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Court ordered to deny motion to dismiss officials from lawsuit

Ex-state officials who managed broadband grant program not immune from prosecution

CHARLESTON — Two former state officials who managed a federal broadband grant program for West Virginia are not immune from prosecution according to a decision Monday by a federal appeals court.

A three-judge panel from the U.S. District Court of Appeals for the 4th Circuit issued a decision Monday ordering the U.S. District Court for the Southern District of West Virginia to deny a motion to dismiss former state Division of Homeland Security and Emergency Management director Jimmy Gianato and former state Chief Technology Officer Gale Given from a lawsuit filed by Bridgeport-based internet service provider Citynet over the state’s handling of broadband expansion.

The appeals court also remanded the case back to the U.S. District Court and vacated the district court’s ruling that deferred further action on the lawsuit until questions about the immunity issue were answered.

Citynet filed suit against Frontier Communications in 2014, accusing the telecommunications company of allegedly misusing $40.5 million in federal grant funding to build a statewide broadband network only benefiting Frontier. Citynet also filed suit against Gianato, Givens and former Commerce Department Secretary Kelly Goes, alleging that the state officials defrauded the federal government by submitting false statements and records to the U.S. Department of Commerce.

Attorneys for Gianato and Givens argued that the two former state officials had qualified immunity, protecting them from prosecution for the performance of their duties. U.S. District Court Judge John Copenhaver ruled that with the exception of two charges leveled at Givens, both Gianato and Givens had violated the False Claims Act as argued by attorneys for Citynet. But Copenhaver said the issue of qualified immunity needed more fact-finding.

Appeals court judges J. Harvie Wilkinson III, Paul Niemeyer and Diana Motz heard the appeal from Gianato and Givens regarding the qualified immunity question. In the opinion penned by Niemeyer Monday, the judge said that the two are not protected from prosecution under the False Claims Act, which imposes liability on people or companies who defraud the federal government.

“…We exercise appellate jurisdiction and hold that qualified immunity does not apply to protect government officials from claims against them for fraud under the (False Claims Act),” Niemeyer wrote. “Accordingly, we vacate the district court’s immunity ruling and remand with the instruction that the district court deny Gianato and Given’s claim of qualified immunity.”

In 2009, the state applied for a $126 million stimulus grant through the Broadband Technology Opportunities Program for broadband expansion in West Virginia. Frontier, the sub-recipient of the grant, was supposed to build middle-mile fiber connections and allow competitors to also access these lines at lower rates.

The state’s goal was to connect hundreds of anchor facilities to high-speed broadband and build a fiber line between West Virginia University and the National Radio Astronomy Observatory in Pocahontas County. Gianato was named the chief grant administrator.

According to the Citynet FCA complaint, Gianato and Given allegedly engaged in a scheme to get the U.S. Commerce Department to award the state the $126 million grant, who then in turn gave Frontier a portion of the funding. The state officials and Frontier were also accused of submitting falsified invoices for work it did not complete. Niemeyer said the state officials could not be shielded from in lawsuits brought under the False Claims Act.

“…We hold that qualified immunity may not be invoked as a defense to liability under the FCA,” Niemeyer wrote. “Therefore, Gianato and Given cannot claim qualified immunity as a defense to Citynet’s FCA claims, as the district court assumed was a possibility.”

In 2018, Copenhaver issued an opinion allowing most of Citynet’s claims against Frontier under the False Claims Act regarding the billing of materials and services and invoice markups to continue after Frontier and the state employees filed motions to dismiss.

Frontier was later accused by the Inspector General’s Office for the U.S. Department of Commerce for marking up invoices to the state by as much as 35 percent and charging the state millions in indirect costs that were not allowable. The state was forced to pay $4.6 million last May to repay the federal government for Frontier’s billings. West Virginia Attorney General Patrick Morrisey filed a motion to intervene in the federal lawsuit last fall to recoup $4.9 million in penalties and fees from Frontier.

A request for comment from attorneys representing Gianato and Givens was not returned. Benjamin Bailey, an attorney representing Citynet, said their lawsuit was about keeping Frontier accountable while pointing out that the state’s broadband access is still lacking.

“West Virginia desperately needs rural broadband more than ever, and Citynet’s efforts to recover these funds are one big piece of our State’s efforts to achieve that goal,” Bailey said.

As part of the grant implementation team, Gianato approved the purchase of 1,164 internet routers for the anchor facilities – public schools, libraries, city and county governments and state police detachments across the state in 2010. According to a 2013 legislative audit, the routers were too large and too powerful for the anchor facilities to use.

The report went on to state a survey should have been done to determine the right routers to purchase. Instead, the state paid $24 million for routers the anchor facilities could not use. The grant team also ignored state purchasing laws when ordering the Cisco routers. According to the report, Gianato told auditors Cisco recommended the routers due to their internal dual power supply.

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