Mayor Bob Kiss: Report Critical of Burlington Telecom ‘Lacks Credibility’

It’s a tried and true trick of the trade: If you have bad news to release, ship it off to the media as near the end of business on Friday as possible.

Both today and last Friday, Queen City officials released statements about the beleaguered Burlington Telecom between 4 and 5 p.m. 

Today’s release was critical of a state report that itself was highly critical of the financial and management decisions that led to Burlington Telecom’s hefty debt load and poor financial condition.

Last week, Mayor Bob Kiss issued a brief statement saying he would comment more fully at a later date. Today, Kiss issued a broader critique of the report, but said the city will respond further next week as it more fully reads and evaluates the report.

The report, written by Michigan*-based Larkin and Associates, was initiated in late 2009 after it was first revealed that the city had essentially loaned BT $17 million in violation of its certificate of public good.

A key finding from the report is that BT was in debt, and in violation of its CPG, as early as September 2005 — back when Mayor Peter Clavelle was in office and BT’s General Manager was Tim Nulty.

The Larkin report also largely confirmed what has been known for months — BT is so far in debt that it can’t afford to climb out, and its future as a standalone company is bleak. A special Blue Ribbon Committee came to similar conclusions earlier this year. From that earlier committee’s work the city hired the consulting firm Dorman & Fawcett to help the utility attempt to right itself and renegotiate its $33.5 million lease with CitiCapital.

“Larkin praises the Blue Ribbon Committee but fails to observe that the city has been implementing the committee’s primary recommendations,” said Kiss in a statement. “With the assistance of Dorman & Fawcett, the city has sought to address the CitiCapital lease while improving BT’s cashflow and the efficiency of BT’s operations.”

Dorman & Fawcett took over complete management of Burlington Telecom in August after General Manager Chris Burns left to take a job with a telecom firm in Alaska.

At a Public Service Board hearing, city officials told state regulators that they are in talks with potential private investors and partners to keep BT afloat.

Kiss said he’s also calling a special meeting of the city council in January to discuss Burlington Telecom and is weighing the option of filing an official response to the Larkin Report with the PSB.

The city claims the report has “several gaps and omissions,” including:

• Larkin staff never contacted or interviewed city officials or the city’s consultant Dorman & Fawcett;
• Larkin never interviewed the city’s independent auditors, Sullivan, Powers & Co;
• Larkin’s analysis fails to include recent developments with CitiCapital; and
• Larkin failed to account for BT’s current financial status and improvements implemented since Dorman & Fawcett took over interim management of BT nearly four months ago.

“The Larkin Report lacks credibility,” said Kiss. “BT’s viability is of paramount importance. It is a major mistake to rely on the Larkin report. It is dated, incomplete, and contains numerous omissions.”

Kiss and other city officials claim almost every issue cited from the city’s management letters, in section L of the report, had been addressed by the city by the end of FY10, at least six months before Larkin completed its report. In addition, a formal process for monitoring the Certificate of Public Good (“CPG”) was addressed in September 2009 prior to initiation of the Larkin report; however Larkin failed to note this significant development, offiicals claimed in a release.

“Our review shows that Larkin failed to understand how and when the city addressed issues identified in auditor management letters, causing the report to be misleading,” said Chief Administrative Officer Jonathan Leopold, who the Larkin Report criticizes for withholding information from the city council and public about BT’s debt. Leopold denies he withheld information, claiming that city councilors were informed of BT’s money problems in late 2007 after former GM Tim Nulty resigned.

Leopold recently lost a bid to retain immunty from a citizen’s lawsuit filed against the city and Leopold for mismanagement.

City officials also claim the Larkin Report doesn’t take into account any of the work that is being done by Dorman & Fawcett, nor did the consultant talk to Dorman & Fawcett about its concerns.

City officials also called into question the independence of the report.

“This report has been characterized as independent, which is not true. In reality, it was prepared for the Department of Public Service and David O’Brien in the context of an adversarial proceeding,” said Kiss.

Kiss said Larkin was a consultant during a rate increase case last year involving Burlington Electric. Larkin’s analysis in that case was ultimately rejected by the parties in favor of the city’s position, Kiss noted.

* The consultant’s home state was incorrect in the initial post. It has been corrected in this version.

This article appears in Dec 15-21, 2010.

Got something to say?

Send a letter to the editor and we'll publish your feedback in print!