Did forgery land iProvo contract?

PROVO — An employee of the first company to provide digital cable television, telephone and Internet services over the iProvo fiber-optic network may have forged a document to land the contract with the city.

The Utah County Attorney's Office is investigating allegations that HomeNet Communications Inc.'s bookkeeper forged a $50,000 letter of credit to prove the company's financial viability before a 2004 deadline in negotiations between Provo and the company.

Court documents obtained by the Deseret Morning News also reveal that the county attorney is investigating whether HomeNet bilked investors out of more than $1 million.

A 4th District Court judge has granted authority to the county attorney's office to issue investigative subpoenas for the financial records of HomeNet and six former employees for evidence of possible crimes ranging from securities and communication fraud to racketeering.

Provo awarded the iProvo contract to HomeNet in July 2004, entrusting the $40 million public project to the company based in part on the alleged forgery.

Provo Mayor Lewis Billings defended the city's effort to screen HomeNet.

"Letters of credit are goodwill documents you have to assume are legitimate," he said. "It's a pretty serious breach."

Billings said HomeNet's executive staff was impressive and "they started out to be what they said they were." Then divisions grew within the company, some executives left and the company stopped performing.

"I don't know how you do more due diligence than we did, given where HomeNet was at the time," Billings said.

The deal gave HomeNet a period of exclusive access to the city's network of fiber-optic cables, granting the company a head start on future companies expected to join the network and compete to win subscribers among city residents.

HomeNet filed for bankruptcy in Washington state in August 2005, just after severing ties with Provo and at about the same time city leaders reported the alleged forgery to the county attorney.

The city replaced HomeNet with two new service providers, MStar and Veracity, now known as Nuvont.

The bonds issued by Provo to build the $40 million iProvo network are backed by sales tax revenue. The network has not generated enough income to completely cover the payments on those bonds.

To make the payments, the Provo City Council has loaned $3 million to iProvo over the past two years. This year, instead of another loan, the council authorized $1.2 million from a expected sales tax surplus to cover another expected shortfall in the iProvo budget.

The iProvo subscription rate has flattened out this year.