A.G. Aims to Recoup Money in Broadband Suit
CHARLESTON — Attorney General Patrick Morrisey announced Friday that he will seek to recoup millions of dollars West Virginia had to pay the federal government for mistakes Frontier Communications made a decade ago on a broadband grant.
The Attorney General’s Office filed a motion to intervene Friday in a lawsuit brought by Citynet, an internet provider based in Harrison County, against Frontier Communications and officials with the state Department of Commerce under former Gov. Earl Ray Tomblin.
The lawsuit accuses Frontier of misusing federal grant funding to the tune of $40.5 million to build a statewide broadband network to only benefit itself. Citynet brought the suit under the False Claims Act in 2014
The West Virginia Legislature passed Senate Bill 1026 on May 20 to move $4.7 million from the West Virginia Treasurer’s Office unclaimed property line item to the state general fund to repay the federal government after an audit found that the state and Frontier were improperly reimbursed for certain broadband fiber cable purchases and installations.
Morrisey’s motion makes no judgment regarding Citynet’s claims against Frontier, but requests if the court rules in Citynet’s favor that the court require Frontier to reimburse the state for $4.7 million plus miscellaneous costs, bringing the total request to $4.9 million.
“We must act now to assert our claim and protect West Virginia’s interest,” Morrisey said in a statement Friday. “It is only right that West Virginia be made whole and another entity bear the costs, if it is proven that entity engaged in fraud. Anything less would amount to the federal government receiving double payment for the same underlying costs.”
In 2009, the state was awarded millions of dollars for broadband internet expansion through the American Recovery and Investment Act created by former President Barack Obama to help the country bounce back after the 2008 recession and housing bubble. The program, also known as the stimulus, provided funding for “shovel-ready” infrastructure projects.
Kelley Goes, the commerce secretary under former governor Joe Manchin, applied for a $126 million stimulus grant through the federal Broadband Technology Opportunities Program for broadband expansion in West Virginia. Jimmy Gianato, the former director of the Division of Homeland Security and Emergency Management, was named the chief grant administrator for the broadband program.
Frontier, a subrecipient of the $126 million grant, was supposed to build middle-mile fiber connections and allow competitors to also access these lines at lower rates. According to a June 2017 audit by the Inspector General for the U.S. Department of Commerce, Frontier marked up its invoices to the state by imposing a 35.2 percent fee to profit off the subcontracts. Frontier made more than $465,000 off these markup fees.
“The rate has been established . . . so that this is a revenue opportunity for Frontier,” said one unnamed Frontier executive in an email obtained by the Inspector General.
According to the audit, the state paid Frontier $4.2 million for “loadings,” a term for indirect costs that covered administrative and overhead. Frontier also misled the public on how much maintenance coil, saying that they used 12 miles but actually used 49 miles, a 400 percent increase.
During the debate on SB 1026 in May, several lawmakers were upset about the state having to pay the $4.7 million debt due to mistakes made by Frontier and former state officials.
“This is one that gives me real heartache,” said Sen. Randy Smith, R-Tucker. “Officials in the state knew this was going on, and here we are going to pay $4.7 million and Frontier is getting off the hook. They’re not accountable for anyone if it because they were our subcontractors. This isn’t fair to the citizens of West Virginia.”
Senate Finance Committee Chairman Craig Blair, R-Berkeley, told the Senate if the state didn’t pay the $4.7 million penalty, the federal government could have halted all other grant payments and loans to the state.
“Frontier, as a subrecipient, is not liable to the federal government for the repayment of these funds,” Blair said. “It may be possible for the state to pursue reimbursement of these costs from Frontier…I don’t think this is over.”
A request for comment from Frontier was not returned.