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.