Netbeam awarded partial settlement
BRECKENRIDGE – A judge has approved a million-dollar settlement between bankruptcy-embroiled Netbeam and one of its creditors, a major step in the Breckenridge-based Internet provider’s pursuit of financial reorganization.
In documents filed Monday, a U.S. Bankruptcy Court judge endorsed a settlement between Netbeam and Qwest. Since the company’s formation in 1999, Netbeam has purchased technology such as circuits from Qwest.
The Denver-based telecommunications company joins a host of other creditors hoping to recoup investments and unpaid bills from Netbeam, which filed for Chapter 11 bankruptcy protection in 2001.
The settlement fixes Qwest’s claim at $1,333,636.86, plus administrative expenses incurred through the bankruptcy proceedings at $160,000. The settlement outlines a payment plan over the next two years.
Netbeam founder Greg Friedman, also president of Peak Speed Communications, a sister company operated from the same office complex which will merge with Netbeam if the bankruptcy reorganization plan is approved, would not comment on the settlement.
The settlement is key to Friedman’s plan, as it will allow Netbeam’s continued operation using the Qwest equipment and execution of Peak Speed contracts with Qwest for additional technology infrastructure. According to bankruptcy court documents, Peak Speed has orders pending with Qwest for circuits to be installed in Utah, Arizona and Breckenridge.
Other documents might not work in Netbeam’s favor when the company and its creditors convene for a hearing on the company’s reorganization plan Thursday.
A report filed by an accountant appointed by the court to examine the financial paper trail between Netbeam and Peak Speed resulted in numerous corrections to the companies’ books, putting several of the companies’ bank accounts in the red.
The bankruptcy judge ordered the financial analysis after the federal trustee in the case questioned the Friedmans’ expense accounts, Netbeam financial statements and projections, online bank transfers that amounted to more than $1 million and the apparent depreciation of Netbeam assets by more than $1 million.
In general, the court’s examiner found that money flowed from the Friedmans’ three bank accounts and one business account in the form of loans to Peak Speed’s three accounts, which in turn made payments and loans to Netbeam’s two accounts. The accountant’s report, filed Sept. 12, notes, among other findings:
– Netbeam’s cash was overstated on financial documents by $68,052, nearly half as the result of double-booking receipts and underbooking sales returns in 2002. The other portion could be due to unrecorded expenses or loans to company insiders.
– No costs associated with the bankruptcy were included in Netbeam’s financial statements.
– Peak Speed paid Friedman and his wife $97,211 to pay off two second mortgages on their home, making possible a different mortgage to be pledged to open a $410,000 line of credit for Peak Speed.
– Peak Speed’s outstanding invoices for Netbeam were overstated by $81,859.
– Of a $55,121 correction reduction to cash in Peak Speed accounts, $11,500 is estimated to be the result of loan payments to the Friedmans.
– Netbeam owed Peak Speed $159,821 as of June 30, in addition to about $35,000 of a $50,000 revolving line of credit between the companies.
– Many of the financial transactions for 2001 and 2002, including a $219,000 charge from the Friedmans to Peak Speed, are not completely documented or verified.
– Cash transactions between company insiders in 2003 were properly accounted for. However, 2001 and 2002 transactions must still be analyzed, including how ledgers contain entries for checks issued to Peak Speed, when the actual checks were made out to the Friedmans.
Summit County has paid Peak Speed $16,000 a month since February for the Beanpole Project.
Peak Speed won a contract worth at least $456,00 from the county’s public telecommunications consortium to build a high-speed, wireless connection to the state’s fiber optic backbone.
The project is funded by grants from the state. The infrastructure for the project, namely cell towers, is under construction, and county officials have said they are monitoring the company’s performance “rigorously.”
The county will retain ownership of the Beanpole Project equipment and infrastructure if Peak Speed does not meet its obligations.
Service is expected to begin by the end of the year or the county government, fiscal agent for the grant, will start looking at performance penalties spelled out in the contract.
Reid Williams can be reached at (970) 668-3998, ext. 237, or firstname.lastname@example.org.
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