We received a communication from City Auditor Kevin Kennedy regarding a statement attributed to him about Alameda Power & Telecom never being able to sign up enough Cable TV and Internet subscribers to make the Telecom division successful.
We cannot find where we wrote it now, but apparently we quoted a statement attributed to Mr. Kennedy by Nuveen Asset Management in their lawsuit against Alameda Power & Telecom and the City of Alameda. In their lawsuit, attorneys representing Nuveen Asset Management (technically, two funds managed by Nuveen which bought AP&T bonds) assert that “at or about the time Alameda voters approved the creation of the Telecom System” which would be around 1998, Mr. Kennedy said that “the System would never be able to recover the infrastructure costs it paid, even if it signed up every cable subscriber on the island.”
Here is a verbatim excerpt from the Nuveen filing:
31. In 1998, Alameda voters approved the creation of a cable television division within AP&T and, within a year, the City began laying fiber-optic cable for the Telecom System.
32. At or about the time Alameda voters approved the creation of the Telecom System, the City Treasurer, Kevin Kennedy, told the Alameda Defendants that the Telecom System was not economically feasible with words to the effect that, “the System would never be able to recover the
infrastructure costs it paid, even if it signed up every cable subscriber on the island.”
Mr. Kennedy asserts that he made no such statement at the time of the creation of the Telecom system (around 1998) and that the earliest he might have made any public statement about the Telecom division’s inability to recover its infrastructure costs would have been some time in 2003. Mr. Kennedy further asserts that he has told the City Manager and City Attorney that he disputes the claim made by Nuveen’s lawyers that he made such statements in 1998 or thereabouts.
The issue is significant, because Nuveen is asserting that because of Mr. Kennedy’s statements, alleged by Nuveen to have been made in 1998, the City of Alameda knew that the Telecom division would not be profitable, and that the City fraudulently issued the bonds to Nuveen which now cannot be paid back.