Idaho hit with two federal lawsuits over failed broadband network

BOISE – Two politically connected vendors are suing the state of Idaho in federal court after Attorney General Lawrence Wasden demanded that they give back all the money they were paid for the now-defunct Idaho Education Network, including millions for broadband services that Idaho schools used for up to six years.

The problem: Idaho law bans payments to vendors under a void contract. The Idaho Supreme Court declared the $60 million Idaho Education Network void in March, saying it was issued illegally. And “void” means it was never legal in the first place.

A committee of Idaho lawmakers tasked with revamping state purchasing laws expressed deep concerns about the law Monday. “We don’t have the right statutory policy in place,” said Senate Majority Leader Bart Davis, R-Idaho Falls.

But any changes to the law the panel recommends wouldn’t apply to the IEN lawsuits, which deal with Idaho’s existing law. That law states, “All contracts made in violation of the provisions of this chapter shall be void. Any sum of money advanced by the state in consideration of a void contract shall be repaid forthwith.”

Idaho Department of Administration Director Bob Geddes, in a July 25 letter to Wasden, wrote that he interpreted “advanced” to mean pre-payments – payments made before services are rendered. But the Idaho Supreme Court’s unanimous ruling in the case, issued in March, suggested it referred to all payments made under the contract, saying the vendors were trying to “close the barn door after substantial funds had been advanced by the state.”

Idaho law, Chief Justice Jim Jones wrote for the court, “does impose an obligation on the proper officer of the state of Idaho to seek repayment of money advanced under the void” contract. “If the appropriate state officer fails to perform this statutory obligation,” he wrote, “the state’s chief legal officer can step forward to make the state whole for these unfortunate violations of state law.”

Education Networks of America and CenturyLink say they shouldn’t be asked to pay back money they received for providing services the state requested and was happy with at the time.

“The issues with the contract were the fault of the state and not ENA,” Phillip Oberrecht, attorney for company, said in a statement.

The two federal suits charge that the Idaho law is unconstitutional as the state is interpreting it because it would deprive the companies of property without compensation and violate their due process rights.

“There is no dispute regarding the quality, suitability or value of the telecommunications services,” ENA wrote in its complaint.

CenturyLink wrote, “The state has repeatedly acknowledged its obligation to pay for the services as provided.” Among other items, it noted Geddes’ July 25 letter.

They also note an Idaho law that expressly permits civil lawsuits in cases of “theft of communications services.”

Plus, the two firms say they invested millions – $13.5 million by CenturyLink and $18.5 million by ENA – into infrastructure designed to serve Idaho schools in the future under the now-voided contract, which the state Department of Administration in 2013 extended through 2019, without notifying state lawmakers who already were concerned about the project.

Both firms are politically active in Idaho and have donated to the campaigns of Gov. Butch Otter and other Idaho politicians. CenturyLink has donated $35,000 to Otter’s campaigns since 2006, according to state records; ENA has given $18,250, plus another $6,000 to the campaign of then-state schools Superintendent Tom Luna.

Top state officials had been pressing for a settlement with the two vendors over the winter, and the state Legislature appropriated $8 million to cover a possible settlement. But those talks were put on hold when the Supreme Court ruled in March.

Sen. Fred Martin, R-Boise, co-chairman of the legislative panel on procurement laws, said Monday, “I agree that our responsibility is to the citizens of the state of Idaho whom we represent. But the way I interpret this as written now – void, money advanced, return forthwith – if I’m a vendor, my only recourse is to sue the state. To me, the state’s recourse is to say the contract’s void, we want our money back … even though we received something. So … we created, in my mind, a lawsuit, by the way this is set up.”

Deputy Attorney General Brian Kane responded, “I think that we’re actually seeing that scenario bear out right before our eyes.”