As my story in today’s Floyd Press reports, the county’s Economic Development Authority (EDA) Tuesday approved issuing a formal “final demand for closing” for the twice-aborted sale of 51.5 acres of undeveloped land in the largely-empty Commerce Park on Christiansburg Pike to Data Knight 365 (DK3), a company whose ownership and resources remain in doubt.
What does a “final demand for closing” mean? Can’t say for sure because EDA chairman Jack Russell refused to provide details after the authority met in its third closed-door “executive session” in 34 days to discuss the controversial deal that has generated much debate and more than a few jokes among Floyd County residents.
Russell responded with “I really don’t know” when I asked what the “final demand for closing” entailed. Was there a timetable? Russell refused to answer. Did the EDA set a new deadline after DK3 missed closing dates on Sept. 1 and a previous “final” closing date of Oct. 23? No answer.
I later learned timetables were discussed in the closed-door session. It’s not the first time Russell lied about the activities of the EDA. I doubt it will be the last.
Russell apparently believes the expenditure of county taxpayer dollars is not the business of the public that pays those taxes and bills. The EDA is a group of appointed volunteers with the power to cut multi-million dollar deals involving county property and funds with little or no oversight from the Board of Supervisors, the ones elected to represent the citizens. Because Virginia’s Open Meetings Act allows closed-door discussion on certain real estate deals and legal matters, Russell manipulates the law to assure that much of what the EDA does is hidden from the public — so much so that some EDA members say privately they are worried that they have “pushed the envelope” of the law with some of the discussions and decisions the authority has made in secret.
From what I’ve observed while attending EDA meetings, Russell runs the authority like a personal fiefdom. His decisions are absolute and not subject to question. After a closed-session in September, EDA member Jon Beegle told me that “only the chairman” should speak to the press about authority matters. Russell warns other EDA members not to speak to the press about certain matters and one quoted in one of my stories was castigated by the volatile authority chairman for doing so.
This summer, the EDA unanimously approved the sale of the 51.5 acres of land for $900,000 to DK3, a company created just a few months earlier after the first company involved the deal was shut down by the state of Ohio for failing to file disclosure forms or pay taxes. A performance agreement crafted by the county required DK3 to come up with $100,000 for a down payment by Sept. 1 and build a $67.8 million data center on the property by 2013. When DK3 failed to meet the Sept. 1 deadline and didn’t even have the courtesy to offer the county an explanation or request an extension, the EDA went behind closed doors and decided to give the company another chance with a deadline of Oct. 23, along with a requirement that documents needed for closing be submitted to the county no less than five business days before the scheduled closing.
DK3 owner of record William W. Byler delivered the documents on Friday, Oct. 16, but the second closing deadline came and went when he couldn’t come up with the 100 grand down payment and the documents didn’t pass muster. One county official close to the deal tells me the documents submitted by DK3 were “pure bull shit.” Some question whether or not Byler, an Amish wood products company owner from Ohio, is really the sole owner of the business. Other say the company’s claimed resources don’t check out. Most believe controversial English-born promoter Paul Allen is far more involved in the business than Byler claims.
So the EDA went into closed session again on Tuesday of this week and came out with the vague “final demand for closing” after nearly 90 minutes of hiding their discussions from the public.
Some local businessmen say privately they are increasingly frustrated with Russell’s cheer leading role for DK3 in trying to close the deal. Floyd Attorney Jonathan Rogers says Russell told him that the DK3 principals are “good people who have received a bad rap.” A local businessman reported he saw Russell meeting with Byler at Oddfellas Cantina the week before the last deadline, coaching the Ohio Amish businessman on how to act at closing.
When the EDA approved the deal last summer, Russell assured other authority members that participants in the deal were “fully vetted.”
They weren’t. Before the vote, EDA members were not told that Allen and his company, B-Telecom, had been involved in failed tech deals in Radford, Memphis and Ohio because of questions about his resources, credit and business practices. They were not told that Cleveland telemarketer Dan Delfino and his company, Power Direct — the reported money man behind the deal — had been fined by the Federal Trade Commission for violating the Do Not Call Registry rules or that the FTC had a restraining order in place against the company. They weren’t told Allen had been named in a “loan kiting” scheme in a federal civil suit filed in Memphis, even though Russell had a copy of the lawsuit but did not share it. They were not told that the Columbiana County Port Authority in Ohio in January had canceled a deal with B-Telecom and Allen after the county spent millions to build a building and run fiber optic cable for a data center in their commerce park.
“They didn’t perform anything they were supposed to do,” says Tracey Drake, executive director of the Columbiana Port Authority. “All we got from them was excuses. They kept stringing us along and we couldn’t afford to wait.”
ATK, the private contractor that runs the Radford Army Ammunition Plant in Radford, spent $150,000 on a deal with Allen, Byler and B-Telecom on a deal that went south before the Floyd County EDA deal.
The county’s vetting consisted primarily of running a credit check on Delfino and Byler and checking references, most of them provided by Delfino. In August, Russell and County Administrator Dan Campbell said Delfino’s involvement and resources were key to the deal. Delfino later dropped out, citing negative publicity, but the EDA voted last week to try and proceed with closing anyway.
To the EDA’s credit, it refused to grant DK3 any tax breaks, even though Allen originally requested them, or spend any county money on developing the land. The performance agreement signed by Byler allows the county to keep any money he pays for purchase of the land or any improvements to the site.
But no money has been paid for the purchase and the site still sits empty in the Commerce Park. The county has spent several thousand dollars in legal fees on the deal and the EDA members, behind closed doors, discussed suing DK3 to recover those funds. Even if a lawsuit is filed, chances of recovery are slim because DK3 is a company that exists only on paper and a two-page web site.
(Updated on Nov. 1 2009 to add new information)