Data Knight 365 missed deadline for closing

A number of people have called, emailed or dropped by to ask about the status of the announced data center for the Floyd County Commerce Park.

My story in today’s Floyd Press updates the situation: Data Knight 365 (DK365) missed the Tuesday deadline for coming up with $100,000 for a down payment for their $900,000 purchase of a 51.5 acres of undeveloped land at the Commerce Park on Christiansburg Pike where the company says it will eventually spend $67 million to build a 120,000 square foot data center.

The company also failed to provide the county with documentation on principals in the company, a letter of credit and a detailed explanation of the role Paul Allen plays in both the current and future operations of the company.

Allen, who was named last month in a loan kiting scheme that resulted in a federal case filed in Tennessee, moved out of one of the two apartments DK365 is renting at the Station on South Locust. In March, the Ohio Secretary of State shut down Allen’s company, B-Telecom. Bill Byler, the Amish businessman who now appears to be the front man on the deal, returned to Floyd this week and tells people "nothing has changed."

Things have changed. The Tuesday deadline for closing was the first milestone DK365 needed to meet in a performance agreement signed last month. Missing the deadline is grounds for canceling the deal if the county chooses to do so.

Economic Development Authority member Mike Maslaney says the "level of skepticism" over the deal has increased and that "questions need to be answered." Maslaney says he and others on the EDA still have hope the deal can be closed.

EDA chairman Jack Russell is occupied with the death of a family member and is not available for comment The EDA meets on September 22 and a decision on the future of the project may be made at that meeting.

Or it may not. Like so much of the hyperbole, mystery and intrigue that surrounds this deal, the questions far outnumber the answers.

(Updated September 23, 2009 to information about why EDA Chairman Jack Russell was unavailable for comment.)

Data Center promoter named in loan kiting scheme

A civil case filed in federal court under the Racketeer Influenced and Corrupt Organizations (RICO) act names Paul Allen, the promoter behind the announced data center in Floyd, as a participant in a "loan kiting" scheme that threatened the solvency of a 100-year-old family-owned bank in Oakland, Tennessee.

Oakland Deposit Bank cites RICO in its case against former president and CEO Stephen D. Henry.  According to court filings in the case, filed on August 14, 2009, in U.S. District Court in Memphis, the bank says it lost millions in the scheme and charges Henry with breach of fiduciary duty.

The bank, founded in 1904 by the Henry family, was sold in January of this year to Tennessee banker Marion "Ed" Lowery, who immediately invested $12 million in the financial institution. On December 2, 2008, the Federal Deposit Insurance Corporation (FDIC) found the bank had engaged in "unsound banking practices and violations of laws," issued a cease and desist order and forced the bank’s sale.

Court papers say Henry, acting as the bank’s chief executive with unquestioned authority to approve loans, set up loans in shell companies and other people’s names and proceeds were then diverted to Henry and his co-conspirators: Stephen L. Sims of Memphis and Paul Allen of B-Telecom of Ohio.

According to court files:

Henry became acquainted with Allen in or around 2002 and subsequently originated a personal loan for Allen.

From 2002 to 2008, Henry opened deposit accounts and originated several loans for businesses owned or controlled by Allen, including, but not limited to, actual or purported businesses known as the following: BTl Home Theatre, Inc.; B-Telecom Construction, Inc.; M&A Holdings, LLC (a Montana entity); M&A Holdings, LLC (a Tennessee entity); Fiber Media US, Inc.; S& P Properties, LLC; and BTl Sales Management & Marketing LTD.

From 2002 to 2008, Allen also provided Henry with personal information for individuals with whom he worked or was acquainted for the purpose of originating loans in their names. These borrowers included residents of Ohio, Montana, Tennessee, and Canada.

Many of the Allen-related loans were fixed-term loans, while others were lines of credit. Most of the loans were unsecured and, as in the case with the Sims-related loans, Henry did not engage in any due diligence to investigate the credit-worthiness of the borrowers.

After the initial loans were made, Henry and Allen created subsequent loans in the names of the individual borrowers without the borrowers’ knowledge or consent. Signatures for the borrowers on the subsequent loan documentation was typically forged.

The proceeds from these loans were channeled to Allen for his personal use and to fund Allen’s business ventures.

In another instance of loan-kiting, loan proceeds were often used to pay the interest due on loans to Allen’s businesses and other Allen-borrower loans, as well as to cover Allen’s excessive and chronic deposit-account overdrafts.

In order to obtain funds to keep the scheme going and to obtain cash for other purposes, Henry inflated loans, increasing the principal amount of a loan without the borrower’s knowledge or consent. Henry often used those funds to cover the interest payments for Allen’s loans and overdraft amounts. As with the Sims loan scheme, Henry personally benefited from the Allen loan scheme by means of obtaining large amounts of cash through cash-out transactions.

A federal criminal investigation is ongoing.

Allen came to Floyd County in 2008 and began negotiating with the Economic Development Authority to purchase 51.5 acres of undeveloped land in the county’s Commerce Park to, he said, build a "world class" data center.

