CHARLESTON – A lawsuit filed in 2014 against Frontier Communications alleging violations of the False Claims Act will continue after a judge’s recent order dismissing several counts from the amended complaint.
Federal Judge John T. Copenhaver Jr. dismissed Counts I and V of the complaint with respect to Citynet’s allegations of conduct occurring after the 2010 amendments to the FCA; Counts I and V as to defendant Gale Given for failure to state a claim; Counts II and VI as to defendants Dana Waldo, Kenneth Arndt and Kelly Goes for failure to state a claim; and Counts III and VII as to defendants Arndt and Goes for failure to state a claim, according to the March 30 memorandum opinion and order.
“The court agrees that Citynet has sufficiently set forth the who, what and when of the conspiracy with adequate particularity,” Copenhaver wrote. “The complaint alleges that defendants worked together to prepare the WVEO grant and prepared it containing a number of misrepresentations so that it would be awarded and with the knowledge that Frontier would become a sub-recipient of the grant.”
Once awarded, it is alleged that the defendants did not build the network that the grant stated they would build, but built substantially less miles of fiber because the network was already mostly built, and additionally worked together, with the Frontier defendants submitting and the state employees approving invoices containing impermissible invoice fees, so that the grant money would be expended and not given to other applicants who applied for grant funds, according to Copenhaver’s order.
“The court finds that these allegations, if proven, give rise to the inference that defendants had an implied agreement to violate the FCA, and that Citynet has alleged overt acts committed in furtherance of the conspiracy,” Copenhaver wrote.
In August, Frontier filed a motion to dismiss, calling the lawsuit a six-year vendetta against it by a “disgruntled competitor” who was seeking revenge after losing a bid for government funds.
“This is a familiar tale,” the Aug. 23 memorandum in support of Frontier’s motion to dismiss states. “After losing a bid for government funds to a competitor, a company seeks revenge.”
Frontier had asked for Copenhaver to dismiss Citynet’s lawsuit, alleging that Citynet had taken part in a the “six-year vendetta against two recipients of those funds: the State of West Virginia and grant sub-recipient Frontier, a Citynet competitor.”
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 funds were set aside to build a fiber-cable network.
The project was completed four years later.
Citynet alleged Frontier and the state employees named in the suit misrepresented that the proposed project complied with NOFA because no private entity could afford to build the $42 million proposed network and that the network would not be built “but for” the federal grant despite knowing that Frontier had already committed to spend $279 million to upgrade its facilities and infrastructure in West Virginia in order to gain approval of the Verizon merger.
Despite marketing the WVEO application as a “middle-mile” solution, Goes advised Citynet that $40 million of the funds were going to be given to Frontier to construct “tails” to government facilities from the nearest Frontier hub or similar facility and that the construction of the “Last Mile” tails would constitute the full extent of fiber construction under the WVEO’s plan, according to the suit.
Citynet alleges the overall effect of the misrepresentation in the WVEO grant application led to the grant being awarded to the WVEO for the sole benefit of Frontier.
Frontier caused the federal government to pay 365 Frontier invoices that included prohibited indirect costs and attempted to obtain reimbursement for indirect costs before Given became the Chief Technology Officer, but was denied by Co. Michael Todorovich who advised the Grant Implementation Team and WVOT that indirect costs were not reimbursable under the grant, according to the suit.
The Federal Communications Commission ranked West Virginia 48th in the nation for broadband access before the state received its $126.3 million stimulus grant, however, after the project was completed, West Virginia ranked 53rd among 50 states, Guam, Puerto Rico and the District of Columbia, according to the suit.
Frontier is West Virginia’s largest internet provider.
U.S. District Court for the Southern District of West Virginia case number: 2:14-cv-15947