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Agreement Between the City of Loveland and
Bill Beierwaltes' vNET Company
vNet Stories
Bill Beierwaltes For Breach of Contract
Vnet and now operate under a nearly identical name from the same location.  

The planned closed door secret discussion by council was stopped last night after Councilwoman Joan Shaffer refused to support a
motion by colleague Carol Johnson to convene into closed session to discuss the matter.  Councilman Larry Heckel seconded the
motion which Johnson later withdrew after it became obvious they didn't have the required 6 votes to convene into a closed door on
the matter while Councilwoman Donna Rice joined-in and said she also agreed it was time to make the discussion public.

Beierwaltes' Breech
At issue is a March 31, 2008 agreement between longtime Loveland resident Bill Beierwaltes, his Colorado vNet LLC company
and the City of Loveland.  The agreement provided an "Economic Incentive" payment of $900,000 to Beierwaltes' company to
move from downtown Loveland into the old WaterPic building on 402 in Loveland.  Beierwaltes agreed to increase the number of
people employed in Loveland at the new location to at least 250 by December 31, 2012 or return $2,000 to the city for each
position not filled in the new location.

Within months of the move out of downtown Loveland Colorado vNet began laying-off employees (not hiring new ones) until
Beiewaltes' finally sold the business assets (
but not the business entity Colorado vNet which he still owns) to a New Hampshire
company named Russound.  Russound promptly put the assets into a new entity that has no agreement with the city calling it
Colorado vNet Corp which continues to operate from the same location benefiting from the lease holder improvements paid for by
the city's $900,000 subsidy.

Section 9 of Beiewaltes' March 31, 2008 agreement with the City of Loveland states;

"Colorado vNet and Beiewaltes shall not assign or transfer any or all of their interests, rights or obligations under this
Agreement without the prior written consent of the City."

Beierwaltes apparently attempted to transfer the agreement to the new company along with his few remaining employees who
expected the city would agree to the transfer later.  Beierwaltes never sought the city's written consent before selling his company's
assets (which include those created with taxpayer funds) and agreeing to transfer the agreement with the new owners.  Beiewaltes
also indemnified the new owners from any responsibility to repay the business incentive in the event they are sued by the city.  This
gesture may be an empty one as the new owners have no obligation to the city therefore owe the city nothing while Beierwaltes and
his wife Lynda Beierwaltes both signed personal guarantees promising to pay back the money in the event their company defaults on
its obligations under the agreement.

Public Versus Private Statements
Comments reported by the Loveland Daily Reporter-Herald after Beierwaltes sold the company assets caused anger among
members of the council.  Beiewaltes' was quoted as saying he was willing to return all the money if necessary while in private was
apparently unwilling to make good on that promise according to members of the council.

Councilwoman Joan Shaffer commented, "Despite public comments to the contrary they were unwilling to pay."  Shaffer went on to
describe the "arrogance" Beiewaltes' showed even towards those on the council who most enthusiastically supported the business
incentive for his company.  

The "Unknown"
One paragraph in a recent counter-offer by Colorado vNet Corp. in negotiations with the city was not described in public but
instead referred to by council members only as the "unknown" issue to avoid pubic disclosure.  Councilman Klassen expressed his
frustration it was in the counter-offer while Councilwoman Cathleen McEwen stated she believed the new owners and Bill
Beiewaltes' were not negotiating in good faith and that the negotiations had broken down.  Another member referred to the
"unknown" paragraph as a threat against the city to accept their offer "or else...."

Cathleen McEwen added, "As a city we shouldn't allow debtors to strong arm the city into third party agreements."

The City of Loveland apparently offered to transfer the business incentive agreement over to the new entity provided the owner,
who lives on the East Coast, provide a Letter of Credit to show she will pay back the incentive if the company fails to reach the
intended target of 250 employees by the end of 2012.  Instead, the new owner agreed only to make a personal guarantee while not
disclosing assets which the city rejected last night.

In previous meetings with the city the representatives from Colorado vNet indicated they expect their current number of employees
to remain the same for the next couple years.  This means they will fail to meet the target of hiring 250 employees by the end of
2012 thus any renegotiation will only result in a delay in returning the funds to the city without creating any new jobs.

The council provided direction to the city attorney to begin legal action to enforce the original agreement.

Despite agreeing in March (executive session) and directing  staff to pursue litigation Councilors Klassen, McKean, Heckel and
Johnson last night changed course and argued to continue negotiating; with Klassen saying that the newest offer from Russound (in
which they'd return pennies on the dollar VNet was given by the City, combined with weaker performance standards); was "even
better than" the initial agreement with Beierwaltes that he and others had authorized. However, Kent Solt and Joan Shaffer
emphasized that the City's agreement was with Beirwaltes and the original V-Net; and therefore the liability and breech is theirs, not
with Russound.

Solt in particular noted the specific violation of Section 9 of Beierwaltes' agreement with the City, prohibiting transfer without City
authorization.  He also pointed out that engaging in further negotiations with Russound actually harms the City's legal position as it
implies a recognition and legitimizing of the transfer of VNet despite the breech of the  2008 contract.  

Members of the Council who voted in 2008 for the gift to V-Net appeared also to be the most strongly interested in accepting even
a discounted offer from Russound. This may reflect an interest in saving face; given their 2008 vote for the subsidy, which since has
proven to be a bad gamble.  

The council provided direction to the city attorney to begin legal action to enforce the original agreement.