West Virginia will pay $4.7M for failure

CHARLESTON — Another part of Monday’s special session involved the state paying for a mistake made nearly a decade earlier during the flawed implementation of broadband grant funding.

On Monday, the West Virginia Legislature passed Senate Bill 1026, one of 18 bills passed during a one-day resumption of the special session called by Gov. Jim Justice March 9 to address education betterment. Monday’s session focused on legislation vetoed by the governor in March for technical flaws, as well as several supplemental appropriations bills.

SB 1026 moves $4.7 million from the State Treasurer’s Office unclaimed property line item to the state general fund. The money will be paid to the federal government after an audit found that the state and Frontier Communications were improperly reimbursed for certain broadband fiber cable purchases and installations.

In 2009, the state was awarded millions of dollars for broadband internet expansion through the American Recovery and Investment Act created by former President Barack Obama to help the country bounce back after the 2008 recession and housing bubble. The program provided funding for “shovel-ready” infrastructure projects, and Kelley Goes, the commerce secretary under former governor Joe Manchin, applied for a $126 million grant for broadband expansion in West Virginia through the program.

Jimmy Gianato, the former director of the Division of Homeland Security and Emergency Management, was named the chief grant administrator for the broadband program.

With the grant money, the state planned to connect hundreds of anchor facilities to high-speed broadband and build a fiber line between West Virginia University and the National Radio Astronomy Observatory in Green Bank. Instead, the state spent $24 million on 1,164 routers that a 2013 legislative audit found were too large and too powerful for the anchor facilities to use. The grant team also ignored state purchasing laws when ordering the Cisco routers.

Frontier, a sub-recipient of the $126 million grant, was supposed to build the middle-mile fiber connections and allow competitors to also access these lines at lower rates, according to an internal audit. The audit accused Frontier of using the funding to build out its own network and not providing documentation of its spending, planning, and reporting.

“As the steward of the…grant, (West Virginia) cannot be put into the position of improperly using public funds and cannot be party to Frontier decisions that subvert, appear to subvert, or are not in compliance to federal regulations and grant objectives,” the internal audit stated.

The federal government ordered that state to repay the $4.7 million – an order appealed by the administration of former governor Earl Ray Tomblin. Those appeals fell on deaf ears, requiring the state to pay the amount either in full or in payments or possibly put other grant funding at risk, such as the $149 million disaster recovery funding from the U.S. Department of Housing and Urban Development for the 2016 flood.

Senate Government Organization Committee Chairman Greg Boso, R-Nicholas, said he received a “education by fire” on the state’s broadband missteps since becoming chair of the committee that provides oversight for state government.

“These are issues that arose under two previous governors,” Boso said. “For $127 million we built very limited access internet broadband that we can’t even access in many respects in the State of West Virginia. This is a mess.”

Boso laid the blame for the poor implementation of the broadband grant program at the feet of Gianato, for resigned as homeland security director in October 2018 and as homeland security advisor to the governor in March – two roles he had since 2005 when appointed by now-U.S. Sen. Manchin when he served as governor.

State Sen. Randy Smith, R-Tucker, recalled dealing with the broadband grant controversy while serving in the House of Delegates.

“We knew we were getting raked across the coals,” Smith said. “At the time I thought it was the biggest sham, considering the state our internet service was in. We all remember Router-Gate when we spent all that money for routers we couldn’t even use. Nobody was held accountable for it.”

Smith raised concerns Monday during the discussion of SB 1026 that while the state was paying the full $4.7 million, that Frontier was not having to repay the state for its share of that penalty. Smith said the state Attorney General should sue Frontier on behalf of the state to recover what Frontier owes.

“He we are about to pay $4.7 million and Frontier is getting off the hook free,” Smith said. “They’re not accountable for any of it because they were our sub-contractor. This isn’t fair to the citizens of West Virginia.”

Frontier, in a statement Wednesday, maintains that they followed the broadband grant process and that all their actions have been legal.

“Frontier is monitoring these developments in the West Virginia Legislature,” said Frontier spokesperson Bob Elek. “As Frontier has maintained since it became involved in the…project, all of its costs on the project were entirely proper.”


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