Ex-CEO of failed start-up advising Tomblin on broadband
CHARLESTON, W.Va. -- The former CEO of a failed start-up company that solicited funding from cities and counties across West Virginia is now advising the governor's office on the state's use of $126.3 million in federal stimulus funds to expand high-speed Internet.
Keith Montgomery, who once headed iTown Communications, now works for Fairfax, Va.-based ICF International, the consulting firm hired to advise state Commerce Secretary Keith Burdette and Gov. Earl Ray Tomblin on West Virginia's broadband expansion plans. Montgomery is ICF's senior director on the assignment.
Burdette was iTown's lobbyist in 2005 and 2006, according to Ethics Commission filings. Earlier this month, he assigned Jamie Gaucher, deputy director for small business at the state Development Office, to monitor ICF's contract.
In 2005 and 2006, Gaucher traveled throughout the state with Montgomery, pitching iTown's proposed broadband services to local officials, according to news articles and meeting minutes. At one meeting, Gaucher described iTown's proposal as "revolutionary."
The company, which offered to provide government-subsidized broadband Internet services to rural towns and counties, was shut down in 2008, records show.
"We fought them. We felt like they were making promises they couldn't keep," recalled Elaine Harris, a spokeswoman for the Communications Workers of America union, which represented Verizon employees at the time. "We were already doing the work they wanted to do."
Although iTown's former backers -- Montgomery, Gaucher and Burdette -- recently reunited, Tomblin administration officials said they wouldn't consider any plan that required government subsidies to expand broadband in West Virginia.
"The governor's office does not have any interest in resurrecting iTown," said Tomblin spokeswoman Amy Goodwin.
Companies such as Frontier, Lumos Networks, Citynet, MicroLogic and Stratus Wave already are investing tens of millions of dollars to expand broadband in West Virginia, Goodwin noted.
"We are much more focused on looking at opportunities to foster their investment in West Virginia," she said. "We believe we can work together to provide competitively priced and meaningful broadband access to businesses and residents throughout West Virginia."
Contacted Wednesday, Montgomery said he was in a meeting and unable to answer questions about iTown. He did not respond to additional requests for comment.
Gaucher also would not comment or iTown or ICF's contract. He's no longer assigned to review ICF's work for the state, the governor's office confirmed Wednesday.
"Jamie is no longer working on it," Goodwin said. "He's focusing on other projects at the Development Office."
iTown folded after loan
ITown was founded in Glen Allen, Va., in 2003. Two years later, Montgomery, a Wood County native, first met Burdette, who headed the Wood County Economic Development Authority at the time.
Montgomery proposed a "public-private partnership" to bring a high-speed fiber optic broadband network to the Parkersburg area. The Wood County Commission endorsed the plan, at Burdette's request.
At the time, iTown worried that established telecommunications companies, such as Verizon, would ask state lawmakers to pass "roadblocks" that would make it difficult for iTown to carry out its West Virginia broadband plans, according to an email Burdette sent to the governor's office last week to explain his former relationship with iTown and Montgomery.
So the Glen Allen, Va.-based company hired Burdette, a former state Senate president, to lobby state legislators.
"I was retained through my company, The Burdette Group, to represent iTown during legislative sessions with the full knowledge of my board of directors at the Wood County Economic Development Authority," Burdette wrote in his email to the governor's office.
Montgomery and Gaucher also made iTown pitches in Bluefield, Beckley, Shepherdstown, Martinsburg and other cities. Montgomery solicited funding for broadband feasibility studies in those areas. Burdette said he didn't travel with Montgomery and Gaucher.
"I did not meet with any other city or county government outside Wood County for the purpose of convincing them to participate," Burdette wrote in last week's email. "I would have, because I strongly believed in the proposal, but I was not asked to and did not."
The cities of Bluefield, Parkersburg, Beckley and Vienna signed up as "local sponsors" for iTown's broadband expansion plan -- named "West Virginia's First Advanced Broadband Project." Wood, Raleigh and Fayette counties also agreed to join the project.
In 2005, Montgomery asked the state Economic Development Authority to guarantee 80 percent of a $400,000 loan with Huntington Bank. EDA members, who are appointed by the governor, rejected the request.
In 2007, U.S. Sen. Jay Rockefeller announced $37.9 million in federal loans to help iTown start its broadband expansion plans in Beckley.
In a press release, Rockefeller said iTown's project would bring broadband to 12,624 homes and 1,124 businesses, "creating substantial economic growth and create educational opportunities."
"The creation of this high-speed network will ensure that Southern West Virginia is on the cutting edge of telecommunications technology, and is able to compete in this 21st century economy," Rockefeller said at the time.
However, iTown never accepted the loan and went out of business the following year.
Sandy Fain, iTown's former vice president of service, sales and marketing, said the company struggled to secure money from investors, and ultimately "decided not to go forward." The decision came shortly before the start of the national recession in 2008.
"iTown didn't work for one reason: There was a financial tsunami on the way," Fain said. "The banks knew it. They were starting to hoard cash. They weren't investing in infrastructure."
'Hourly rate exceeded contract'
ICF International was awarded a contract with the state Development Office earlier this year. Montgomery is ICF's lead consultant under the West Virginia contract.
The firm was the second-lowest bidder, but got the job after a five-member review committee gave ICF's proposal the highest score. Gaucher served on the committee
Burdette previously told the Gazette he appointed the bid review committee members. Last week, he told the governor's office that Deputy Commerce Secretary Angel Moore assembled the committee.
In his email to the governor's office, Burdette said his previous "working relationship" with Montgomery didn't give ICF an unfair advantage during the selection process.
Burdette said he never spoke to Gaucher or other committee members about which consulting firm should be picked. Most committee members didn't know that Burdette formerly did work for Montgomery at iTown, the commerce secretary said in his email to the governor's office.
"Short of not allowing his current employer [ICF] to even bid on this work, which I have no authority to do, I could not have more thoroughly recused myself," Burdette wrote in a May 16 email to Tomblin spokeswoman Amy Goodwin.
On May 4, the State Auditor's Office rejected a $62,500 bill from ICF -- the first invoice the firm submitted.
The Auditor's Office found that ICF billed the state at rates as high as $255 an hour, even though the firm signed a contract to charge no more than $148 an hour.
Gaucher signed off on ICF's invoice and submitted it for payment to the Auditor's Office.
Last week, Burdette told the Gazette that ICF didn't overbill the state, blaming the higher charge on a "formatting error."
However, Burdette acknowledged, "after further review and clarification, the hourly rate did exceed the contract," according to his email to the governor's office last week.
ICF submitted three additional invoices, but the Development Office didn't forward those to the Auditor's Office.
"We have now rejected at the department level all invoices and instructed ICF that all services to the state must be billed at $147.81," Burdette wrote.
ICF was initially hired to analyze West Virginia's broadband infrastructure and to advise Burdette and Tomblin.
Earlier this month, Burdette said ICF would also review how state officials were spending more than $126 million in federal economic stimulus funds to expand high-speed Internet in West Virginia. The review is expected to include a financial audit.
Burdette's announcement followed Gazette reports that state officials are using $24 million from the stimulus grant to put 1,000 high-end Internet routers in small libraries, schools and health clinics, even though the equipment is designed to serve research universities, medical centers and large corporations.
The state purchased the Cisco series 3945 routers, even though an Office of Technology administrator warned that the pricey devices "may be grossly oversized." The routers cost $22,600 each.
Reach Eric Eyre at email@example.com or 304-348-4869.