LPEA seeks return of $2 million spent by now-bankrupt REAnet

LPEA seeks return of $2 million spent by now-bankrupt REAnet

June 2, 2001

By Tom Sluis
Durango Herald Staff Writer

La Plata Electric Association is negotiating to recover $2 million that REAnet – its bankrupt telecommunications company – allegedly spent partly through fraud and wrongdoing before it declared bankruptcy.

According to papers filed with the U.S. Bankruptcy Court in Denver, the money includes $300,000 fraudulently transferred to Charles D. Scarborough, a Denver businessman, as a loan fee so then-chief executive officer Kelly Bloomer could get a loan for a corporation he owns.

The corporation is not named in court papers, but David Potter, chief executive officer of LPEA, said the co-op believes the loan was to be for REAnet Telecom Corp., known as RnT, which Bloomer owns. Bloomer has said RnT wants to buy REAnet, but he has not come up with the money.

Despite the $300,000 loan fee paid with REAnet money to Scarborough, the loan for Bloomer’s corporation never materialized, according to court records.

The amount of the loan sought was not listed in court records. REAnet was valued at $24 million in 1999, and at one point had a $30 million offer from TCOM Ventures, but the deal fell through.

Neither Bloomer nor REAnet returned phone calls Wednesday seeking comment.

REAnet is claiming in court papers that when Bloomer authorized the loan fee he acted "outside the scope of his (corporate) authority."

Potter said the REAnet board never approved the fee, and David Sitton, an REAnet board member, said he had never heard of the board approving the fee.

"That’s why REAnet is making a claim against it," Sitton said.

Because of Bloomer’s alleged abuse of his authority while at REAnet, the company wants Bloomer to return all payments made under his severance agreement before the disclosure of the Scarborough payment was made.

Bloomer and LPEA officially say he resigned as chief executive officer of REAnet, and the terms of the severance package have not been made public.

According to court records, Bloomer says REAnet owes him $100,000 that was agreed to as part of the severance settlement. REAnet disputes the amount.

Court records show that part of the severance settlement included $37,024, which REAnet paid with 10 checks for $3,702.42 each on Feb. 6. Bloomer also received a check from REAnet on Feb. 6 for "payroll and vacation final pay," for $4,487.45.

Besides the $300,000 that REAnet wants back from Scarborough, and the return of Bloomer’s severance money, REAnet also wants $755,000 returned that was paid to Kevin Rosenberg, who sold the Internet company Cyberport Station in Farmington to REAnet in 1999.

According to court records, REAnet repurchased corporate stock from Rosenberg for $400,000 on Dec. 29, 2000, and $355,000 on March 20.

REAnet now wants the money back because, according to court records, the transfers of money were fraudulent because REAnet was insolvent at the time.

Finally, REAnet wants $1 million returned that was paid to Adesta Communications, a company that is planning on building its own fiber-optic network in Colorado.

Potter, with LPEA, said the money was a down payment on a contract where REAnet would receive 36 fiber lines from Adesta.

According to court documents, the fiber lines have not been completed.

"The theory is that if the contract is canceled, REAnet should be able to get its money back," Potter said.

Peter Lucas, LPEA’s bankruptcy attorney, said REAnet is asking for the $2 million because after a company files for bankruptcy, there is a certain period where transactions can be reviewed and perhaps revoked.

For a non-insider, the period is 90 days; insider transactions fall within a one-year window.

"The theory is that all creditors should share equally," Lucas said.

Although REAnet is listed on court documents as the entity having the claims on the $2 million, LPEA and REAnet are negotiating for the claims to be transferred to LPEA.

If the transfer is approved by the LPEA board, the co-op may sue to get the money back.

In the meantime, as REAnet tries to reorganize under Chapter 11, Cyberport Station and Ruralnet, REAnet’s Internet company in Grand Junction, are being auctioned to the highest bidder on Monday.