Court orders probe into ties between firms
SUMMIT COUNTY – A U.S. Bankruptcy Court judge has ordered the examination of the financial transactions between Netbeam and the new company created by its founders, including what the trustee in the case cites as “the apparent disappearance” of about $3 million in assets in one year.
According to a court order posted Friday, the office of the United States Trustee, the neutral third party that oversees bankruptcy cases, will appoint an examiner to follow the paper trail between Netbeam and Peak Speed Communications.
Netbeam, based in Breckenridge, provides wireless Internet service in Colorado, Arizona and Utah. The company filed for Chapter 11 federal bankruptcy protection from creditors in July 2001, following disputes with employees over unpaid salaries and benefits, unpaid debts to vendors and interruptions to customers’ Internet service.
The principal founders of Netbeam – Greg Friedman and Judith Mercer-Friedman – formed Peak Speed a month before the bankruptcy filing.
Bankruptcy court documents filed by the Friedmans’ attorney state that Peak Speed will shepherd Netbeam through financial reorganization by providing employees and taking on new customers.
The reorganization plan indicates that, if it is approved, Peak Speed and Netbeam will merge, with the Friedmans controlling the majority interest in the new company.
Last year, the Summit County Telecommunications Consortium, the group of local government representatives charged with negotiating cable rates and other information technology services for the county, awarded a $456,000 contract to Peak Speed. With funds provided by the state’s Beanpole Project, Peak Speed is to build a series of radio towers to create a high-speed, wireless link to the state’s fiber optic backbone, or multiuse network. The contract is worth about $650,000 in total, with the extra $200,000 representing fees for Internet service.
The examiner is to audit the following, according to the judge’s order:
– Loan repayments from Netbeam to Peak Speed made this year. According to court documents, Netbeam repaid $1,027,000 to Peak Speed, including $626,000 in one month.
“There is no apparent basis for this level of funding since Netbeam recorded expenses of only $425,000 and a $31,000 profit for the period,” the trustee’s office stated in its reply to Netbeam’s objection to the request for an examiner;
– Expense reports submitted by the Friedmans, to the tune of $37,000;
– Netbeam financial statements and projections. Peak Speed builds kits of technology components and sells them to Netbeam at a 15 percent margin, according to Netbeam statements. A trustee analysis of Peak Speed’s books, however, shows that that margin is at least 61 percent;
– More than $600,000 in deposits to Netbeam accounts made by online transfers from other companies the Friedmans created. According to the trustee documents, the transactions were unauthorized;
– How Netbeam’s inventory and assets could depreciate from $1,276,522 and $1,990,805, respectively, in January 2001, to $16,568 and $249,037, respectively, in July later that year.
“Since Peak (Speed) sells inventory out of the same building where the … inventory is located, this is an important inquiry,” the trustee document said.
The examiner is to file a report within two weeks of his or her appointment, with a full report anticipated before the parties meet to consider Netbeam’s reorganization plan Sept. 2.
Peak Speed was to have the Beanpole Project towers in place in May, but planning commission approval delayed the project. Friedman hoped to have the towers in place this month. According to the Summit County planning department, all towers have been approved.
The county has paid Peak Speed $16,000 a month since February for the project. County officials met in June to discuss the delays in the project and maintained they were confident in Peak Speed. The county will retain ownership of the Beanpole Project equipment and infrastructure if Peak Speed does not meet its obligations.
Friedman could not be reached for comment Friday. In an objection to the request for an audit, Netbeam’s attorney claimed the examination would be a duplication of the analysis already performed by the trustee’s office and that Netbeam’s officials have been fully forthcoming in explaining the financial arrangements of the company.
Reid Williams can be reached at (970) 668-3998, ext. 237, or email@example.com.
Support Local Journalism
Support Local Journalism
As a Summit Daily News reader, you make our work possible.
Now more than ever, your financial support is critical to help us keep our communities informed about the evolving coronavirus pandemic and the impact it is having on our residents and businesses. Every contribution, no matter the size, will make a difference.
Your donation will be used exclusively to support quality, local journalism.
Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.
User Legend: Moderator Trusted User