Netbeam hearing continued
SUMMIT COUNTY – A hearing begun Tuesday to determine whether or not a Breckenridge-based Internet service company’s bankruptcy reorganization plan should be approved has been continued to allow more time for witnesses and documents to be presented in court.
The wireless Web and communications company Netbeam and officials Greg Friedman and his wife, Judith Mercer-Friedman, are scheduled to appear again Nov. 3 at the United States Bankruptcy Court in Denver, along with creditors and companies interested in buying the financially troubled technology venture.
According to Richard Kimmel, a Netbeam investor and stockholder who attended the hearing, testimony Tuesday included four hours of questions for David Dennis, a certified public accountant (CPA).
The court appointed Dennis to examine the financial statements of the Friedmans, Netbeam and two other Friedman companies, Peak Speed Communications and Blue River Networks.
The judge in the Chapter 11 bankruptcy case ordered Dennis to examine the companies’ books following a motion filed by the United States Trustee in the case to reconcile accounting discrepancies.
In two reports filed before the hearing, Dennis outlined how money moved between numerous personal and business accounts. Dennis concluded that, in several different instances, Peak Speed’s and Netbeam’s cash positions were overstated, invoices were overstated, receipts were overbooked and administrative expenses were left off the books – all resulting in a restatement and reduction in the companies’ accounts.
Transcripts of the hearing could not be obtained Wednesday, but Kimmel said Dennis’ additional findings discussed in court Tuesday included a $90,000 payroll tax liability that was not accounted for, $30,000 in check overdrafts during the past 10 months and substantial costs for having company accounts balanced that were not logged.
As the proceedings continue, the court will have to decide whether or not to approve the sixth version of Netbeam’s plan for reorganization and how much creditors will be able to collect of their more than $3 million in claims.
But no matter what happens with Netbeam, subscribers and future Internet connection projects are likely to continue, as three different companies are lining up to acquire Netbeam’s infrastructure.
“The good news is there’s plenty of interest in the company,” said Tom Bell, who works with NB Associates, which joins Boulder’s Ionthesky and Rocksolid in pursuing Netbeam’s assets. “There’s no reason the company won’t go forward. Regardless of how it all ends up, it should come out healthier.”
Kimmel had different prognositcations, however.
The Buena Vista resident said any decision is likely to be appealed by the party that loses, dragging out any resolution in court.
“I don’t think anybody’s going to win when this deal’s done,” said Kimmel, adding that he has been offered investment positions in the companies seeking to acquire Netbeam.
Much of Netbeam’s ability to reorganize hinges on the success of Peak Speed.
The Summit County Telecommunications Consortium, the collection of local officials that collectively negotiates with cable and telecommunications companies, awarded Peak Speed a $456,000 contract to build a wireless network to connect government agencies and local nonprofits to the state’s high-speed, fiber-optic network.
The money for the project comes from the state’s Department of Local Affairs’ Beanpole Project.
Peak Speed was scheduled to have completed the project in May, but getting approvals from local planning commissions held up the project. Friedman, who has repeatedly refused to comment on stories about his companies and project, expects to have the system operational by the first of the year.
Delays in a Beanpole Project are to be expected, said Rick Heming, operations manager for NC Telecom, which completed a Beanpole-funded project for Routt, Moffat and Rio Blanco counties.
“We had our share of newspapers saying, “When’s it going to happen?'” Heming said.
NC Telecom’s contract amounted to $1.2 million and was completed in about 18 months after the contract was awarded, Heming said.
What does appear to be different, though, is how the Beanpole-paid companies were compensated.
Peak Speed has been receiving payments from Summit County for about $16,000 per month since February. The state grant funds are held in an escrow account and county managers issue checks. Friedman has also asked the telecommunications consortium for more up-front money to complete the project.
Heming said his company didn’t receive any money until it could provide the services outlined in the contract. He also said that about three-fourths of that $1.2 million was earmarked for services, not hardware and circuits for building the system.
Summit County officials have said they went to extreme measures to guarantee the public will get what it’s paying for from Peak Speed, including a letter of credit from Friedman, performance clauses in the contract and “rigorous” examination.
Kimmel said that, given the difficulty the court has had examining the companies, he was doubtful county officials had the whole picture.
“I don’t want to criticize your officials, but the fact that the court had to appoint an examiner and give him legal powers to get this information, and it still took two weeks – I don’t know,” Kimmel said.
“That says to me that if the Beanpole stays with Friedman and he keeps the company, it’s going to be next to impossible to monitor their financial performance.”
Reid Williams can be reached at (970) 668-3998, ext. 237, or firstname.lastname@example.org.
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