BT Criminal and Financial Reviews Near Completion

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Amidst the news that Burlington Telecom has broken off its lease agreement with CitiCapital comes word that a state-run, nine-month criminal review is now being reviewed by the feds.

On Wednesday, the Burlington Free Press reported that Capt. Dave Covell, of the Vermont State Police, and Orleans County State's Attorney Keith Flynn have asked federal law enforcement officials to provide some help in the review.

Flynn and Covell have not yet responded to calls from Seven Days to independently confirm the report. Flynn is in Montpelier today.

Vermont's U.S. Attorney Tristam Coffin would neither confirm nor deny whether his office has been asked to help the state's review. Ditto the regional office of the Federal Bureau of Investigation in Albany, NY.

"It's our practice not to comment on, or even the existence of, investigations," Coffin said.

The Department of Public Service first turned over information for a possible criminal review in February. A key document that sparked the interest of DPS Commissioner David O'Brien was a letter written by attorney Joe McNeil on behalf of the city and Burlington Telecom to CitiCapital.

In that letter (which you can download below as part of a packet of materials related to the CitiCapital lease), McNeil didn't explicitly note that the city was required to repay any borrowed funds from the cash pool within 60 days.

Since February, Flynn has been reviewing the BT case. As of today, city officials say they have not been contacted by either Flynn's office or federal officials as part of their probe.

"No officials from Burlington Telecom or the city have been questioned or asked to provide documents," said Joe Reinert, assistant to Mayor Bob Kiss. "If asked we'll cooperate in any way we can."

It's unclear what the feds, or the state's attorney, believe may be violations of law. For sure, the Vermont Public Service Board has already declared the city and BT to be in violation of its certificate of public good and its own city charter for not repaying money borrowed from the city's cash pool and leaving taxpayers on the hook.

The last time the state and feds combined forces on a major public financing scandal it involved the massive Renaissance Project redevelopment at Fletcher Allen Health Care. The ensuing scandal and prosecutions landed one top official in jail, and resulted in millions of dollars in fines and charges levied against a wide range of individuals involved in the crime.

Fletcher Allen management and others involved with the Renaissance Project developed and implemented a scheme to falsify the true costs of the project and conceal them from the Department of Banking, Insurance, Securities and Health Care Administration (BISHCA).

FAHC's CEO Bill Beottcher pleaded guilty, repaid Fletcher Allen $733,000 and was sentenced to two years in a federal prison. Several other top FAHC officials, pled guilty and paid fines and were able to avoid jail time by cooperating with investigators. Thad Krupka, the former chief operating officer, pled guilty in 2005 to three state charges of making false claims, and agreed to cooperate with the probe. He had to give back $170,000.

Fletcher Allen reached a settlement agreement with state and federal prosecutors, too, regarding the Renaissance Project investigations. As part of that settlement, Fletcher Allen paid $1 million, half to the state and half to the federal government. FA's law firm — Downs, Rachlin and Martin — paid about $2 million in restitution for its role in the scheme, as did the hospital's architect.

Tsoi-Kobus and Associates, the architectural firm for the project, agreed to cooperate with prosecutors and paid $1.3 million to resolve its role. Macomber Barton Mallow, the construction management firm, also cooperated and paid $150,000. Vermuelens Cost Consultants, the construction cost estimating firm used by Fletcher Allen, cooperated and forfeited $50,000.

After obtaining BISHCA approval, based upon false information, Fletcher Allen continued to misrepresent the costs of the project by, among other things, claiming in filings with BISHCA that the costs of the project would be $173.4 million. The project, at completion, will cost nearly $367.3 million.

Sound familiar? BT is costing about twice as much to build as originally estimated (which means either the original estimate was off or the buildout was botched — or both). In addition, the Kiss administration was less than forthcoming with city councilors and the state about the extent to which Burlington Telecom was in debt to the so-called "cash pool."

Given the original proposed cost of BT and its curent debt load, It's possible state and federal officials are examining similar misstatements to regulatory authorities and to CitiCapital regarding the buildout, BT's potential value and whether BT was in violation of its CPG at the time it signed the CitiCapital agrement in August 2007.

As of June 30, 2007 BT was in debt to the city's cash pool by more than $5.1 million with only about $300,000 in receivables. It's likely that $5.1 million accumulated well before June 30, which means it had been in violation of its CPG.

The city and Chief Administrative Officer Jonathan Leopold are already being sued by two city residents, who claim the city and Leopold defrauded taxpayers by using the $17 million without their consent. Leopold is seeking qualified immunity from the suit, which has been denied by Superior Court Judge Helen Toor. In early November, Leopold's attorney, Bob Gensburg, appealed her ruling to the Vermont Supreme Court. The state's high court has yet to respond to Gensburg's request.

Also nearly complete is a long-awaited financial review of BT's operations by a consultant hired by the Department of Public Service.

The city is reviewing documents that DPS wants to include as part of its financial review of Burlington Telecom. The review is being conducted as part of the ongoing investigation by the Vermont Public Service Board into violations of BT's certificate of public good.

Some of the documents DPS wants to release publicly were filed to the PSB under protective seal, said Reinert. Other documents were created by the outside consultants hired to review BT's, but are based on information that was filed under seal, added Reinert.

"So what we're trying to determine is what information we are okay with releasing, and what information we still think is protected," said Reinert. The goal is to respond to the DPS by the end of day Friday.

To date, the city has not seen a draft copy of the state's financial review.

