MLGW Networx: Keeping Us in the Dark?




The less you know about Networx, the better. Until very recently, that would appear to be Memphis Networx's attitude toward both its citizen ownership and the Memphis City Council. According to commentary by MLGW Commissioner and Networx board member Nick Clark, secrecy was probably in the "best interests" of the ratepayer. If "best interests" means MLGW taking a $29-million dollar bath without any public oversight, he would be correct.

Memphis Networx has been in trouble for some time. Clark says he's held concerns for two-and-a-half years about the city's telecom venture. Two years ago, apparently someone at Memphis Networx decided it was time for the company to zip its lip. The company stopped updating its website in March, 2005, and from December of that year until last week's announcement of Networx's impending sale, it maintained a virtual media blackout.

There was no public announcement when Networx COO Mark Ivie left the company in 2006, nor was there an announcement about the hire of Dan Platko, Ivie's successor. (Platko had worked as the COO of Infinium Labs -- now Phantom Entertainment -- and as head of North American global customer service for Equant, a subsidiary of France Telecom, before joining Networx's sales division in 2005.)

Why didn't Networx want the public to know about the transition in leadership? According to Clark, it was a political decision, designed to keep the general public uninformed.

In an e-mail to the Flyer, Clark explained that "given the long-standing concerns of Networx's financial strength and the negative press it tended to receive due to MLGW's ownership, and politics at City Council, the desire was for a simple transition in executive management."

In this case, "simple" apparently means "secret." Networx didn't make any effort to inform the ratepayers, who own 49 percent of the company, of the changeover at the top. Clark views the company's decision not to disclose even the most basic information as a good thing:

"Fortunately for Networx and for MLGW's investment in Networx, Mark Ivie's departure was not publicized," Clark says.

He then listed the top three priorities of Networx board of directors: "The goal for the board is first net asset preservation and then, secondly, net income growth, and thirdly, net asset appreciation." But Networx's determination to function under the radar in order to avoid bad press borders on deliberate obfuscation.

According to Clark, Networx hired Platko because the Networx board didn't think it was financially in a position to search for a new COO or to attract a potentially better candidate.

Finally, Networx failed to notify either the City Council or the public of the decision to sell the company. Nor did it allow any scrutiny of the bids until after the bidding process was over. But MLGW is ratepayer-owned, and Networx's failure to include the public in this process is, at the least, a breach of trust. It becomes more troubling in light of the fact there may have been more lucrative bids than the one that was finally accepted.

At City Council on Tuesday, it was revealed that American Fiber Systems of Rochester, N.Y., offered what appears to have been a higher bid for Networx. In apparent violation of a nondisclosure agreement, AFS revealed that it had offered a deal valued at $13.5 million. AFS is the company that acquired a Networx-like venture started by the city of Marietta, Ga. Marietta lost $25 million dollars in the deal.

Still, after purchasing FiberNet, a municipal investment so bad it prompted Marietta Mayor Bill Dunaway to pronounce “Thank God and Greyhound they’re gone,” AFS, still thinks high-speed fiber is a pretty good investment.

Which raises another question: What do all these guys know that we don’t?

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