Vt. telecommunications firm not viable, audit concludes

By Dave Gram
Associated Press / December 11, 2010

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MONTPELIER — A new audit says financially troubled Burlington Telecom has been violating its state license since it started operating five years ago, and the telecommunications company has little hope of being viable in the long term.

“The proverbial light at the end of the tunnel does not seem to exist in BT’s near- or longer-term future,’’ said the audit released yesterday by the state Department of Public Service. It was conducted by Larkin & Associates of Livonia, Mich., which said it did not see a way the municipal phone, cable television, and Internet service could repay its debts.

Those debts include about $17 million city officials have acknowledged was improperly borrowed from taxpayers, and about $33 million the city owed on a lease of its equipment until October, when the lender, Citi Capital Adivsors, announced it was coming to repossess the fiber-optic backbone and computerized central nervous system of the Burlington Telecom network.

The audit also said that Burlington officials misled the state and the public on their knowledge of the license violations.

City officials have maintained they did not know until November 2008 that they had violated a key condition of the company’s state license: that if it borrowed any money from general city funds, that it be paid back within 60 days.

“BT’s failure to identify its noncompliance . . . prior to November of 2008 is troubling,’’ the audit said. “The city’s auditor’s management letter and workpapers for the year ended June 30, 2007, in our opinion clearly indicate that the city was made aware of, or the city itself made the auditors aware of, the noncompliance.’’

David O’Brien, commissioner of the state Department of Public Service, which represents consumers before the Public Service Board, continued his recent criticisms of the city and its telecom venture yesterday.

“This is further evidence that Burlington Telecom and the city of Burlington’s leadership have knowingly withheld and manipulated information to cover the fundamental financial flaws in the case for Burlington Telecom,’’ he said in a statement.

He said Mayor Bob Kiss and his administration “continue to misrepresent the facts in what can only be a considered a campaign to ignore a painful reality, that Burlington Telecom is not viable. It is my hope that the voters and City Council take action before more money is lost.’’

Kiss called O’Brien’s comments “irresponsible, inaccurate and inappropriate.’’

The mayor said he continued to hold out hope for Burlington Telecom’s survival, pointing out that it had a positive cash flow and was in talks “with a number of strong financial partners’’ about acquiring replacement equipment to address the termination of its lease agreement with Citi Capital.