City-owned Burlington Telecom dodges Citibank's contempt claims

Burlington, Vt. dodged a bullet Tuesday when Citibank withdrew a U.S. District Court contempt-of-court motion because it said it wasn't getting the full story about municipally owned and operated Burlington Telecom.

The bank was pressing for the city to be held in contempt as part of an ongoing dispute that started last year when the bank said the city and its law firm owed $33.5 million on a BT lease agreement. It withdrew the complaint when the city agreed to follow the bank's discovery schedule, as ordered by U.S. District Judge William Sessions. Citibank wants to find out when the city can or will offer up compensation.

The dispute between the two parties really heated up in 2010 when the Burlington City Council legally dissolved its lease agreement with the bank and stopped allocating lease payments. Citibank moved to repossess BT's fiber optics, switching gear and servers, buildings and vehicles, but was stymied because Vermont regulators claimed an abrupt disruption of voice, video and data services would damage the utility's "public good," according to a story in the Burlington Free Press.

Instead, in March 2012, the city and the bank reached what the newspaper described as an "interim agreement" where the city-run telco would deliver a portion of its earnings to the bank and a separate escrow account and let Citibank monitor its finances. Citibank attorney Kevin Fitzgerald told the newspaper that this month's payment was $301 and last month's was "just more than $500."

Citibank in August said that Burlington "changed plans for an audit, causing an inconvenient and costly delay to its auditors" and the bank filed for the contempt motion.  

Burlington disputed that, claiming that Citibank didn't have the right to seek the documents it wanted and maintaining that the contempt claim be dropped. The city offered to share "several months of BT financial statements" with the bank and that conformed to the March court order, city attorney Michael Burak said. The bank said it wanted several years' worth of documents.

Judge William Sessions, while calling Citibank's contempt claim "academic," seemed to side with the bank and amended his March order to require Burlington to make the past two years' worth of BT accounts available within the next 30 days.

"I'm hopeful that it's enough time for us to make a thorough review of what they're asking for," Burak told the newspaper. "If it isn't, we'll ask for more."

While all this is going on, Burlington is actively seeking a buyer for BT which, to complicate matters even further, still owes Burlington $16.9 million. All things considered, the city seems stymied when it comes to getting a new owner, a Seven Days story said.

The business is now being managed by financial advisory firm Dorman & Fawcett and "the number of BT subscribers has nosed up in recent months," but there's no "major growth spurt" on the horizon and "BT can't afford to conduct a marketing campaign with its primary competitor, Comcast," according to the article.

For more:
- The Burlington Free Press has this story
- and Seven Days has this story

Related articles:
Burlington Telecom lender CitiCapital to repossess its network equipment
Burlington Telecom wants to extend network throughout Vermont

Suggested Articles

To better gauge which rural areas in the U.S. lack broadband services, FCC Chairman Ajit Pai is proposing a new mapping process.

VMware announced Thursday afternoon that it was buying application delivery controller startup Avi Networks, but it didn't disclose the financial terms.

Google continues to execute on its $13 billion U.S. investment plan by announcing on Thursday that it's expanding a data center in Oklahoma.