Friday, September 3, 2010

Stimulus Clawback: USDA Rescinds $19 Million Broadband Award to Texas Firm Charged with Fraud by SEC 09/03/2010 San Francisco – In response to investigative reporting by, the U.S. Department of Agriculture (USDA) today disclosed that it has issued one of the few funding “clawbacks” within the overall $787 billion economic stimulus program of the Obama Administration.  The action was taken relative to a $19 million broadband stimulus grant / loan award made by the Rural Utilities Service (RUS) division of USDA to a Texas wireless firm charged in April by the U.S. Securities and Exchange Commission with alleged federal securities violations.

A First Under $7.2 Billion Broadband Stimulus Program
The action disclosed today by USDA is the first time any of the 440 broadband stimulus awards made for infrastructure projects under the $7.2 billion program within the federal stimulus effort has been rescinded. The the funded total of $19,224,200 in a grant / loan package was announced for TierOne Converged Networks, Inc., a Dallas-based wireless firm incorporated in Nevada, as part of a large group of awards announced on August 18 by Vice President Joe Biden.  

In a brief statement emailed this morning to an authorized spokesman for USDA stated, “In light of recent information and disclosure by TierOne to RUS, we are rescinding our prior announcement of our intent to offer an award to TierOne.”  The spokesman, in a follow-up telephone call of this morning further stated that no one at USDA had been authorized to disclose any additional information about the matter.

Today’s disclosure by USDA to this publication follows a 2 week high level review of the $19 million award within the Department following’s first report on August 19 that RUS had made the award to TierOne, a privately held wireless Internet service provider (WISP), irrespective of the SEC charges issued on April 27.  Additionally we reported at that time that prior to the April SEC action filed in U.S. District Court in Dallas, the firm and 2 of its officers had been cited by state securities regulators in Colorado and Texas the 2 previous years. 

Following our report of August 19, RUS opened a post-award review of the $19 million issued to TierOne which resulted in the funding rescission action disclosed today in response to our inquiries. was informed that our initial reporting of the matter was being reviewed following our questions issued to communications personnel at RUS and in the office of agriculture secretary Tom Vilsack.  We accepted the information off the record from an authorized USDA spokesperson, pending completion of the review of our reporting.

USDA has not disclosed what personnel were involved in the review and decision to rescind the award.  RUS is headed by Administrator Jonathan S. Adelstein, a former commissioner of the Federal Communications Commission, who is a seasoned federal official.  Adelstein is a respected authority on the challenges of telecommunications deployment in rural America.  We believe that Administrator Adelstein was directly involved in the review of the award to TierOne, and in the subsequent rescission decision first disclosed today to this publication.     

"No Comment" from Company To Date
David Margulies, a Dallas public relations specialist retained by TierOne, stated within the past half hour that the firm "has no comment at this time," when asked the reaction of the firm to the grant / loan rescission made by USDA.

RUS and the National Telecommunications and Information Administration (NTIA) of the Department of Commerce are the 2 federal agencies mandated by Congress to jointly administer the $7.2 billion broadband stimulus program under the Recovery Act signed into law by President Obama in February of 2009.   To date, the 2 agencies have awarded $6.2 billion in the core infrastructure categories of the program for a total of 440 broadband infrastructure projects around the nation. Under provisions of the Recovery Act, the balance of all program monies must be issued by the end of this month.

The NTIA’s portion of the $7.2 billion effort was reduced by $302 million when President Obama on August 10 signed legislation to fund teacher salaries and Medicaid payments in states hard hit by the continuing recession.  The funding cut to NTIA was one of several mechanisms proposed by Capitol Hill Democrats to make the emergency funding bill revenue neutral

References & Links to this Story:
09/08 - Really Rocket Science by Rocco Fanucci: Broadband Stimulus=B.S.? 
09/07-  Connected Planet by Joan Engebretson: RUS rescinds stimulus award to TierOne 
09/04 - FierceBroadbandWireless by Lynette Luna: USDA Rescinds broadband stimulus award 
09/06 - Dallas Morning News by Eric Torbenson:  TierOne loses $19 million federal grant 
09/04 - TMC News via McClatchy-Tribune News Wire: TierOne loses $19 million federal grant
09/03 - DSL Prime by Dave Burstein: RUS Says No
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