Burlington Telecom's Legal and Consulting Costs Near $1 Million Mark

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Burlington Telecom has racked up close to $1 million in charges to pay for lawyers and outside consultants to deal with regulatory and criminal investigations, as well as to oversee a major financial overhaul of the struggling municipal utility.

In a memo released late Thursday, City Hall officials claim Burlington Telecom (BT) has incurred up $974,445 in expenses since July 1, 2009.

That figure has nearly doubled since "Fair Game" first reported the growing cost of BT's external consultants. In September 2010 the cost of outside consultants was close to $500,000. That figure rose to $625,000 in December, according to a memo prepared in response to a Seven Days freedom of information request.

The lion's share of the money spent to sort out BT's troubles to date — roughly $620,000 — has been paid directly by BT. Yet another $354,000 has been paid from the city's general fund — or directly by taxpayers. If a judge finds the city in contempt of a February 2010 court order, BT could be forced to repay that money immediately. A hearing on that contempt charge is scheduled for later this month.

Of that $354,000 charged back to taxpayers, nearly $18,000 has been shelled out to the law firm of Langrock, Sperry and Wool for "criminal defense" work related to ongoing investigations by state and federal authorities.

No charges have been filed to date, but Chief Administrative Officer Jonathan Leopold announced earlier this year that he is resigning his post at the end of June — a move widely believed to be connected with the ongoing criminal probes.

Click here to download a copy of the updated BT expense report.

Not included in these figures are the costs borne by the city's insurance company, Travelers, which is paying the city's legal defense costs as part of a civil lawsuit brought in late 2009 by two Burlington taxpayers: former City Councilors Fred Osier and Gene Shaver. City officials have denied Seven Days' requests seeking the defense costs billed to the city's insurance company, claiming it fell under attorney-client privilege and is related to ongoing litigation.

The taxpayers' lawsuit demands that BT immediately repay the city's cash pool the $16.9 million that had been borrowed over the course of several years. Leopold tried to plead immunity from being named in the suit, but to no avail. That means he could be on the hook financially for some of the money repaid to taxpayers if the court finds in the plaintiffs ' favor.

The insurance company is also paying Leopold's defense costs. City officials have said it's "premature" to determine if the city will continue to cover Leopold's legal expenses beyond June 30 when the CAO leaves office.

In Thursday's memo updating BT's legal, consulting and regulatory expenses, city officials admitted they made an error in their December figures — under reporting by $42,485 the costs borne by the city's general fund. The money was used to pay three separate consultants to review BT's business plan as part of an extensive reexamination of the muni telecom's operations. That work was overseen by the City Council-appointed Blue Ribbon Committee. In December, the city reported that BT paid for those services, when in fact the city's general fund had.

"The city has reviewed and considered whether to reclassify these consulting expenses and transfer the expense to Burlington Telecom," wrote Scott Schrader and Rich Goodwin, who are both assistant chief administrative officers in Burlington, and who prepared the recent BT expense report. "In reviewing the nature and purpose of the consulting services, however, the city is satisfied that the expenses were not Burlington Telecom expenses, and were appropriately charged to the general fund."

Whether those charges are appropriate is up for debate and will be debated later this month in a Burlington courtroom.

Those BT-related payments from the general fund, argue Osier and Shaver, violate a standing court order. The pair, through their attorney Norman Williams at Gravel & Shea, has asked Superior Court Judge Helen Toor to find the city in contempt of a February 2010 court order that prohibits the city from spending any money on BT-related expenses from the general fund unless they were repaid within 60 days.

The city has defended those payments, claiming the consultants’ work benefited the city, not just BT.

Osier and Shaver disagree. They believe no money should be coming out of the general fund to support BT; the utility should stand on its own.

Vermont Superior Court Judge Helen Toor has denied BT's repeated requests to delay a hearing on whether the utility is in violation of last year's court order. A contempt of court hearing will be held on May 23 in Vermont Superior Court in Burlington.

Despite BT's legal troubles, potential buyers remain interested in the municipal telecom. Two of those suitors were initially interested in February — and remain interested. Meanwhile, two more potential buyers are just beginning to make overtures. Several meetings are being held this month with these unnamed buyers, according to a letter filed with the Vermont Public Service Board at the beginning of the month.

Aside from the civil trial, a state investigation led by Chittenden County State's Attorney T.J. Donovan is close to wrapping up. A separate federal investigation was started last year, too, but the U.S. Attorney's office hasn't said whether it will bring charges.

Comments

[Jcarter]

I would suggest that ALL of the money has been or will be paid by the City. BT maybe paying a portion of the fees, but since it isn't their money someone else is going to have to fund that. Right now Citi owns BT, the fiber, the equipment, etc. Any money generated by BT is Citi's money. Someday soon they are going to come calling for it.

As for the argument that its appropriate to use General fund money as it benefits the CIty as a whole... that's just stupid. It's opinion, it may benefit the city, but Kiss also says BT benefits the City, under this line of reasoning all of BT's expenses could come from the General Fund, except we have already established thats illegal.

[Jimmy]

"potential buyers remain interested"
"two more potential buyers are just beginning to make overtures"

ACCORDING TO SOMEONE WHO WORKS FOR THE CITY

Good Lord, PLEASE stop reporting single-sourced hearsay as accepted fact.

[Howard]

Jimmy, I believe in this case the single source is the City itself! It's amateur hour. The city has less than zero and will not be able to make a deal. As man many have already said, everything is lost - and to extent CitiFinancial is going to come after Burlington we are going to lose a lot more than $17 Million.

[dale tillotson]

More proof city hall cannot get anything correct.
More proof Mayor Kiss is the biggest failure in this city, since any of us can remember.
More proof Leopold and Kiss do not understand the severity of the matter.
More proof Leopold and Kiss really do not care.
More proof we should not have ventured into the telecom business.
More proof we better stay out of the ice climbing and laser tag business at the Moran plant.
More proof Kiss needs to resign immediately, and join Leopold at the bungalow.
More proof that bungalow should be behind jail cells.
More proof we cannot believe a word coming out of city hall.
Lastly while Schwarzenegger did a lot of behind the back screwing, we as taxpayers of Burlington should feel like Maria is feeling now thanks to Bob and Jonathan.
I will try to be more harsh and direct in my next message but I am having a soft moment now.

[Buster]

I remain interested in Burlington Telecom Im not really a suitor I just want to dress it up in a french maid outfit and have my way.

Shay did Tim tell you to put a little progressive swagger on your pile of crap. Put a tongue in the ear a wet willy to punctuate the screwing the majority of Burlington tax payers are getting most of us do not subscribe to BT and are forced to pay for your sorry services. They are solvent and paying the bills well not all the bills some of them well not really they are broke Selling BT is CITI financials problem not the City of Burlingtons...

How about more bullpuckey about how there are suitors sure there are for BT Ask DSK's french maid how it feels Shay.

Why arent you exposing Leopolds misappropriation of the airport and Electric department bonds and his stuffing the theft in BT????

[Jcarter]

An interview with CIti would be more informative.

[Tim]

"Aside from the civil trial, a state investigation led by Chittenden County State's Attorney T.J. Donovan is close to wrapping up."

Close?