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When Bill Beierwaltes, CEO of vNet and longtime Loveland resident stood before Loveland’s City Council in March of 2008
asking for almost $1 million; he saw a council not in complete agreement.

Beierwaltes sought $900,000 in taxpayer money from the city to assist him in relocating the company he started in 2002,
vNET, move from its headquarters in downtown Loveland to the old WaterPik building in south Loveland nearer to his home.  
In exchange for the taxpayer money (to be used for the move and lease-holder improvements) Beierwaltes agreed to employ at
It was not a loan but instead called a “business incentive” meant to bring new high-tech jobs to Loveland.  VNet appeared like
a good candidate for some on council who wanted to take the risk and give Beierwaltes the money in exchange for his
promise to bring new jobs to Loveland.  As long as Beierwaltes’ vNet could employ at least 250 people in Loveland the money
would be his to keep.

The council approved Beierwaltes’ request but only after Councilman Kent Solt and Councilman Cecil Gutierrez attempted to
create a “clawback” provision that would require vNet to payback the entire subsidy should the company fail to bring any jobs
to Loveland.  The motion offered by Solt to this effect failed on a 2-7 vote with only Gutierrez and Solt voting yes.

Instead, Larry Heckel prevailed along with former Mayor Pro Tem Dave Clark and others in limiting vNet and Beierwaltes’
total exposure in the agreement to only $500,000 under the “Non-Performance Payback” section of the agreement.  

Key in the city’s agreement with vNet is section 14 called “The Beierwaltes’ Guarantee” that makes a personal guarantee by
both Bill Beierwaltes and his wife to make the city whole should their company fail to comply with the terms of the agreement.

vNet Goes Out Of Business

Seven months after receiving the subsidy to bring new jobs to Loveland, vNet received the NCEDC (Northern Colorado
Economic Development Corp.) Economic Development Project of the Year Award.  One month later vNet was reported to
have
laid-off 30 or their 90 employees and by September of 2009 the company closed its doors.

Last October the company’s assets were acquired by
Russound Acquisition Corp. which promptly changed its name to vNet
Corp. and assumed control of the company’s assets including occupying the 42,000 square foot Loveland headquarters of the
former
L & B, LLC which operated under the name of Colorado vNet.  Some of the original vNet employees now work at the
new company called vNet Corp.

LovelandPolitics learned that as part of the acquisition agreement, Bill Beierwaltes assumed responsibility for $500,000 of the
$900,000 paid to his former company by the City of Loveland should the new entity, vNet Corp., become liable for not
meeting the terms of the agreement with the city.   For their part, the new vNet Corp. and its parent company Russound
believe Loveland isn’t owed any money until December of 2012.  Currently the new entity has 45 employees and believes the
City of Loveland should give them 3 more years before making any determination regarding whether or not vNet (new or old)
has lived-up to the terms of the agreement.

The legally binding agreement Beierwaltes signed with the City of Loveland doesn’t appear to contemplate a sale of the
company but does provide remedies for default if the company is bankrupted or goes out of business.  While the business was
not sold (only the assets and liabilities) Beierwaltes has kept the original vNet company (B&L, LLC) active but it doesn't
appear to have any assets.


City of Loveland Likely Planning to Litigate

In a tense meeting between the City of Loveland and Bill Beierwaltes along with vNet Corp. CFO Tom Gambon there was no
meeting of the minds.  Participants on both sides described the meeting as unproductive.  At the end of the meeting, City
Attorney John Duval reportedly told vNET the city is not beyond litigating to recover the $900,000 according to a source
from vNET.  Beiewaltes is said to have responded that he spent $1.5 million moving to and improving the old WaterPik
building consistent with the agreement.

One issue the city has raised is allegedly false information vNET provided Betsy Hale, the business development director who
helped to broker the deal regarding the number of employees the company has in Loveland.  One city official, speaking off-the-
record, told LovelandPolitics that Beierwalts already was in breach of his agreement when he failed to provide the city
accurate information during the semi-annual meetings with city staff called for in the agreement.

Sources inside city hall say the City Manager Don Williams isn't likely to implement council direction to call Beierwaltes into
default of the agreement until after the upcoming election in Ward 1.  Williams may feel the business incentive failure being
made public now will hurt the "old guard" candidate.

The Loveland City Council has spent considerable time behind closed doors discussing the vNet business incentive in
Executive Session closed to the public.  The State of Colorado limits what topics may be discussed behind closed doors but
planning litigation is one of the very few exceptions.  Since vNet doesn’t involve a personnel matter or property acquisition
negotiations (the other two reasons for executive sessions) one can easily assume the city is now considering its options to
litigate the matter in court should Beierwaltes continue to refuse to payback the money.

The vNET View

According to one source working in vNet Corp. currently, Beierwaltes "lost his ass on vNET" and therefore should not be
expected to pay the City of Loveland any of the money back. The same source told LovelandPolitics "we would like to have
the agreement transferred.  We invested money into the community and spent all of the $900,000 right here."  The same
source stated the company believes that Beierwaltes has tried to live to the intent of the agreement but the recent economic
recession sunk his business when the housing market collapsed.
VNET: Did Loveland Lose $900,000?
Front view of Beierwaltes' $ 2 million lake front estate on Gail
Court just off South Taft Ave. in Loveland.  According to former
lower than street level and suffered constant flooding when he first
moved into the home.  Beierwaltes later persuaded the City of
Loveland to change the curve of the street he built and put an
island in the street to prevent future flooding at taxpayer's expense.

Beierwaltes mistake became a taxpayer liability as a result of his
influence over the "old guard" on Loveland's City Council.
Feb. 2008