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Business Incentive
Agreement Between the
City of Loveland and
Bill Beierwaltes' vNET
Company
Previous vNet
Stories
Council Majority
Capitulates to vNet
Beierwaltes' Demands Are Met - Loophole
added to agreement regarding definition of
"jobs" and agreement to be assigned to a
Massachusetts company
litigate against Loveland entrepreneur Bill Beierwaltes to recover some $900,000 in a taxpayer funded "business incentive" subsidy
he received in 2008.  The city invested the money in his company, Colorado vNet LLC, to pay for lease-holder improvements and
other costs Beierwaltes requested as a direct subsidy from the city to grow his business.  The money was provided in exchange for
In 2008, then Councilors
Cecil Gutierrez and Kent Solt insisted that any promise to repay city funds be backed by a legal
agreement including personal guarantees by Colorado vNet LLC owners Bill Beierwaltes and his wife.  Absent the personal
After exhausting the city's nearly $1 million cash subsidy to improve his company's Loveland headquarters in 2008, Beierwaltes'
Colorado vNet LLC began laying-off employees and at one point closed its doors for business.  Instead of making good on his
personal guarantee to the city to repay the funds should his company default on the agreement or later fail to attract the promised
jobs by 2012, Beierwaltes sold the assets of his Colorado vNet LLC to an east coast competitor while retaining the company with
the city agreement, Colorado vNet LLC, in name only.  

Russound
The Colorado vNet LLC competitor, Russound (located in a Boston, Massachusetts suburb), took control of the assets
Beiewaltes acquired with the city's money and began doing business in Loveland under the nearly identical name of Colorado vNet
Corp. However, despite the similar sounding name, they are a different corporate entity and the city's agreement remained with the
now defunct Colorado vNet LLC not Colorado vNet Corp. owned by Russound.

Loveland Council members
Donna Rice, Carol Johnson, Hugh McKean, Larry Heckel and Daryl Klassen voted to cease
any further efforts by the city attorney to enforce their agreement with Beierwaltes and instead accept Beierwaltes' proposal to
assign the agreement to Russound while also changing the definition of what constitutes jobs in Loveland.   According to Loveland
City Attorney John Duval, the proposed settlement accepted by the council majority constitutes an assignment of the agreement to
the new Russound owned entity named Colorado vNet Corp. and a more liberal definition of jobs in Loveland to include people
contracted but not hired by the company.  Russound was reported to have retained some 30 former Colorado vNet employees still
in Loveland.

While some of the council discussion Tuesday veered into concerns over the future custody of the office furnishings purchased by
Beierwaltes' Colorado vNet LLC with city money and later sold to Russound, much of it focused on whether or not the settlement
was indeed an assignment of the agreement to another entity.  Councilors
Joan Shaffer and Cat McEwen said they believed the
city's economic development team should have been included in the decision to determine if assigning the agreement to Russound
was a prudent move that could really bring future jobs.  In other words, excursive the city's right to recover the stranded investment
under the agreement terms and later determine if Russound is a proper candidate to receive the money given newly adopted
guidelines regarding business incentives.

Councilwoman
Carol Johnson, who was reported to have had ex-parte communications with Russound executives along with
Councilman
Hugh McKean, described the new agreement as a sort of "Olive Branch" being offered by the city and in an attempt
to make the best of a bad situation.  

Johnson offered the "Olive Branch" explanation while defending her decision to capitulate in reaction to comments made by
Councilman
Kent Solt who argued against the city surrendering after Johnson made a motion the council settle on the terms offered
by Beierwaltes.  

Solt reminded his colleagues that in September of 2009 they unanimously approved the city's new economic development incentive
guidelines that should be followed before signing any new business incentive subsidies.  
Solt also reminded his colleagues the new
tougher standards were created as a direct result of the frustration they shared over the failure of the vNet agreement to bring jobs
to the city or sufficiently protect taxpayers.  The new guidelines created by council require an economic impact study and
independent analysis by area economists or academics be consulted before approving more subsidies.  Solt, in referring the new
guideline for approving economic incentive agreements to bring jobs to the city, stated:

"You can pretty much rip it up now."

Councilman Daryl Klassen took strong exception to Solt's comments and stated they were not voting to assign the agreement to
another entity.  Solt retorted, "
What we are doing now is essentially assigning the contract." To which Klassen quickly
replied.
"I don't think so."

Finally,
Mayor Gutierrez jumped in and told Klassen that is also what he understood and asked Duval to clarify.  The city
attorney stated, "
The effect is to assign the contract.."  Klassen turned towards his colleagues and said into the microphone, "I
see heads nodding so I will agree.
"  Despite learning he was voting to do what he earlier in the meeting said he was not going to
do,
Klassen also voted in favor Johnson's motion to capitulate and accept the offer by Beierwaltes.

Mayor Gutierrez along with Councilors Solt, McEwen and Shaffer voted against assigning the contract to Russound.  The
decision passed on a 5-4 vote.

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