Another lawsuit filed against United Fiber & Data, this one in Allentown
Another lawsuit has been filed against United Fiber & Data, this time by an Allentown-based company that alleges UFD defaulted on an agreement to pay the company future tax credits.
EPC-Allentown LLC filed the suit Friday in Lehigh County Court alleging breach of contract and asking that the court order UFD to pay EPC $10.5 million plus accrued interest.
The lawsuit states that EPC anticipates the amount it is owed by UFD will increase by nearly $7 million in the next few months.
At issue is property in a state-designated Neighborhood Improvement Zone in Allentown's downtown area. The NIZ provides tax incentives and financing "to attract developers to build within its boundaries," the lawsuit states, and EPC develops and manages real estate in the NIZ area, the suit states.
EPC constructed an office building at 832 Hamilton St. in 2016, and several years before that — in May 2013 — entered into an agreement with Think Loud Development LLC to develop the building, the lawsuit states.
At the time, Bill Hynes was still CEO of UFD and Think Loud corporations. Live members Chad Taylor, Chad Gracey and Patrick Dahlheimer were also part of UFD, Think Loud Development and a number of other Think Loud limited-liability corporations.
All three of the Live members resigned their active management roles in UFD no later than Feb. 1, 2016, according to attorney Jason Confair, who represents Think Loud.
Hynes stepped down as UFD's CEO in November 2019 amid unrelated criminal charges.
"To be clear, EPC’s suit seeks payment from UFD for NIZ tax credits that UFD was supposed to generate. Although the various transactions referenced in the EPC complaint are related, the heart of the lawsuit is quite simple — UFD failed to generate NIZ credits to pay its rental obligations," Confair said in a statement. "Indeed, EPC does not name any member of Live, any entity-affiliate of Live, or Mr. Hynes as a defendant in the lawsuit."
Allentown lease: In 2013, UFD leased 10,000 square feet of office space in the 832 Hamilton St. building as a condition of its development agreement with EPC, according to the lawsuit.
UFD is based at 210 York St. in York City, where Think Loud spent an estimated $16 million renovating the old building just off North Queen Street. For that building renovation, Think Loud received a $5 million grant from then-Gov. Tom Corbett.
Kinsley Construction has obtained a nearly $14 million judgment in relation to the 210 York St. renovations. Read more about that case here:
UFD was created in 2012 by Live members and Hynes to bring high-speed internet to Pennsylvania's southcentral counties. Since that time, it has laid about 400 miles of fiber-optic cable from Manhattan to Ashburn, Virginia.
$5M Allentown loan: As part of the Allentown development agreement, EPC loaned Think Loud Investments LLC $5 million, and UFD entered into a surety agreement with EPC to guarantee the loan, according to the lawsuit.
EPC is not suing over the $5 million loan.
By the fall of 2016, UFD had breached its lease by failing to pay tax credits, Think Loud Investments had breached its obligations under the development agreement, and "yet another entity related to UFD, Think Loud Allentown LLC" had breached its obligations to members of 8th Street LLC, according to the lawsuit. EPC is one of 8th Street's members.
In October 2016, UFD entered into a forbearance agreement in which EPC agreed not to immediately enforce its agreement rights for the breaches and to allow UFD to continue its occupancy in the Hamilton Street building at "favorable" rent terms, according to the lawsuit.
In exchange, UFD provided EPC with updated figures for NIZ taxes to be generated from 2016 to 2023 and committed to generating those set minimum amounts each year, the suit states.
"Further, UFD agreed to annually pay any shortfall in NIZ tax revenue" either in UFD's own membership interest units or in cash, according to the lawsuit.
UFD's agreed-upon yearly minimum NIZ tax revenue for 2016 was $1.65 million, which jumped to $6.2 million in 2019 and is expected to increase to $9 million in 2023, the lawsuit states.
Shortfalls: In March 2018, EPC billed UFD about $1 million for its 2017 shortfall in NIZ credits, which UFD paid off incrementally, the suit states.
UFD's 2018 shortfall is about $4.5 million, of which UFD has paid about $133,200, the lawsuit states. UFD has failed to make any payments toward its 2019 shortfall, which is about $6.1 million, according to the lawsuit.
The shortfalls at this point total $10,545,701, according to the lawsuit, "which amount EPC anticipates will increase by almost $7,000,000 once calendar year 2020 concludes."
'Lavish lifestyle': A lawsuit filed against Think Loud, Hynes and Live members by UFD and Louis Appell III alleges Hynes used UFD as his "personal piggy bank" when he was CEO to fund a lavish lifestyle he couldn't otherwise afford.
"This unlawful pattern of misconduct included the outright theft of Company funds, fraud, and persistent self-dealing," the Appell/UFD lawsuit states.
The Appell/UFD lawsuit alleges Hynes has repeatedly lied, and continues to do so, to cover up the theft.
"Hynes' unlawful pattern of misconduct also involved his causing the Company to enter into various transactions that had absolutely no legitimate business purpose, especially given that the Company was a startup with very little cash," the lawsuit states. "All of these illegitimate actions were intended to result in a material benefit to Hynes or his co-conspirators."
Hynes is a felon, having been convicted of theft by deception in 2010 in Northampton County.
Appell III is the son of the late York philanthropist Louis Appell Jr. — who invested millions of dollars into UFD before his death — and inherited his father's stake in the company.
— Reach senior crime reporter Liz Evans Scolforo at firstname.lastname@example.org or on Twitter at @LizScolforoYD.