As the state embarks on a massive, federally-funded broadband project, a Morgantown internet service provider is facing federal broadband fund theft charges.
The criminal case alleges that Timothy Chad Henson, owner of Monongalia County internet service provider Clearfiber, Inc., defrauded the federal government for more than a quarter million dollars.
William Ihlenfeld, U.S. Attorney for the Northern District of West Virginia, said according to court documents, the United States Department of Agriculture (USDA) Community Connect Program offered grants to eligible applicants providing broadband services to rural areas. On behalf of Clearfiber, Henson applied for, and was awarded, $1.96 million to offer high-speed internet services in Monongalia and Marion counties.
Henson is charged with submitting false invoices to receive more than $340,000 in reimbursement, then transferring $322,900 into another bank account for his personal use.
“The way it works is they don’t simply give you all of the money,” Ihlenfeld said. “The grant is awarded, and then you submit invoices, and then the USDA reimburses you for those invoices that you’ve submitted. What Mr. Henson is alleged to have submitted fabricated invoices, at least 30 of them, for a variety of cable and fiber and broadband companies that operate in and around West Virginia.”
Ihnelfeld said Henson extended his fraudulent schemes outside the state as well.
“He created a document that appeared to be an invoice from a company in North Carolina,” he said. “Hensen submitted it to the USDA and then he was reimbursed for what was indicated on that invoice. The reality of it was that he didn’t actually obtain fiber optic cable from that company. He didn’t obtain services from another company down the road. Instead he fabricated the invoices. He received reimbursement from the grant and then he kept the money for himself.”
Ihlenfeld said the schemes also included ordering thousands of dollars of fiber optic cable from one company.
“Then he turned around and very quickly sold it to another company,” Ihlenfled said. “He didn’t pay the first company for the cable, so they were left holding the bag. They didn’t receive the $209,000 they should have. Hensen turned around and sold it to someone else and pocketed the money that he gained from the sale.”
Ihelnfeld said it’s not just cable companies and taxpayers victimized here, but rural customers who never got intended internet service.
“We’re back to square one with some of these homeowners who don’t have access to broadband,” Ihlenfeld said. “This has been a problem for a long time in our state and there’s a lot of money that is coming in from the federal government to try to help and address this.”
He’s referring to the $1.2 billion federally funded “last mile” broadband project, involving numerous internet service providers. Last mile programs mean helping providers install cable to hook up rural customers, going the “last mile” from established service to their homes.
Del. Daniel Linvlle, R-Cabell, and chair of the House Committee on Technology and Infrastructure, said project fraud safeguards include multiple steps to insure that invoiced work has occurred.
“As we’re actually giving out any of these grants, that money is not transferred until services are actually performed,” Linville said. “So, we’re able to say, look, as you build these things, send us the invoices, and then we will make sure that, that has actually occurred, and then send out the grant dollars for only those portions which have actually happened. We actually have spot checks that are going on as we do these grants to make 100 percent sure that we’re actually getting what it is that we’ve paid for.”
Ihlenfeld hopes the Clearfiber case creates a red flag of fraud due diligence. But, with millions of dollars coming in, and remembering the massive fraud with COVID-19 federal funds, he said he fears the worst.
“With the enormous amounts of money that are going to be thrown at broadband in West Virginia and across the country, we will see more cases, like we have here with Timothy Hansen,” Ihlenfeld said. “I think we can take steps, and the holders of the money can take steps, to make it much more difficult for fraud to occur by engaging in very thorough due diligence and not trusting any invoice and verifying every invoice, and then following up and making sure that the work is actually being done, as it’s been promised.”
Ihlenfeld said there is a tentative plea agreement reached in the case including restitution and prison time.
“He has to face the United States District Court judge who is going to be asked by the government, by me, to impose a lengthy jail sentence,” Ihlenfeld said.
Henson is scheduled for an initial appearance on May 29 before U.S. Magistrate Judge Michael John Aloi. He faces up to 10 years in federal prison.
