Economic Development Authority wants to recoup costs from Data Knight 365

by Doug Thompson

Faced with thousands of dollars in mounting legal fees from failed attempts to close on sale of property in the Commerce Park for a proposed data center, Floyd County’s Economic Development Authority is looking for ways to collect reimbursement for the funds from Data Knight 365, which is expected to formally default on the deal on Dec. 2.

The EDA, as part of a “final demand for closing” on the $900,000 sale of 51.5 acres of undeveloped land in the Commerce Park to Data Knight 365 for development of a proposed $67.8 million data center, considered demanding a non-refundable “earnest money” payment to cover the legal costs as a condition for keeping the deal alive.

But Data Knight 365 showed no interest in paying for the legal fees and the company recently served notice to its landlord that it is leaving the county before the Dec. 2 deadline.

Data Knight missed two dates for closing on the deal in September and October and the EDA authorized issuance of the “final demand” at their meeting last month.

Details of the demand were ironed out in a closed-door “executive session” at the meeting and EDA chairman Jack Russell refused to disclosed the details when questioned after the meeting.

County administrator Dan Campbell confirmed this week that the “final demand” set Dec 2 as the date the company must close or face default on a performance agreement on the proposed $67.8 million data center deal.

Data Knight, has failed to come up with a $100,000 down payment by two previous deadlines, much less the “earnest money” to cover legal expenses that Campbell said total $12,322 to date.  The expenses are expected to rise by the time the deal is terminated.

“It the company defaults, the Authority may pursue any and all legal remedies available,” Campbell told The Floyd Press.

EDA chairman Russell said Data Knight will be considered in default if it does not meet the Dec. 2 deadline and said the county will consider all options, including litigation, to recover money lost on the failed deal.  Russell said the letter sent to Byler did not make payment of legal fees a condition for extending the date through Dec. 2 but sources close to the deal tell The Floyd Press that Russell did make the request verbally to Data Knight’s owner.

However, the Floyd Press also learned that Ohio Amish businessman William W. Byler, the owner of record for Data Knight 365, notified his landlord that he would be moving out of his apartment in Floyd at the end of the month. The company once rented two apartments at The Station on South Locust but dropped the second apartment when Allen moved to a rented house in South Roanoke County.

The data center project has been shrouded in controversy since Data Knight announced the proposed data center in August. Although county officials maintained the company and its principals were “fully vetted,” investigations by The Floyd Press and a local blogger revealed numerous questions about the business practices of the principals.

Cleveland telemarketer Dan Delfino and his company, Power Direct, cited as the money behind the deal, dropped out, citing negative publicity about a Federal Trade Commission fine and restraining order against him and Power Direct for violations of federal “do not call” registry rules.

Project promoter Paul Allen, whose company B-Telecom Inc. (Bti) originally approached Floyd County on the deal, ran afoul of Ohio regulators who shut down Bti for unpaid taxes and failure to file disclosure forms.  Allen was also named earlier this year in a federal civil suit filed in Memphis under the Racketeering Influence and Corrupt Organizations (RICO) act as a participant in a “loan kiting” scheme that threatened the solvency of a 105-year-old family-owned bank in Oakland, Tennessee.

Allen and Byler were part of a proposed data center project that fell through at the Radford Army Ammunition Plant because of questions over the validity of documents they provided to close the deal.  The Columbiana County Port Authority in Ohio cancelled a data center project with Allen in January, saying he failed to deliver on promises after the county spent millions on a building and data lines to their industrial park.  Bti was also removed as a bidder for a networking system in Memphis because of questions about the company’s finances and the validity of letters of credit submitted for the deal.

Data Knight 365, formed in April after Ohio shut down Bti in March, missed the original Sept. 1 closing on purchase of the land in the commerce park for $900,000. The EDA, meeting in closed session, decided later that month to give the company a second chance to close on Oct. 23 but the company again failed to come up with the required $100,000 down payment and questions were raised about the validity of documents Byler furnished to the county a week before closing.

After that missed deadline, Russell and Campbell told The Floyd Press that they had serious doubts that the company had the resources to finance the deal. Allen told other businessmen in the Floyd area that “negative press” drove away his investors. Both Russell and Campbell said in an interview in August that the involvement of Delfino and Power Direct were crucial to the deal.

Although some EDA members wanted to pull the plug on the project after the second missed deadline, Russell convinced the authority, meeting again in closed session, to go along with one more chance to close the deal but a central issue for closing the deal became the growing bill for legal fees.