, Leopold said work conducted on behalf of the Blue Ribbon Committee — a panel established by the city council — was charged to the general fund because it was not specific to BT's operations, but rather sifting through the city's own options on how to proceed given BT's debt load, legal constrictions and regulatory violations.
Hemley told the court it's hard to understand how the city can justify spending that money on behalf of BT — rather than making BT pay the money. Talks with CitiCapital were an attempt to renegotiate its municipal financing lease to keep BT's equipment in place; that equipment is necessary for BT to operate and provide services to its customers.
Under questioning from Hemley, Terry Dorman of Dorman & Fawcett said that if CitiCapital were to reclaim ownership of BT's equipment that it could force the telecom to cease operations unless BT could find new equipment. Also called to the stand was Scott Schrader, Burlington's assistant chief administrative officer, and a subordinate to Leopold.
Leopold was the third witness called during the two-hour hearing but his testimony was probably the most anticipated. Leopold is seen as the financial wizard behind City Hall's proverbial emerald curtains and the man who made key decisions to loan $16.9 million to Burlington Telecom over the course of several years — a loan that violated a key condition of the muni telecom's state certificate of public good.
"That decision to charge those bills that, in part, relate to the renegotiation of the CitiCapital lease, to the general fund," asked Hemley. "That is a decision you made, correct?"
"In consultation with the management team that has been working on this matter," answered Leopold.
"A decision for which you take responsibility?" asked Hemley.
"Ultimately it is my responsibility to make my decision. I don't exclusively do this on my own. I seek consultation with legal counsel and financial advisors," responded Leopold.
It wasn't all cut and dry answers. As Leopold has shown before the City Council, he can at times be evasive, if not confounding, to councilors attempting to get a straight answer. On the stand, Leopold proved no easy quarry for Hemley, himself one of the more skilled trial attorneys in Vermont.
At one point, as Leopold began to refute Hemley's characterization of various documents, including the scope of work conducted by Dorman & Fawcett, Judge Helen Toor had to step in and verbally separate the pair. The exchange went like this:
Hemley: "The renegotiation of the lease with CitiCapital for the equipment used by Burlington Telecom is one of the things that Dorman and Fawectt has been doing, correct?"
Leopold: "Yes it is."
Hemley: "It has billed the city, in part, for those efforts, correct?"
Leopold: "It has billed the city for the work under its … "
Hemley: "Can you answer that question? Has it billed the city for the efforts it has done in renegotiating the Citi lease?"
Leopold: "It has billed the city for the work it has done pursuant to the letter of engagement and part of that involves a liaison with CitiCapital."
Hemley: "I think that the answer to my question is yes. Would you agree with that?"
Leopold: "I think that the answer is misrepresented to say that it is their primary purpose or sole purpose. Is it an element of what they are doing? Yes."
Hemley: "Mr. Leopold, I'm not misrepresenting anything. I asked what I think is a simple question."
Leopold: "I didn't suggest that you were."
"Gentlemen, gentlemen, let's not argue," interrupted Toor.
Toor gave no indication how soon she would rule on Hemley's request to find the city in contempt of last year's order. Hemley told Toor if she ruled in his clients' favor that they would like to see BT immediately repay the $354,000 owed to the city's general fund.