The Great IEN Boondoggle – Taxpayers Broadband Bailout
by Kathy Rose
On the last day of the 2016 session, Maxine Bell moved an appropriations bill to allocate $8 million from the general fund to the legislative legal defense fund. In her support of the bill, she described how the fund was created in 2013 with $200,000. Just over $1 million was allocated to it in 2015. This year’s large jump in the dollar amount piqued many interests.
Bell went on to say the legal defense fund “… has been basically been used in defense of land issues, (the) interim committee looking into federal land use, and sage grouse status litigation.” She concluded her sales pitch with “The remainder of the funds in there could be used for most any issue and is entirely up to the Speaker and the Pro Tem in the protection of our rights as a legislature.”
Rep. King, District 18 (D) objected and referred to it as a “slush fund”. Rep. Heather Scott District 1(R) asked Speaker Bedke if he would answer a question, forcing him to relinquish the chair and debate on the floor.
His response admitted the $8 million could be used as a settlement for the Idaho Education Network (IEN) lawsuit. There you have it, the full $8 million picture. Let’s take a look back in history.
HB543 passed unanimously in 2008, establishing the Idaho Education Network, a common high-bandwidth connectivity and technology platform to enable advanced and specialized courses to be shared within or among school districts and allow students access to concurrent enrollment offered by higher education as well as scarce educational resources to be shared throughout the state.
The bill instructed the Department of Administration to create, implement, and fund the $60 million IEN. At least 65% of IEN’s operating costs were supposed to come from E-rate dollars. Gov. Otter loves his federal money.
The original bidding process occurred in January 2009. Qwest and Verizon submitted a proposal as a partnership. Education Networks of America and Idaho based Syringa Networks also submitted their own joint proposal and it was the lowest bid. The Department of Administration awarded the IEN contract to ENA and Qwest (Now CenturyLink) in the form of two Statewide Blanket Purchase Orders (SBPO1308 and SBPO1309 respectively.)
Four weeks later, the Department of Administration issued Amendment 1 to each of the SPBOs, dividing the work between Qwest and ENA. It designated Qwest as the general contractor for all technical network services and ENA responsible for all E-rate services. This amendment essentially awarded the work that the partnership would have given Syringa to Qwest. In other words the department of Administration cut Syringa out of the contract.
In December 2009 Syringa filed a lawsuit against The Idaho Department of Administration, Qwest and ENA. The lawsuit specifically names the DOA, its director J. Michael Gwartney, its chief technology officer Jack G. Zickau, ENA and Qwest. The district court granted a summary judgment against Syringa, dismissing the lawsuit on all counts. Syringa appealed.
July 30, 2010, Gwartney announced his retirement and Teresa Luna was named as interim director.
Since the initial roll-out of the IEN relied on stimulus funding, the federal government stepped in. The FBI addressed fraud in the process of awarding the bid, and fraud in the allocation of the funds.
In April 2012 former Idaho Education Network communications director, Garry Lough, began working for ENA, the E-rate contractor for the IEN. Could this be a conflict of interest? About a year later, Universal Service Administration Company (USAC) stopped E-rate funding for the IEN project.
March 29, 2013 “[M]ere schemes to evade law, once their true character is established, are impotent for the purpose intended. Courts sweep them aside as so much rubbish,” quoted by Supreme Court Justice Eismann to characterize the award process for the IEN contract. The court also targeted the IEN former director: “Gwartney appears to have been the architect of the State’s effort to bend the contracting rules to Qwest’s advantage. In deposition testimony, he essentially admitted knowing, even before the contract award was made on January 20, 2009, that Qwest would be ‘making the connections and providing the broadband’ for IEN.”
In a January 2013 presentation to the Joint Finance-Appropriations Committee (JFAC), Teresa Luna reported the withheld E-rate dollars for the first time to the Legislature and requests $14.45 million to keep the IEN afloat. A short term $4.8 million bailout bill passed to keep broadband in schools until the next session.
January 2015 Legislative Services Office (LSO) presented an audit of the IEN to JFAC. Even though school districts had been utilizing the broadband Internet service that comes with the IEN, only 2 percent of students served by the IEN were taking classes specifically on the network.
On January 23, 2015 CenturyLink requested a payment of $1.01 million from Education Networks of America to prevent interrupted or disconnected service. It was reported that vendors for the IEN contract had not been paid since September. The governor’s office asked JFAC for $10.5 million from the general fund, which included $6.7 million to cover lost E-rate funds.
February 5, 2015 Gov. Otter appointed former state Senator John Goedde to lead a 20 member IEN Working Group. Goedde would soon report that the state was at risk of losing $245 million in federal funding if it was unable to administer online standardized tests in the spring. The IEN was on life support.
February 11, 2015 was the day 4th District Judge Owen issued the final ruling on the Syringa lawsuit, declaring the IEN contract is void.
February 23, 2015 another financial bandage was approved in HB168 for $3.6 million to fund through July. On February 27th, the DOA declared an emergency and signed a 6-month, $1.88 million contract with CenturyLink to provide broadband to those state agencies. You can view more details of this time line at http://idahoptv.org/idreports/ien/ .
The illegal IEN contract sent schools into a tailspin to keep their internet going. Once freed from the shackles of the crony state contract, Idaho schools and kids saw immediate benefits. Most schools districts were amazed that they were able to save thousands of dollars per month, for more bandwidth and better service by negotiating their own contracts.
It’s obvious that the Governor’s office has been engaged in another game of cronyism. As usual, the taxpayers are the ones lighter in the wallet. The Administration Department hired outside attorneys to handle the lawsuit. As of the middle of February 2015, the department paid out almost $628,000 in legal fees.
Both Education Networks of America and CenturyLink have filed tort claims with the state, demanding unpaid payments on the project. Legislative leaders say that the vendors’ claims could reach $11 million. This boondoggle has cost us another $8 million if this can be settled.
Rep. King may not have been far off when she called it a “slush fund.” If this was not grand incompetence, it has to be a con game played over the last 8 years, and I have some land in Florida I’d like to sell you.