ValleyNet, operator of internet provider ECFiber, says contractor stole money

Editor’s Note: This story by John Lippman first appeared in the Valley News on July 21.

ValleyNet, the entity that operates Upper Valley internet providers ECFiber and LymeFiber, has been the victim of “certain financial irregularities” in which an outside contractor allegedly stole money from the organization, the company announced Wednesday.

Neither the identity of the contractor nor the amount of money was disclosed, but ValleyNet said the incident will “not materially impact our financial viability and does not pose a risk” to ECFiber’s service or ability to repay debt.

“This will not impact customers,” said Stan Williams, chief financial officer of ValleyNet and one of the founding principals behind ECFiber.

ValleyNet, a nonprofit, has a contract to operate fiber-to-the-home internet networks ECFiber, which serves about 7,000 subscribers in east-central Vermont, and another contract with LymeFiber, which serves about 400 homes in Lyme, New Hampshire.

Launched in 2008 with nearly two dozen member towns organized as a telecommunications district, ECFiber has been hailed by advocates as a model for bringing high-speed internet service to rural Vermont.

But the rapid growth, funded by nearly $62 million in municipal bonds issued by ECFiber to build out 1,600 miles of fiber optic networks, has strained the 30-employee ValleyNet, and in June the company announced it was “restructuring” and reached an agreement with Great Works Internet, a Maine-based internet service provider, to take over day-to-day operations.

ValleyNet said the financial irregularities were discovered by “the newly strengthened management team” put in place under the new operating agreement as part of an effort “to bring a higher level of professionalism and internal controls to the business.”

ValleyNet expressed hope that it can recover the money.

“We are in the process of filing actions to ensure accountability, and we trust that this process will ensure we can recover funds that were taken,” ValleyNet said in the press release, adding that “all bank accounts and internal accounting data have been secured and controls have been put in place to prevent further incidents.”

ValleyNet’s CFO said the company blames itself for what happened.

“Our internal controls did not keep up with our level of growth,” Williams said in an interview with the Valley News, conceding that ValleyNet “made mistakes in not hiring additional accounting personnel earlier or in conducting audits” because managers were “under the gun financially to make ECFiber profitable, which we have done.”

The missing money was discovered “in the last month or two months in reviewing ValleyNet tax filings” and “bank reconciliations,” Williams said. ValleyNet is working with state and federal authorities in the investigation, and Williams said he expects more details to emerge as the investigation progresses.

Generally, financial crimes are investigated by the FBI and prosecuted by the federal US Attorney offices, as happened when a West Lebanon, New Hampshire, payroll company manager was charged with stealing $1.2 million from clients in 2019 and the former manager of the Lebanon Elks Lodge was indicted in an alleged check-kiting scheme involving lodge bank accounts earlier this year.

Williams described the money that was taken from ValleyNet “a large amount that was accumulated over years” but an amount nevertheless that is “not significant given the size that ECFiber has now become. It is not enough to imperil the operations of any of our related entities.”

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