City Disputes Claims in Burlington Telecom Lawsuit

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A lawsuit filed by two former Republican city councilors was greeted this week with a sharp rebuke from the mayor's office.

The suit, which "Fair Game" reported this week and last, was officially served on the city Monday and became a public record. The plaintiffs are Fred Osier and Eugene Shaver.

The lawsuit (available below) seeks:

• Repayment of the $17 million to the taxpayers;

• Putting a hold on the use of Burlington Telecom's assets to protect any taxpayer investment;

• A full accounting of money provided to BT from the city's cash management system, including the timing and amount of all payments from the city's cash pool to BT; how BT used the money; the amount BT owes to the city, including interest; and, a determination if BT is able to promptly repay any owed amounts from its assets or operating revenues; and,

• An injunction to keep BT from taking any further actions that violate the CPG or city charter.

The suit also holds Chief Administrative Office Jonathan Leopold personally liable for any unpaid money to the so-called cash pool. Burlington Telecom currently owes $17 million to the cash pool, an amount it hopes to repay through a refinancing of its total debt of $50 million. It is also hoping to borrow up to an additional $10 million to complete the build out of its fiber network in the city.

The suit claims Leopold knowingly loaned BT money in violation of its certificate of public good and the city charter. BT's CPG states that the telecom cannot borrow money from the cash pool unless it can demonstrate that it can repay the money within 60 days. Both the CPG and the charter are clear that BT cannot saddle taxpayers with any debt or liability.

"Even though Leopold knew that BT had not and could not repay funds from the City's cash pool management system within 60 days as required by its Certificate of Public Good, he continued to authorize the payment of such funds to BT and to hide the violation from regulatory authorities, city councilors, and the public," the lawsuit alleges. "Such conduct constitutes deceit and renders Leopold personally liable for the unpaid funds."

As I noted in this week's column: Gee, couldn't they just give him a lump of coal for Christmas instead? Seriously, it's a charge that could leave Leopold indebted to the city far longer than BT. Kinda puts a damper on any retirement plans.

However, on Wednesday, the mayor's office issued its first public statement on the lawsuit:

"These claims are unfounded and frivolous. They also appear to be partisan in nature. Both of the plaintiffs are former officials in the Burlington Republican Party.  The attorneys representing the plaintiffs, Gravel and Shea, have represented Comcast in proceedings against the City in the past. Comcast is currently opposing Burlington Telecom in proceedings before the Vermont Public Service Board," read the statement. "The issues facing Burlington Telecom have unfortunately fostered as much political opportunism as they have genuine public interest."

The mayor's office claims Superior Court is not the proper legal venue to deal with the CPG violations. The proper venue is before the Public Service Board.

The city is currently before the PSB regarding Burlington Telecom’s use of pooled cash and compliance with its CPG. The legal discovery process began last week, with the city answering 124 questions posed by the Department of Public Service.

The case before the PSB could easily drag into May, which is when hearings are scheduled before the PSB. That is, unless the state and city settle their differences in a negotiated settlement.

Before Monday night's council meeting, the city's outside legal counsel briefed councilors in a secret on negotiations with the department.

To read the lawsuit, click Download BurlingtonTelecomLawsuit.

Comments

[Sean]

Burlington City Administration:

"More bad people are interfering with our plans! Waaaaaaah."

[Jimmy]

That's a "sharp rebuke"? The appropriate response would have been "these charges are unfounded and we look forward to proving as much."

Watch for these guys to fight with everything they've got to avoid testifying under oath.

[Morgan M]

I don't think the courts normally hear what is basically a taxpayer beef. It's a stunt.

But the City took the bait. A terse "we can't comment on pending litigation" would have been OK. Instead they snarl at the plaintiffs, their motives, their lawyers (!) and their competitors. (So let's see, a plaintiff would choose an attorney in this manner? . . . does that mean that BT defenders would go to someone like-- John Franco? Is that how it works?)

I'm still waiting for a defense of BT that addresses the facts, and let's give the lawsuit credit for tossing a few of those on the table. So far all the venom coming from the BT/BTV side adds up to a collective non-denial denial.

[Thomas]

Morgan: Just a small clarification. BT doesn't need a defender. The CAO/City does. BT needs subscribers. The CAO/City needs to explain many things, a small subset of which this lawsuit outlines. What CAO did is either defensible (the ends justify the means) or indefensible. In this case, based on what we've seen thus far, the CAO has put the City in a corner that they can't get out of - this is obvious to me anyway and can't be dismissed by claims of "they're playing politics". Lawsuit or no lawsuit, the train has left the tracks and soon we will be faced with picking up the pieces and salvaging the wreckage.

[dale tillotson]

Is that the Mayors truck parked in the Mayors parking space with the tailgate being held on by those disgusting bumper stickers? How disgusting for a person of responsibility.

[twitty]

Golly, Dale, is that all you can muster today? Pretty lame, even by your standards.

[Lea Terhune]

Two ways to improve BT's standing in the city:

(1)People in the city who want to support BT, and are not subscribers but could be -- sign up. One of the big disappointments, and it looks really bad for the city and BT, is the fact that many fewer people signed up than anticipated. Give up your DVR -- Go BT.

(2)BT -- offer free wifi to all taxpayers and contributors to the city coffers when they are in a city building. In return for use of $17 million in city funds, it's the least you could do! Citizen access to documents, minutes, agendas, etc, during government meetings would be a great service to democracy and open government.

[dale tillotson]

Happy holidays to all and that includes the Mayor and CAO and their families.
Open government must be the theme from here on through. We are lacking in this aspect coming out of city hall. It must and will stop here on and through.Burlington taxpayers, citizens and voters can be amazingly acceptable of bad news when it is distributed in an honest and open way.
Please city hall be honest and open, it will be a lot easier on all of us including yourselves in city hall.

[Jen]

fire leopold and raise his property taxes to pay back the $17mil.