Bell Atlantic is sued in fiber-optic deal

January 26, 1994|By Michael Dresser | Michael Dresser,Staff Writer

A Virginia telecommunications company filed a lawsuit against Bell Atlantic Corp. yesterday, charging that the phone company used its political clout to pursue "a hidden agenda" when it struck a deal with the Schaefer administration to create a fiber-optic network linking the state's colleges and high schools.

In a wide-ranging civil suit filed in the District of Columbia Superior Court, FreBon International Corp. of McLean, Va., accused Bell Atlantic and its Maryland affiliate, Chesapeake & Potomac Telephone Co. of Maryland, of fraud, deceit and treachery in their effort to gain dominance in the potentially lucrative "video-conferencing" business.

C&P changed its name to Bell Atlantic-Maryland on Monday.

Steven L. Snyder, a lawyer for FreBon, said he would seek to take depositions from several high-ranking government officials, including "quite possibly" Gov. William Donald Schaefer.

Dave Pacholczyk, a spokesman for Bell Atlantic, said yesterday that "neither Bell Atlantic nor any of its subsidiaries has done anything wrong" in connection with FreBon or the fiber-optic project. "It's unfortunate that this very positive initiative is being dragged into a suit by a disgruntled contractor," he said.

According to the lawsuit, FreBon was a small systems integrator specializing in videoconferencing technologies when a Bell Atlantic subsidiary called BASIC (since renamed BAPSS) approached it in April 1991, suggesting that the two companies team up on a bid. Mr. Snyder said the company's co-owners jumped at the opportunity because they were led to believe that Bell Atlantic was interested in a long-term, cooperative relationship.

But Bell Atlantic "ultimately intended to take FreBon's marketing and proprietary information and enter into the video conferencing market on its own," the suit alleges.

According to the suit, in early 1993 Bell Atlantic hired away a key FreBon executive in order to obtain inside information, which it used to lure an important FreBon client.

Last June, C&P and Mr. Schaefer announced an ambitious plan to build a $30 million fiber-optic cable network linking as many as 270 Maryland high schools and colleges at the telephone company's expense. Because of that agreement, several FreBon contracts were put on hold, the lawsuit said, leaving the company in precarious financial condition. The suit seeks $80 million in compensatory damages and $600 million in punitive damages.

FreBon questions the role played by Frank Knott, unpaid chairman of the Governor's Information Technology Board. The lawsuit asserts that Mr. Knott's service as a consultant to Northern Telecom while he was negotiating the C&P deal raises conflict-of-interest issues. Mr. Knott could not be reached for comment.

The suit also contends that C&P "manipulated" the Public Service Commission to reverse a January 1993 decision that would have required a $15 million refund to ratepayers after C&P President Frederick D'Alessio and several Schaefer cabinet secretaries met with PSC Chairman Frank Heintz. By canceling the refund, the suit contends, the state in effect was subsidizing the construction of a fiber-optic system at ratepayers' expense.

Mr. Heintz said the PSC had "absolutely not" been manipulated.

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