Feds Probing Idaho Broadband Deal

The DOJ has been interviewing employees of the state and of contractors Education Networks of America and CenturyLink about how the $60 million broadband contract was awarded in 2008.

by Nathan Brown, The Times-News / February 6, 2015
Gov. Butch Otter (pictured) and outgoing state school superintendent Tom Luna have voiced their support for continued broadband in high schools. Flickr/Jake Putnam

(TNS) --  The U.S. Department of Justice is investigating Idaho’s award of a school broadband contract that a judge later invalidated, legislators were told Thursday.

The DOJ has been interviewing employees of the state and of contractors Education Networks of America and CenturyLink about how the $60 million contract was awarded in 2008, advised Teresa Luna, director of the state Department of Administration, speaking to the Legislature’s Joint Finance-Appropriation Committee.

The feds have talked to Laura Hill, a former Department of Administration staffer, and Mark Little, former administrator of the Idaho Division of Purchasing, said Camille Wells, spokeswoman for the Idaho Education Network, the state agency that oversees the broadband network.

Idaho District U.S. Attorney Wendy Olson declined to comment Thursday.

Syringa Networks, which originally was to have provided some broadband Internet to Idaho’s high schools, sued in 2009, saying then-Department of Administration Director Mike Gwartney broke the rules to cut them out of the deal.

District Judge Patrick Owen declared the contract void in November, prompting the state to put payments to the contractors on hold until Owen clarified whether the underlying contract or only amendments to it were void.

Idaho now owes ENA and CenturyLink $4.2 million for services rendered since the last payment in September.

The two are demanding payment, warning they might shut down the network Feb. 22, reported former state Sen. John Goedde, who is working as a consultant for Gov. C.L. “Butch” Otter’s office to resolve the issues.

“They drew a line in the sand at Feb. 22,” Goedde told reporters after the JFAC meeting. “It’d be well within their right to pull the plug.”

The state and contractors all have filed motions to appeal and seeking clarification, but Luna said she doesn’t know if Owen will issue his final ruling before Feb. 22.

“We are concerned about paying our vendors on an invalid contract,” she said. “We’re awaiting clarification from (the court) to do so.”

Luna said the last time she checked with Owen’s clerk, she was told he was writing his decision.

“I don’t know that we can wait for the court to determine what’s legal,” Goedde responded to a question from Rep. John Gannon, D-Boise.

“I’m concerned with your statement that there’s a ‘moral obligation’ to pay,” Gannon said. “Because this is public money. And we have to deal with legal obligations.”

JFAC heard a report in January that much of the IEN equipment given to schools isn’t being used, and that only 2 percent or so of the state’s high school students are taking IEN classes at any one time.

Goedde said 1,500 students are taking IEN classes now.

Gannon questioned whether the state should let local school districts handle the network.

Goedde disagreed. “I think everyone recognizes the need for a statewide network,” he told reporters.

Originally, three-quarters of the IEN’s cost was covered by federal “e-rate” money, collected from a surcharge on phone bills. But the feds stopped paying this in 2013 amid concerns about the contract’s legality.

Lawmakers have appropriated more than $11 million to replace this money. Last year’s appropriation funds the network through the middle of this month.

The department is asking for another $1.6 million for the IEN to get through the end of June, plus $10.54 million for the 2015-16 fiscal year.

The IEN is soliciting bids for a long-term contract to administer the service. Now, though, it also is seeking a short-term contractor to handle it for a year.

Goedde said that request was issued Tuesday, and the department wants someone in place by March 26, the deadline for applying for e-rate money.

The short-term contractor would run the IEN as it is currently structured, but the long-term solution could look different. Goedde said bidders are asked to submit their vision of the network, as technology has changed a lot since 2008.

He said he is “confident that our long-term solution will be e-rate fundable,” though there is no guarantee the state will get the money. Even when there aren’t any issues with the contract, he says, it can take a state years to get that funding.

Luna said the state might have to repay the federal government more than $13 million in e-rate payment, but she added that this usually has been required only in cases of fraud when the money wasn’t spent on the intended services.

JFAC Co-Chairman Sen. Dean Cameron, R-Rupert, asked why the department is seeking a short-term contract identical to the existing one, given the problems with the previous contract.

Goedde said this was the best way to let more vendors bid and get something in place in time to apply for e-rate money.

Cameron also asked if the department acknowledges that the original contract was between the state, ENA and Syringa, rather than CenturyLink. He referenced a 2008 news release announcing the deal, which identified the vendors as Syringa and ENA.

Luna replied that ENA was the bidder, Syringa a subcontractor. She said Syringa never signed the required paperwork, and the final contract was with ENA and CenturyLink.

“As far as legally, the state has only recognized ENA and CenturyLink as the awardees,” she said.

©2015 The Times-News (Twin Falls, Idaho)

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