Download a copy of the lease agreement with CitiCapital, ancillary documents and the McNeil letter: Download BT Exhibit Response DPS 3-37 12-11-09

Comments

[Carol]

The difference between the Fletcher Allen debacle and the BT fiasco is that Fletcher Allen didn't disclose what it was spending out of its own funds; BT didn't disclose what it took from the taxpayers. In comparison, BT's crime is far worse.

[Jimmy]

"Burlington Telecom has broken off its lease agreement with CitiCaptial"

Does Bob Kiss write these pieces?

There's a pretty good, if short, piece on this at greenmountaindaily.com. It's speculation, but sounds like informed speculation. When the FBI doesn't talk to you, it doesn't mean they're not looking at you, it means it's time to start sweating.

[dale tillotson]

It will be interesting to see if the investigation is able to go into the details of all of the conversations, executive session etc. preceding the dipping into the cash pool for 17 million. What could that reveal? My guess is it would reveal that Leopold and Kiss did the dipping on their own without revealing anything to the council. Of course these meetings were quite possibly ruled in executive session
so would the investigators be able to use any evidence pro con or indifferent Vs. Kiss, Leopold, or maybe even the council members. Again my guess is that the sole responsibility is in the hands of the Mayor and CAO. That would be the best scenario. Removing those two seems to be nearly impossible but if issues arise and the entire council are connected to this mess we have even bigger issues here. Ugly is the only word that comes to mind here.
This is ugly.

[webber]

"Does Bob Kiss write these pieces?"

Um, no. That would be Mayor Leopold.

[oy]

it continues to be a surprise that Totten gets paid for what he does. There's nothing different here than in the Free Press and we all know how lame they are. Yes, the rehashing of the Renaissance Project is different but the only similarity is that the F.B.I. was involved. If you're going to skim other people's work why didn't you used the speculation from GMD?

[dale tillotson]

Shay. the photo of the cuffs in the top right corner just hit me. I missed them earlier. For over 12 months I have been suggesting Kiss and Leopold leave city hall in cuffs as it would certainly appear logical, with 17 million in pooled cash tapped, and missing, nowhere in sight to ever be paid back, the Leopold, Kiss tagteam must leave city hall in cuffs to help reassure justice to all taxpayers.
I simply ask to share royalties with you Shay on the handcuff photo. I gotta feeling though the profits will not help me pay of the Kiss Leopold debt of 17 million+ to be reflected eventually in my tax bill, especially as the bond ratings continue to faaaallllllllllllllllllll.

[johanna]

1-800-Comcast. BT customers, dial it now.

[Frank Frank]

Advice to BT customers who are switching their service to Comcast.

Wait until your service to Comcast is installed, tested, and running to your satisfaction before calling BT to cancel your service. Sometimes installations can be difficult, and in the case of many BT customers, the existing cable that came into their apartments or homes was cut by BT installers. This simple fact could delay your install time by a few hours to a few days (in cases where BT actually took the comcast drop wire off the house).

In general, if you can't live with uninterrupted internet service, it's always good practice to make sure the new services are working before you cancel the old.

[Buster]

The Big difference between the hospital and Burlington Telecom, the hospital was financing the garage project from the employees captured insurance funds. No taxpayers funds were ever at risk. So the ballooning cost were not the same problem we have on our hands with BT.

BT has been using taxpayer funds and perhaps federal bond funds slated for the airport. Leopold admits to creating the "liar loan" and accounting for it as an asset on the city's books by all accounting standards an unsecured loan to pay wages and services should be a liability.

By hearsay accounts from insiders at Telecom they cannot make heads or tails of this amount of money having been spent for the buildout or for equipment.

The independent consultants from Minnesota claim BT spent twice the norm than the national average to string the fiber optic cable. Hanky panky has clearly been going on during this entire mess.

Kiss and Reinert and Leopold and any other city official declaring that their actions should remain secret and that the value of BT woudld be harmed by disclosing any and all of the lease agreements customer lists any negotiations at this point is laughable.
the company is dead and we are waiting for the burial.

It would be nice to know if Leopold embezzled the money, or was trying to be superman for the city and save us taxpaying shlubs a few bucks by gaming the bond rating system. What ever way this plays out he was clearly delusional in his thinking.

Bob kiss remains a moron his gibberish is a sign the man has gone mad.

Totten could ask the questions of Leopold about his investment property in the Bahamas what shape is it in? What are the ties between Burlington College and Jane Sanders patronizing of his resort sending students to spend a semester with the Leopold's.

Is or has Leopold been advising Burlington College on their purchase of the new campus? Would Jane Sanders hire Leopold if he were dismissed from City hall? Has Jonathan Leopold ever been a personal financial adviser to the Sanders? How many local politicians or folks close to the Democratic party and the Progressive party have been clients of Jonathan Leopold's financial consulting business what is the nature of that business?
Was Leopold trading clients accounts as a moonlighting job while he was CAO/ Did he have a motive to embezzle?
What are the possible reasons for an FBI probe can you find out the nature of the investigation?
How many city councilors have lawyer-ed up?

[Frank Frank]

Those are excellent questions Buster

[matt Trottley]

Wow - those are great questions

[David G]

Leopold said at a council meeting that the underwriting of the bonds made the "cash pool whole again".

It was his intention to use the bond underwriting as a Liar Loan from the beginning and that is exactly what I wrote when I filed a complaint with the SEC.

A prospectus claiming that money from an underwriting will be used for one purpose and then using it for another usually is frowned upon by the SEC.

If this was Comcast or an insurance company doing this people would already be in jail.