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The art of the deal: Floyd County style

As my story in today's Floyd Press reports, county officials hope to close a deal by September 1 to sell 51.5 acres of undeveloped land in the Commerce Park on Christiansburg Pike to Data Knight 365 for $900,000 -- plus interest -- even though we uncovered past and present legal problems of some involved in the project.

"I don't think it's relevant," Economic Development Authority chairman Jack Russell says of the run-ins with the Federal Trade Commission by Cleveland's Power Direct and its owner, Dan Delfino.  Russell and other county officials did not know of Delfino's fine by the FTC for violating federal "do not call" registry rules until we reported it recently. Power Direct is backing the deal even though the project is a data storage facility, not a call center.

They also did not know that Paul Allen, the front man for the deal, lost the right to operate his company, B Telecom, Inc., when the Secretary of State in Ohio revoked that company's articles of incorporation and certificate of authority in March of this year for not filing disclosure reports or paying taxes. The company's status remains "on hold" in Ohio because of an open investigation of other actvities. Bti's web site is down and returns a "403 Forbidden code."

County administrator Dan Campbell says the county checked references and ran Dun & Bradstreet reports on Delfino's company and also vetted Bill Byler, an Amish businessman involved in the deal but did not conduct a full background investigation. The county, Campbell says, does not have the resources for such investigations.

Neither do I. I found the infomation in short order by seaching the Internet and the databases of the sources like the Ohio Secretary of State's business filings database, D&B reports and the Cleveland Plain Dealer online archives.  It's the kind of research that any first-year associate of the law firm of county attorney Jim Cornwell could have completed in a day or two.

In the county's defense, Bti appeared to be a going concern when Allen and other company reps came to Floyd last fall and began negotiations. Bti touted a deal with the Department of Defense for, they said, a top-secret data facility "somewhere outside of Blacksburg, VA."  We've learned the proposed center was slated for space the company would rent at the the Radford Army Ammunition Plant complex but that deal fell through for reasons that remain private because of pending litigation. Although the Bti web site claimed ground had been broken on the construction on September 8 last year no such construction ever began.

A news database search last year, however, would have found controversy surrounding Bti in the controversial Networx deal in Memphis, TN, where an investment banking group hired by the city's public utility found problems with Bti and questioned the company's ability to fund the deal or its honesty in due diligence.

A month after Ohio shut down Bti, Byler filed papers in the state to create Data Knight 365.

Russell, Campbell and others in Floyd County government feel they have crafted a performance agreement that protects the county if the deal goes south and one that will allow the county to collect at least $100,000 in a non-refundable deposit that the company must have by September 1.  The performance agreement also requires the company to spend over $7 million on site prep and construction by certain dates and pay the remaining $800,000 at 7.5 percent interest over the next few years.  The county holds the first deed of trust on the land and can take it back at any time that Data Knight fails to meet its milestones in the agreement.  Any money paid remains in the EDA accounts and any improvements become county property.

Data Knight has not asked for any tax concessions or money from the county and Campbell estimates the county has spent about $4,000 in legal fees.

So, if Data Knight comes up wth a hundred grand by September 1, the county makes at least $96,000 and stands to make more if the project proceeds. If the project is fully developed, Data Knight must build a 120,000 square foot facility and spend over $67 million facility that could bring $2.6 million a year to the county in taxes on land and equipment. About 20 employees would work there if it opens.

The county is still waiting for addtional verfications documents before scheduling an exact date for closing.

Floyd is a poor county and cannot afford to spend the $1 million or so that it would take the prep the 51 acres behind a power substation for use in the commerce park. Basically, the EDA and county feels it can dump 51.5 acres at a profit by taking a chance on a company that may or may not be able to deliver on its promises.

Both Russell and Campbell admit the deal is a risk but they feel the county has crafted an agreement that minimizes risk to the county and provides a big payoff if things work out.

"If" remains the question. Can the Data Knight team deliver on its grand promises? If more legal problems arise for those involved in the project, will the county be tainted by an association with the company or its players? Does the potential reward justify the risk?

Time will tell.

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Data Knight 365 missed deadline for closing

A number of people have called, emailed or dropped by to ask about the status of the announced data center for the Floyd County Commerce Park.

My story in today's Floyd Press updates the situation: Data Knight 365 (DK365) missed the Tuesday deadline for coming up with $100,000 for a down payment for their $900,000 purchase of a 51.5 acres of undeveloped land at the Commerce Park on Christiansburg Pike where the company says it will eventually spend $67 million to build a 120,000 square foot data center.

The company also failed to provide the county with documentation on principals in the company, a letter of credit and a detailed explanation of the role Paul Allen plays in both the current and future operations of the company.

Allen, who was named last month in a loan kiting scheme that resulted in a federal case filed in Tennessee, moved out of one of the two apartments DK365 is renting at the Station on South Locust. In March, the Ohio Secretary of State shut down Allen's company, B-Telecom. Bill Byler, the Amish businessman who now appears to be the front man on the deal, returned to Floyd this week and tells people "nothing has changed."

Things have changed. The Tuesday deadline for closing was the first milestone DK365 needed to meet in a performance agreement signed last month. Missing the deadline is grounds for canceling the deal if the county chooses to do so.

Economic Development Authority member Mike Maslaney says the "level of skepticism" over the deal has increased and that "questions need to be answered." Maslaney says he and others on the EDA still have hope the deal can be closed.

EDA chairman Jack Russell is occupied with the death of a family member and is not available for comment The EDA meets on September 22 and a decision on the future of the project may be made at that meeting.

Or it may not. Like so much of the hyperbole, mystery and intrigue that surrounds this deal, the questions far outnumber the answers.

(Updated September 23, 2009 to information about why EDA Chairman Jack Russell was unavailable for comment.)

The Data Knight 365 soap opera continues

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