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10/06/2014
U.S. investigates W.Va. fiber cable project

By Eric Eyre, Staff writer, The Charleston Gazette

CHARLESTON, W.Va. — The U.S. Commerce Department’s inspector general has started an investigation into a $42 million fiber-optic cable network that Frontier Communications built with federal stimulus funds in West Virginia.

Federal investigators have told state officials to turn over Frontier’s invoices and thousands of other documents related to the high-speed Internet project.

A letter sent to the state suggests the U.S. is looking into whether Frontier padded invoices with unnecessary costs — and whether high-ranking state officials turned a blind eye to any fraudulent billings.

The inspector general named eight former and current state officials whose emails and files should be searched. The names include state Homeland Security Director Jimmy Gianato, former state Commerce Secretary Kelley Goes and state Office of Technology administrator John Dunlap.

The state has until Oct. 17 to turn over the records.

In 2010, the state asked Frontier to install 915 miles of fiber to hundreds of public facilities across the state, but scaled back the project to 675 miles. Nonetheless, the state paid Frontier the entire $42 million initially set aside for the project. Frontier finished the project last year.

Frontier charged the state about $57,800 per mile for fiber construction. Other Internet providers install fiber for about $30,000 a mile in West Virginia, according to testimony at legislative hearings last year.

State officials said Monday they’re cooperating with the investigation and "extensive" records request. They said they’ve reviewed Frontier’s invoices closely and found nothing wrong.

"There were a number of quality-control processes in place that were intended to ensure appropriate billing," said Gale Given, who heads the state Office of Technology.

Frontier spokesman Dan Page said the inspector general also has requested records from Frontier about the fiber project. "We will fully comply with the request, which is a standard aspect of the grant-oversight process," Page said.

The inspector general’s "investigator-attorney adviser," Brian D. Nysenbaum, notified Given about the investigation three weeks ago.

In a Sept. 16 letter, Nysenbaum requested documents that detail extra "processing fees" and "indirect costs" that Frontier tacked on to its bills. State officials must turn over records that show how they reviewed Frontier’s invoices, and whether they asked Frontier to make changes.

Federal investigators also are examining whether Frontier inflated the total fiber mileage by installing unneeded spools of fiber — called "maintenance coils" — at public facilities.

The inspector general wants receipts for all fiber purchases, and the total number of fiber miles — with and without the extra spools.

Frontier has said the fiber project included 100 feet of extra coil at every public facility, or about 12 miles of fiber in total across the state.

In March 2013, Gov. Earl Ray Tomblin’s administration released a consultant’s report that raised questions about Frontier’s invoices and the $40 million fiber network being built to schools, libraries and other public buildings in West Virginia.

Tomblin’s consultant, Vienna, Virginia-based ICF International, accused Frontier of driving up construction costs by "gold-plating" facilities — installing up to six times more strands of fiber than needed.

The report also alleged "inadequate Frontier planning, reporting and invoicing" that hampered the project.

Tomblin’s office kept the report confidential for nearly a year. The Charleston Gazette requested a copy under the state Freedom of Information Act, but state Commerce Secretary Keith Burdette withheld the document, saying it would be "embarrassing to some people." The Gazette later independently obtained the report.

ICF’s report concluded that state officials used $40 million in stimulus funds to build a fragmented high-speed Internet network in West Virginia that solely benefits Frontier. ICF found that the project has "no practical use for the public or competition."

Frontier responded that the report was "worthless," citing letters from a federal agency, the National Telecommunications and Information Administration, which dismissed similar allegations in 2011.

The inspector general’s request directs state officials to turn over documents that explain why they didn’t ask Frontier to use fiber to connect schools and libraries within the same communities — a practice called "daisy chaining."

U.S. Commerce Department spokesman Clark Reid said Monday the office "neither confirms nor denies investigations."

In January 2013, the Commerce Department’s inspector general released an audit about West Virginia’s use of $24 million in federal stimulus funds to buy Internet routers that connected public facilities to Frontier’s $40 million fiber network. The audit found that the state could have purchased smaller, less-expensive routers for schools, libraries, health clinics, county courthouses and planning agencies. The inspector general reviewed West Virginia’s router purchase at the request of two congressional subcommittees.
 

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