(07/23/2016)
Eric Eyre, Charleston Gazette Mail

Bridgeport-based Internet provider Citynet has filed a lawsuit against Frontier Communications under the False Claims Act, alleging Frontier misused $40.5 million in federal stimulus funds and built a high-speed broadband network designed to shut out its competitors in West Virginia.

Citynet accuses Frontier of double-billing, falsifying records and charging excess fees not authorized by the federal grant that paid for the broadband expansion project completed two years ago.

The lawsuit also names state officials Homeland Security chief Jimmy Gianato, Chief Technology Officer Gale Given and former Commerce Secretary Kelly Goes as defendants, saying the trio was complicit with Frontier's scheme to defraud the federal government.

Citynet initially filed the federal lawsuit in 2014, but it was kept under seal until this week. A revised complaint was filed Monday, after the U.S. Justice Department declined to intervene in the case. The federal government typically joins about 25 percent of lawsuits filed under the False Claims Act.

Citynet and Frontier lawyers declined to comment Tuesday. Frontier is West Virginia's largest Internet provider.

In 2010, West Virginia received $126.3 million in federal stimulus funds to provide high-speed Internet to 1,064 public facilities mostly schools, libraries, health clinics, courthouses and State Police detachments. About $40 million of the $126.3 million was set aside to build a fiber-cable network.

Citynet alleges that Frontier was supposed to build an "open-access middle-mile network" that linked public facilities to Frontier "central office" hubs, where other Internet providers could hook up to the network and serve customers in rural markets.

Instead, Frontier constructed a "last-mile" network that linked the buildings to the company's existing fiber utility poles, "essentially rendering the newly constructed facilities useless to competitors," according to the lawsuit.

Gianato "unilaterally" signed off on that plan, according to the lawsuit. The project locked schools, libraries and other public agencies into doing business with Frontier "in perpetuity," Citynet alleges.

"Frontier did not want to build the 915-mile open-access middle-mile network because it would be catastrophic to Frontier's business in that it would allow competition from other broadband service providers," the complaint states.

Citynet alleges Frontier grossly overstated the miles of fiber needed to build the broadband network. In the state's application for stimulus funds, more than 400 of the 1,064 public facilities designated to receive fiber already had fiber service.

In Boone County, 20 of 30 buildings already had fiber, and 94 of the 115 public facilities in Kanawha County did not need fiber, according to the complaint.

Citynet claims that Frontier "double-counted" fiber to 58 buildings in 32 counties, and "used excessive maintenance coil to make up for fiber not constructed."

"Frontier also misrepresented the proposed distances for many of the community anchor institutions by simply inputting the same number for several projects," the lawsuit alleges. "Incredibly, there were 36 [buildings] in seven different counties that each required the exact same 4,390 feet of new fiber."

The lawsuit alleges that Frontier submitted nearly 700 invoices that should never have been paid under stimulus grant rules. Given and Gianato approved the bulk of those invoices, which totaled more than $5 million.

"Frontier also engaged in a practice of billing the [federal broadband] grant for material and labor it did not provide, and for fiber lengths that were not constructed," the complaint alleges.

The Federal Communications Commission ranked West Virginia 48th in the nation for broadband access before the state received its $126.3 million stimulus grant. After the project was completed, West Virginia ranked 53rd among 50 states, Guam, Puerto Rico and the District of Columbia, according to the lawsuit.

The lawsuit has been assigned to U.S. District Judge John Copenhaver.


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