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Judge awards ValleyNet $2 million in compensatory damages

Valley News Staff Writer
Published: 1/22/2023 5:52:25 PM
Modified: 1/23/2023 3:48:33 PM

ROYALTON — A Vermont Superior Court judge has ordered ECFiber operator ValleyNet to be paid a total of nearly $2 million in damages stemming from losses it suffered in the embezzlement of the company’s coffers, although how much of that sum — including the actual amount of money taken from the company — ValleyNet will be able to recover remains unclear.

Judge Timothy Tomasi of Washington Superior Court on Wednesday approved $561,072 in compensatory damages plus $1.1 million in punitive damages along with nearly $306,000 in prejudgment interest be paid to ValleyNet, which disclosed last year that a former accountant employed by ValleyNet stole more than half a million dollars from the nonprofit that operates the ECFiber fiber network, according to a lawsuit filed in Vermont State court.

Tomasi, at the end of the one-hour damages hearing, said he was granting ValleyNet’s request to order “treble damages” — a calculation to assess a punitive compensation in addition to the actual losses — because of the “significant impact” the embezzlement had on ValleyNet’s operations.

The stolen founds “would have allowed (ValleyNet), had they had that money, to build out their network in an improved way, it would have allowed them to reduce the amount they borrowed, to lower rates to customers and citizens and to provide more services for customers … treble damages would be warranted based upon the impact on the plaintiff,” Tomasi said.

The financial damages award is expected to be collected from the proceeds in the sales of real estate properties and other assets owned by John Van Vught, an accountant who worked under contract for ValleyNet and whose embezzlement was only discovered after he left the employ of the ValleyNet in 2022 and a new accountant noticed discrepancies in the company’s books.

Van Vught, who was 72 last year, disappeared at the time the embezzlement was discovered and attorneys for Van Vught’s wife have told the court that the family has not heard from him and his whereabouts are unknown. Van Vught’s assets were “attached” during the civil lawsuit proceeding, giving ValleyNet control over their disposal.

Stan Williams, CFO of ValleyNet and one of the founders of ECFiber, declined to comment on the judge’s damages order and referred questions to ValleyNet’s Burlington attorney, Evan Barquest.

Barquest said that the damages will be collected from the sale of Van Vught’s assets, which appear to be principally comprised of real estate.

“The money is gone,” Barquest said in an interview on Thursday. “We’ve identified a number of assets. The FBI identified some other banks that he had assets in that don’t really have anything in them at this point … taken over 10 years it was just spent. Half-million dollars that he absconded with easily.”

Barquest said the plaintiffs are in negotiation with attorneys for Van Vught’s wife, AnneMarie Van Vught, who was a named co-defendant in the lawsuit, because Van Vught’s assets were jointly owned with her as marital property.

AnneMarie Van Vught’s attorney, Brooke Dingledine, told the court that in regard to AnneMarie Van Vught’s husband’s embezzlement “my client had no idea any of this was going on.”

“Our client has been financially destroyed and emotionally devastated by her husband’s actions and disappearance,” Dingledine, said via email to the Valley News on Thursday. “She is cooperating in every way with ValleyNet’s recovery of funds and we expect to resolve the claims against her, which arose solely from her status as spouse.”

ValleyNet’s attorneys were able to identify two real estate properties owned by the Van Vughts in Northfield, Vt., and Cocoa, Fla., according to court documents.

“Are we ever going to collect $2 million? Seems unlikely,” Barquest mused. “But there are some assets we’re going to collect against.”

Barquest said he could not even be certain whether ValleyNet would be able fully to recover the approximately $561,000 in actual money that Van Vught siphoned off because the bulk of the assets are real estate properties and “how much those will sell for is undetermined. It depends on where the market will be when we sell.”

Clifford Rankin, the newly hired finance director who discovered Van Vught’s embezzlement in 2022, explained to the court on Wednesday that he discovered the unauthorized transfers Van Vught had made from company accounts when he took over managing payroll and paying vendors when Van Vught had gone on vacation.

In reviewing ValleyNet’s accounts at Northfield Savings Bank, Rankin said he noticed an account that he previously had not been aware of under ValleyNet’s name that Van Vught controlled.

“I saw transfers going from ValleyNet accounts to this account that I was not aware of and then subsequent immediately being transferred out to another account that eventually I discovered was John Van Vught’s personal count,” Rankin told the court, according to an audio recording of the proceeding.

Van Vught’s embezzlement raised questions both about ValleyNet’s internal controls — the company acknowledged at the time it disclosed the embezzlement that it was working to tighten them — and its vetting of people who work for the company, which a quick Google search would have raised a red flag about Van Vught.

Just how loose were ValleyNet’s internal controls was revealed during Wednesday’s damages hearing in Washington Superior Court when Judge Tomasi asked Rankin how Van Vught managed to “cover his tracks” in order to mask what he was doing.

“Well,” Rankin replied to the judge, his voice slipping into a slight laugh, “when you’re really able to see it there wasn’t much in the way of track covering after (Van Vught) got established with it.

“But one of the tools he used to hide the malfeasance was he never did bank reconciliations, ever.

And then to make sure he had enough money in the bank there would be certain transactions that he would not record in the accounting records, even though that money had been deposited into the bank accounts,” Rankin explained.

Nor does this ValleyNet episode appear to have been Van Vught’s first rodeo in taking money from his employer.

A Northfield accounting manager named John Van Vught was charged with embezzling $49,000 over a six-month period in 2002, the Times Argus in Barre reported at the time.

Van Vught, 51 in 2002 and an accounting manager at TDS Telecom, was arraigned in Barre District Court and charged with writing checks ranging from $4,000 to $6,000 in cash to himself and drawn from a TDS Telecom account, the newspaper reported.

Van Vught told investigating police that he had taken the money from his employer because he had overextended his finances and had planned to repay the money before the missing funds were detected, the Times Argus reported.

Whether or not Van Vught will be criminally charged for embezzling his employer likely depends on whether he will ever be located. And, at least in terms of what has been said in open court, no one knows where he is.

“I’ve been in touch with the FBI and U.S. Attorneys office and there isn’t much they can tell me because it’s an active investigation but it doesn’t sound like they’ve been able to find him either,” Barquest said. “But if he’s vanished, you can’t really charge him with anything.”

Contact John Lippman at jlippman@vnews.com.

CORRECTION: A Vermont Superior Court judge awarded ECFiber operator ValleyNet nearly $2 million in damages from losses due to embezzlement by a former accountant. The headline in an earlier version of this story was incorrect on the dollar figure.




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