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Serious Fraud Office Targets Defunct Finance Firm that Funded H2O Networks UK

Posted: 15th Feb, 2011 By: MarkJ
fibre optic cable i3groupfibrecity dundee uk broadband logoThe UK Serious Fraud Office (SFO) has opened a misconduct investigation into Total Asset Finance (TAF). Until recently TAF had been the principal funder of H2O Networks, which at the time (Q3-2010) was still part of the i3 Group ( Fibrecity ), with related loans worth more than £91m attached.

According to TheBusinessDesk, this cash was being used by Fibrecity and H2O to fund the rollout of its super-fast 100Mbps Fibre-to-the-Home ( FTTH ) broadband ISP services in two UK cities, Bournemouth and Dundee.

Sadly the above project suddenly and controversially ground to a halt (most recent status update) at around the same time as Belgian bank KBC, which is owed £133m by TAF, launched an investigation into the contracts held between TAF and H20.

Soon after that (October 2010) the administrator successfully obtained an injunction to freeze the assets (£24m) of TAF and its Director, Steve Dartnell. Dartnell had also been a Non-Executive Director of the i3 Group until November 2010 (Companies House records) when he resigned. However Dartnell himself claims that he actually resigned in June 2010.

The i3 Group has subsequently sold off its UK subsidiaries (shares), which include its tempestuous Fibrecity project, H2O Networks, Opencity Media and Wireless Network Systems. The buyer, City Fibre Holdings, is a consortium led by Greg Mesch, i3's own former President and COO.

The CEO of City Fibre Holdings, Greg Mesch, said:

"City Fibre Holdings and its management team are not the subject of any investigation. The company is focussed entirely on reorganising the companies and the financial structures that it has inherited. This critical restructuring of these newly purchased businesses will ensure that they can continue to be leaders in fibre-based next generation access networks."

At the time (25th January 2011) City Fibre Holdings' signalled (here) that its new strategy would be revealed over the coming weeks. Many hoped that this would bring some good news for concerned Councillors' in both Bournemouth and Dundee. We're still waiting.

The administrators investigating TAF's collapse are currently looking at the conduct of its directors and related transactions. They're apparently also talking with City Fibre Holdings about settlement of the money owed to TAF, albeit allegedly not as part of the primary investigation.

As it stands the Fibrecity website is today suffering problems and there has been no further update on the fibre rollout since last month. Indeed, given the current problems, it's unclear where City Fibre Holdings could find enough cash to continue. That doesn't bode well for the unfinished work in Bournemouth and Dundee. Credits to Thinkbroadband for spotting this.
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