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FRONTIER: CITYNET SEEKS REVENGE WITH LAWSUIT


Publication: THE CHARLESTON GAZETTE
Published: Tuesday, August 30, 2016
Page: 1A
Byline: ERIC EYRE STAFF WRITER

Frontier Communications has asked a judge to dismiss a federal lawsuit against the company, saying a disgruntled competitor has taken part in a six-year vendetta against Frontier and West Virginia officials over a project that aimed to expand high-speed internet.

Frontier alleges that Citynet, the Bridgeport firm that filed the lawsuit under the False Claims Act, is out for revenge because the federal government rejected Citynet's proposed broadband project in 2010 - and instead awarded funds to the state of West Virginia and Frontier.

"Frontier's motion to dismiss explains the fatal flaws in Citynet's lawsuit and reveals it to be what it really is: the latest serving of sour grapes from a disgruntled competitor, said Andy Malinoski, a Frontier spokesman in West Virginia. "The lawsuit is merely a recycled grievance by an unsuccessful competitor that has already been rejected by the federal government twice before.

Last month, Citynet filed a lawsuit, alleging that Frontier misused $40.5 million in federal stimulus funds and built a high-speed fiber broadband network designed to shut out competitors in West Virginia. Citynet accused Frontier of double-billing, falsifying records and charging excess fees not authorized under the federal grant that paid for the broadband expansion project, which was completed two years ago.

In its response, Frontier called Citynet's allegations "baseless.

The National Telecommunications and Information Administration, which oversaw West Virginia's broadband project, previously rejected Citynet's protest over how the state spent stimulus funds to expand broadband. The same federal agency had rejected Citynet's application for stimulus funds.

Frontier says Citynet then "restyled its policy objections as fraud claims.

"After a two-year comprehensive investigation by the U.S. Department of Justice, in which Frontier produced thousands of documents, responded to requests for information, and made witnesses available to be interviewed, the government declined to intervene in this suit, leaving Citynet alone to pursue its claims, Frontier wrote in its motion to dismiss.

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 Citynet's lawsuit.

In response, Frontier argues that the state's broadband expansion plan never promised - or mentioned a word about - connecting public facilities back to Frontier's hubs. The feds also never prohibited the state from using the funds for "last-mile projects, Frontier says.

"To the contrary, last-mile connections to community anchor institutions were one of the [broadband expansion program's] key priorities, Frontier says in its dismissal motion.

Frontier also disputes Citynet's allegations that Frontier charged for more fiber than it installed. Frontier alleges that Citynet mischaracterized Frontier's cost estimates as invoices.

"Citynet fails to allege a single instance where Frontier billed the state for labor and materials that were not in fact provided, Frontier says.

Frontier took issue with Citynet's accusations that Frontier broke federal grant rules and charged the state for overhead costs. Those indirect expenses totaled more than $5 million.

Frontier argues that the company has a statewide contract - and a separate written agreement - that allowed Frontier to be paid for overhead costs. Federal regulations also permit "commercial organizations like Frontier to recover indirect costs, the company says.

Frontier also claims that Citynet can't file its lawsuit under the False Claims Act because Citynet officials disclosed their allegations publicly - over and over again - before filing the complaint in federal court.

"Citynet's frivolous, yet enduring campaign - which already had audiences in the press, Department of Justice and the very agency Citynet alleges was defrauded - does not belong in this court, Frontier's lawyers write.

In the lawsuit, Citynet named three Frontier executives as defendants. Frontier called Citynet's claims "preposterous because Citynet doesn't allege the executives committed fraud.

"The lawsuit names as defendants not only Frontier, but hard-working Frontier employees who, despite their committed efforts to extend internet access throughout West Virginia, find themselves forced to respond to unsubstantiated allegations and personal attacks against them, Malinoski said.

Frontier is West Virginia's largest internet provider. The lawsuit has been assigned to U.S. District Judge John Copenhaver.

Citynet officials would not comment Monday.

Reach Eric Eyre at ericeyre@wvgazettemail.com, 304-348-4869 or follow @ericeyre on Twitter.

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