Legal battle over Burlington Telecom lands in court - WCAX.COM Local Vermont News, Weather and Sports-

Legal battle over Burlington Telecom lands in court

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BURLINGTON, Vt. -

The battle between the city of Burlington and Citibank over Burlington Telecom landed in federal court Thursday. Tens of millions of dollars are on the line.

When Burlington Telecom was created it was touted as entity that would pull in big profits on its own. But it hit major financial trouble, leaving it millions of dollars in the red. Now BT's big financial backer is fighting to get the money it says it's owed.

Citibank entered a $33 million lease agreement with Burlington Telecom in 2007. An apparent loophole in the deal allowed BT to pull out if it could no longer afford to make payments. That's exactly what happened in 2010 after the city stopped dipping into taxpayer funds to prop up the utility.

Thursday's court proceedings addressed whether those taxpayer dollars could be used to help pay off what Citibank says it's owed.

"I'm somewhat surprised that Burlington Telecom and Citibank have not been able to work this out on their own. However, it strikes me that perhaps Citi is pushing this forward because it is an important case for municipal finance generally," said Jennifer Taub of the Vermont Law School.

Citibank is also trying to get back leased equipment; something that may be easier said than done since much of it is now part of existing telecommunications infrastructure.

Lawyers spent Thursday morning in federal court questioning a former Citibank employee about the due diligence that led to the lease agreement with Burlington Telecom.

The hearing is expected to continue in federal court Friday.

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