Checkmate on Data Knight 365

by Doug Thompson | Dec 3, 2009 | FUBAR

The proposed data center site sits empty

Data Knight 365 (DK3), the data services company that really wasn’t one, defaulted Wednesday on the controversial deal to purchase 51.5 acres of undeveloped land in Floyd County’s Commerce Park for a data center plan that existed only in the grandiose promises of promoters with a questionable track record and the willingness of a government, for reasons that appear to defy logic, to try and do business with them. (My story in today’s Floyd Press)

The deal died quietly, a far cry from the fanfare of the hyperbole-filled press release issued last August. In August, DK3 spokesman Don Sabin and County Board of Supervisors Chairman David Ingram talked of jobs and “millions of dollars” of benefit to the county but what the county got instead was a lot of headaches and more than $12,000 in legal bills — less than other communities have lost in similar “deals” cut by the same promoters but still more than a cash-strapped government like Floyd County’s can afford.

A moving crew arrived Tuesday to take away the furniture and other items left behind in the apartment on South Locust Street first occupied by fast-talking, English-born promoter Paul Allen and later by Amish businesman Bill Byler. In October, after DK3 missed two earlier deadlines for closing, the Economic Development Authority issued a “final demand” for closing by Wednesday, Dec. 2.

As the deadline approached, the county heard nothing from Byler, the only “owner of record” of DK3, and the deal succumbed to a quiet, overdue death.

But as the deal finds its place in the dustbin of failed fast-buck schemes, questions remain:

Why didn’t county officials do a better job of vetting the promoters of the project before signing a deal and performance agreement with DK3?
At first, county officials said the deal hinged on the involvement of Cleveland telemarketer Dan Delfino and his company, Power Direct. Yet, when Delfino pulled out, the EDA went ahead with trying to complete the deal. Why?
When the many problems involving Paul Allen and others involved in the project emerged, why didn’t the county end the deal and cuts its losses? By continuing the county increased its legal costs by at least 300 percent.
Why weren’t county officials concerned with an apparent lack of morality of doing business with promoters with such a questionable track record?

These questions, and others, raise another central issue: Given the problems of the DK3 deal — and questions from an earlier deal that involved tax concessions and rent assistance with truck recycling operator Dex — one of just two tenants in the sprawling Commerce Park — should Floyd County even be in the Commerce Park business?

Local governments often see “industrial” or “commerce” parks as a way to bring business to their areas but Floyd County needs three key elements — money, resources and expertise — to run a successful operation. However:

The county lacks the money to develop the Commerce Park is currently owns;
The county lacks the resources to promote such a park to potential businesses;
The county lacks the expertise to run a Commerce Park.

The county’s Economic Development and Tourism budget is just $20,000. Other counties spend hundreds of thousands of dollars just to promote their areas as ideal lcoations for business. Floyd County’s government, for all practical purposes, is broke.

The EDA, to its credit, crafted a performance agreement with DK3 that protected the county from the millions that Columbiana County, Ohio, lost in a data center deal with Paul Allen and his former company, B-Telecom. The legal fees that Floyd County will probably have to eat is far less than the $150,000 that operators of the Radford Arsenal spent in a failed deal with Allen and Byler.

But others who lost money in failed deals with these same promoters tell me they warned the county not to do business with Allen and his crew yet it appears those warnings were ignored.

Why?

Sadly, it is unlikely that Floyd County’s government, which is not known for its transparency, will ever deal publicly with these questions. If it does not, Floyd County’s government loses more than just money — it stands to lose the respect of those it is supposed to serve.

UPDATE: The Data Knight 365 web site, designed and hosted by Citizens Telephone in Floyd, disappeared from the Internet today (Dec. 3). The same thing happened to Paul Allen’s B-Telecom web site after that company was shut down by Ohio authorities earlier this year.

Previous stories on the data center issue:

18 Comments

Harlin Quesenberry on December 3, 2009 at 9:21 pm

You did their job for them. You exposed the shysters for what they were. Had you not been on the ball with your reporting, some Floyd County residents might have been rooked into investing in this scheme and the county government would have come out looking more like asses than they do now. At least you had your eye on the ball. I only wish our elected officials were as vigilant.
Jim White on December 3, 2009 at 11:48 am

The answer to questions 1-4 is that our local officials are unarmed to deal with the amorphous issue of “Economic Development and Tourism…it’s that simple.

Personally, after about 15 minutes of talking to him I knew, without a doubt, that his intentions were not what he said they were. I have reason to suspect that his story shifted a little with each telling, but that’s the nature of his game.

One thing that bears pointing our here….I feel confident that without your reporting on this issue he would have easily scored at every level, very easily.
Carol Anderson on December 4, 2009 at 6:01 am

Our leaders let us down on the data center fiasco. Jack Russell should resign for the good of the county and the Board of Supervisors should launch an investigation into just how this happened.
Jeff Walker on December 5, 2009 at 10:33 am

Citizens that expect improved services ought to be willing to pay for these services. Whether this is for garbage handling, animal control, fire and rescue or economic development we have volunteers, amateurs and other well meaning residents working to attract, promote and guide changes appropriate for our County. It seems critical to support public goals with the resources to satisfy the obligations inherent to the offices. This does not mean to remove the rolls of willing informed and committed volunteers.

Before speaking about resignations and consequences let’s ask if the goals are appropriate, and the commitment adequate to the task; if we are not prepared to pony up we really have nothing to complain about but ourselves. In the data center failures a valid question would seem to be why was a volunteer able to acquire information that should have been available to the legal team responsible for advising the county board and authority. Shouldn’t the fees paid for attorney’s advice include due diligence verification of the players?

As our environment becomes more developed, the population continues to grow, and the requirements attendant with modern living more expensive, we are going to be looking for the means of raising revenue. Though it now seems to good to be true, the data center would have raised revenue and created employment with appropriate industry in keeping with the stated goals.
Tom Jenkins on December 5, 2009 at 7:11 pm

Jeff:

It wasn’t a volunteer that exposed the Data Knight con-artists. It was a professional journalist. Had Doug Thompson not decided to return to his home town and semi-retirement we most likely would have been at the mercy of the “volunteers” who sit on the Economic Development Authority and fell for the scam. And it was the “volunteers” who sit on the Board of Supervisors and did nothing while the EDA frittered away several thousand taxpayer dollars.

I doubt Mr. Allen and his gang knew that a journalist who exposed politicians as a career was living in Floyd. They thought they had a county of rural rubes who would be blinded by the promises of fast money. To some, the Data Center smelled from the beginning but too many jumped for the money train and didn’t stop to realize it was running on stolen fuel.

The volunteers let Floyd County down. At a time when the news media is often the target of attacks the people of Floyd County owe a journalist a debt of gratitude for doing our government’s job for them.
Jeff Blakley on December 7, 2009 at 10:41 pm

Jeff,

In an earlier comment on this fiasco, I made the observation that a person responsible for economic development should be paid for his/her efforts. At that time, i was unaware that the EDA was an all volunteer organization. I applaud volunteers – it is an honorable and often thankless task. I also stated that I knew that Floyd County did not have a lot of money, but a position as important as economic development should be a paid position. You are right – as Floyd County grows, changes are going to have to be made regarding sources of revenue and changes are also going to have to be made in regards to accountability for public officials. It would help enormously if the citizens of Floyd would pay closer attention to what goes on in government. Since I haven’t yet started construction on my house and don’t live in Floyd County, I am not familiar with attendance figures at government meetings. But from what I have gathered, there are not many people who take the time to be involved in their government. As I’ve often quoted Wendell Phillips: “Eternal vigilance is the price of liberty.”