IEN vendors threaten lawsuits, file multimillion-dollar claims against Idaho

BOISE – The two vendors for the now-defunct Idaho Education Network have both filed tort claims against the state of Idaho, seeking millions in back payments for high school broadband service they provided from September until last month, when a court issued a final order that the state’s $60 million IEN contract was issued illegally. State law prohibits making payments under an illegal contract, so the state Department of Administration stopped paying in September, as legal questions mounted. But Education Networks of America and CenturyLink say the contract problems weren’t their fault – they were all the state’s doing. “The State of Idaho and the children served by the IEN have received the full benefit of ENA’s services; yet, ENA has not been paid,” attorney Phillip Oberrecht wrote in ENA’s tort claim, which demands $6 million plus interest and attorney’s fees. “ENA finds itself in the anomalous position of having undeniably provided valuable services to the IEN, but being denied payment because of the unilateral actions of the state.” Then-state Department of Administration Director Mike Gwartney awarded the $60 million contract in 2009 to Nashville-based ENA, which had partnered with Syringa Networks, and Qwest Communications, now CenturyLink, which had partnered with Verizon. He then amended the contract to shift all broadband connectivity services under the contract from ENA’s bidding partner, Syringa, to Qwest. ENA was informed that the state was acting “unilaterally,” according to the tort claim, a precursor to a lawsuit. “The state also required ENA to contract with Qwest and vested in Qwest control of the technical network and connectivity services,” the claim says. Syringa sued, while the state vigorously defended the contract; a judge sided with Syringa in November, declaring the contract illegal, and reaffirmed his ruling in February, leading to the shutdown of the IEN. “ENA intends to file a complaint for breach of contract,” Oberrecht wrote, adding that the firm also will claim tortious interference with contract and violation of its “constitutional rights to just compensation and due process of law.” CenturyLink’s tort claim, which like ENA’s was filed last week and first reported Thursday by Idaho Education News, doesn’t name a specific damage figure. But like ENA’s, it says the state owes it money for services provided, and that any problems with the contract were all the state’s doing. “We continue to believe that the contract awards to ENA and CenturyLink complied with Idaho Law,” wrote CenturyLink attorney Steven Perfrement. “Regardless, however, there has never been any evidence of any violation of any law by CenturyLink.” The federal government cut off federal “e-rate” money, which was supposed to pay for three-quarters of the cost of the IEN and comes from telephone taxes, in March of 2013 due to legal questions about the contract award. The U.S. Department of Justice is now investigating the deal. But the state Department of Administration continued on with the service even after the federal funds were cut off, maintaining that it had acted properly and the court would rule in its favor. That summer, without informing lawmakers, department Director Teresa Luna extended the IEN contract through 2019, even though it wasn’t yet up for renewal. The state then had to spend millions to make up the lost federal funds. The state has 90 days to respond to the tort claims; if it rejects them or doesn’t respond, the two firms are free to file lawsuits. Since the cutoff of the IEN last month, lawmakers have allocated money to the state Department of Education to reimburse school districts for their own hastily signed, short-term broadband contracts with vendors of their choice to replace the service for the rest of the current school year; costs fell by more than 31 percent as a result, and schools were able to increase their bandwidth. The cost per megabit fell by 61 percent.