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Plaintiffs Lose Round in Burlington Telecom Lawsuit 

Published August 24, 2011 at 4:59 p.m.

Here's the latest on the citizen lawsuit aimed at recouping $17 million in taxpayer money from Burlington Telecom.

Superior Court Judge Helen Toor has ruled that Burlington Telecom was permitted to use general fund money — i.e. city taxpayer dollars — to pay a consultant hired to restructure the debt-laden municipal telecom. The ruling deals a setback to the two Burlington residents who brought the lawsuit, former city councilors Fred Osier and Gene Shaver, who had argued that spending  taxpayer money violated a 2010 court order.

Before we go further, some background: Burlington officials are under fire for loaning $17 million from the city's cash pool to Burlington Telecom and failing to pay it back within 60 days, a violation of its state license. In February 2010, a Blue Ribbon Commission assembled to address the violations concluded BT was a "valuable asset" and recommended the city hire a specialist in business restructuring to rescue the municipal cable, telephone and Internet provider. Without a major fix, the commission said, the city risked never recapturing $15 million to $20 million invested in BT's fiber network.

In response, the city hired financial advisory firm Dorman & Fawcett to renegotiate BT's equipment lease with its creditor, CitiCapital, and to find a way to enable BT to repay the $17 million it owed. Later, after BT's manager resigned, Dorman & Fawcett was also tasked with interim management of BT.

In total, Dorman & Fawcett billed Burlington Telecom $219,705 for "operational oversight" and billed the city $275,066 for "CitiCapital negotiations." Terry Dorman, a principal of the firm, considered all work related to restructuring BT, including renegotiation of its equipment lease, as work on behalf of the city and its taxpayers — and therefore billable to the city.

When Osier and Shaver found out about the payments, they cried foul, citing a court order by Toor that prohibited the city from diverting tax dollars to BT unless the money was paid back within 60 days. Any sum paid to the consultants should come from BT, the plaintiffs argued, not from city taxpayers.

In a ruling dated August 19, Toor disagreed, writing that the expenses paid to Dorman & Fawcett were "essentially for services aimed at preserving an asset that the Blue Ribbon Commission had decided was valuable to the city.

"This case is complicated by the fact that the City and BT are intertwined, as are their finances," the judge wrote. "As a result, drawing a clear line between what was done to benefit BT and what was done to benefit the City is impossible. A spouse purchasing flowers for the other spouse from the couple's joint checking account may be buying the flowers for the benefit of the recipient, but there is no question that the purchase also benefits the giver.

"Surely the City would have been remiss in its duties to the taxpayers if it had not made efforts to address BT's financial woes," Toor wrote. "The expenses that were paid to D&F by the city (from the General Fund) were intended to support the recommendations of the Blue Ribbon Commission, were not day-to-day operational expenses, and were not payments to CitiCapital."

The plaintiffs' lawyer, Norm Williams of Gravel & Shea, said he is disappointed with the ruling and "respectfully disagrees" with the judge.

"We are investigating our options," Williams said, and added that an appeal of the ruling may be possible.

*Updated 5:27 p.m.*

Osier and Shaver did succeed in another request to the court, however.

Judge Toor granted their request for a "protective order" that prohibits the defendants from asking at depositions about who is funding their lawsuit and how much money they've spent. Toor said that information was not relevant, adding, "There may well be political reasons or personal agendas for the claims asserted here, but Plaintiffs are entitled to have such motives. The court can conceive of no reason why they are relevant to the legal issues before the court."

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Andy Bromage

Andy Bromage

Andy Bromage was a Seven Days staff writer from 2009-2012, and the news editor from 2012-2013.

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