WilTel Ordered to Pay $36M

A court ordered WilTel to dish up more than $36 million for a contract it has refused to pay since 2001

February 4, 2003

2 Min Read
WilTel Ordered to Pay $36M

A Georgia court ordered WilTelCommunications Group Inc. (Nasdaq: WTEL) to pay Thoroughbred Technology and Telecommunications Inc. (TTTI) more than $36 million last week, after ruling that it was in breach of contract.

WilTel, which until it reemerged from bankruptcy last December was called Williams Communications, revealed the decision in a Securities and Exchange Commission (SEC) filing yesterday. In the filing, WilTel said it is reviewing its options, including possibly appealing the decision.

WilTel declined to comment on the proceedings.

TTTI (or T-Cubed as it’s also called) filed a lawsuit against Williams Communications in July 2001, claiming the carrier had not paid for a fiber optic installation TTTI had installed between Cleveland, Ohio, and Boyce, Virginia. TTTI uses the extensive rail network of its parent company Norfolk Southern Corporation to offer fiber optic installation, including rights-of-way, to telecom companies.

TTTI did not return calls by press time.

According to yesterday’s SEC filing, WilTel countered TTTI's charges by claiming TTTI itself was in breach of contract due to "construction deficiencies." WilTel stated in the filing that it will “vigorously prosecute the arbitration of its claims for construction deficiencies.”

At least one industry observer says Williams may have pulled out of the contract simply to save some cash. “[2001] was just a bad time to be in that business,” says Peter Cohan of Peter S. Cohan & Associates, pointing out that, like many telecom companies at the time, Williams was really struggling to stay afloat. “It doesn’t surprise me that they might have opted to not honor a contract to save some money.”

The court ruling last week determined that WilTel’s construction claims should be heard by an arbitration panel by the end of this week. Meanwhile, the court decided that the carrier must dish up the $36,264,750 it owes TTTI for the purchase of the network segment, in addition to pre-judgment interests on the purchase. The court denied WilTel’s request for a stay on the proceedings until its construction claims have been heard.

While $36 million won’t break WilTel -- the company recently reported having $574 million in cash on its books -- the T-Cubed case isn't the only one pending. According to WilTel’s annual report, filed last November, the carrier is facing a raft of other lawsuits, including a claim for $47 million filed by Platinum Equity LLC in August 2001. The disputed amount has since risen to $55 million.

“If they end up having to fork over some money for [the TTTI suit], what else will they have to pay for?” Cohan asks. “$30 million here and $40 million there… After a while, these claims could start adding up.”

— Eugénie Larson, Reporter, Light Reading

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