Earlier this year, the Ohio Secretary of State revoked the certificate of authority and the articles of incorporation for B-Telecom, the original company name used by Allen to promote the deal.

A month later, Data Knight 365 emerged as the company backing the project, along with Power Direct of Cleveland, a telemarketing firm fined by the Federal Trade Commission for violating federal Do Not Call registry rules.

Bill Byler, an Amish businessman from Middlefield, Ohio, and a partner with Allen, became the owner of record for Data Knight 365, which filed organizational papers with the Ohio Secretary of State in April.

Allen and Byler moved into apartments at the Station on South Locust project across the street from the Floyd Country Store. Allen bragged to others that his company was a "world class developer" of data centers with locations all over the world. Dun & Bradstreet, however, listed B-Telecom as a "data entry service" with 11 employees at one location in Parma, Ohio. Data centers listed on the company’s web site did not exist.

Allen continued to promote the project and work with county officials under the Data Knight 365 name and the new comppany announced plans for the data center three weeks ago in a press release listing, as a contact, Don Sabin, an Allen associate at B-Telecom. A  two-page web site was set up through Citizen’s Telephone in Floyd.

As late as last week, the county appeared ready to proceed with closing on the $900,000 purchase and was waiting on additional documentation and a $100,000 deposit from Data Knight, due by September 1. County officials said they were unaware of Allen’s previous problems but based their belief in the project on the backing of Power Direct.

Allen moved out of the apartment on Locust Street last week, telling some he had relocated to Montgomery County and saying to others that he is now living "between Floyd and Roanoke." The apartment is still rented by Data Knight 365.

I knocked on the doors today of the two apartments rented by the company.

No one answered.

Ohio shut down business of data center promoter

Paul Allen arrived in Floyd a few months ago with all the subtlety of a Tasmanian Devil, whirling about with grand promises of bringing a mutli-million dollar data center to the county’s commerce park.

He had plenty of time of his hands because the State of Ohio had shut down his data center business there by revoking his company’s registration and Certificate of Authority.

Allen’s bold stories and grand plans sparked interest with the revenue-starved county government, which jumped to embrace the wheeler-dealer from Ohio. He rented one of the most expensive apartments in the new Station on South Locust complex across the street from the Floyd Country Store and then asked locals to help him find free or cheap used furniture. He drove around in a fancy white Mercedes G-Class SUV and talked about buying land, making Floyd his home and even buying Citizens Telephone Cooperative because, he said, they are in trouble, and need his help.

In Floyd County, being showy attracts attention and also creates doubt. People started talking about the flashy promoter and asking questions. No land purchases are on file with the Circuit Clerk’s office. As a public-owned cooperative, Citizens would be difficult, if not impossible, for an indivual to buy.

He bragged about big contracts with the federal government, the Radford Army Ammunition Plant and pending deals with Virginia Tech.  None of these deals, however, can be confirmed.

He said his company was a multi-million dollar operation wth locations around the world. Manta, which tracks small businesses, reports:

B Telecom, Inc is a private company categorized under Data entry service and located in Parma, OH. Our records show it was established in 2002 and incorporated in Ohio. Current estimates show this company has an annual revenue of $630,000 and employs a staff of approximately 11.

Manta’s information came from Dun & Bradstreet, the business and commercial rating company.

Some said Paul Allen was too good to be true. They might be right. Although he shares the same name as the billionaire Paul Allen who co-founded Microsoft with Bill Gates, this Paul Allen is not the same force in the technology industry. Questions are arising about this Paul Allen, his past, and his promises.

Not long after Allen hit town, the Ohio Secretary of State canceled the Articles of Incorporation certificate for his company, B-Telecom Inc. (also known as Bti) for failure to file necessary corporate franchise tax reports or pay taxes. 

In a March 6 letter signed by Secretary of State Jennifer Brunner, Allen was notified of the revocation and told to stop practicing business under the B-Telecom name. The registration for that company remains “on hold” by the state of Ohio.

A month after Ohio revoked Bti’s business credentials, Amish businessman Bill Byler, an Allen partner, filed corporation papers creating Data Knight 365 LLC and Allen continued promoting his latest venture.

It’s not Allen’s first run-in with government or those with questions. An investigation is open in Ohio regarding questions about the validity of letters of credit used by Bti.  Questions about the authenticity of letters of credit provided by Bti were cited in the company’s failure to win a bid for the controversial Networx project in Memphis, TN.

Memphis Light, Gas & Water hired The McLean Group, a prominent investment banking firm headquartered in Northern Virginia, to vet the bidders. McLean found problems with B Telecom, saying their letters of credit were “unconvincing” and the company failed to show for a due deligence meeting.

Others who have dealt with B Telecom and Allen report similar problems. Some said Allen would not show for scheduled meetings but would send Byler or Don Sabin, who served as spokesman when DK3 announced plans for the data center in Floyd. Sometimes, nobody would show.

“I would advise Floyd County to stay as far away from these guys as possible,” says a Virginia-based procurement officer who has dealt with Bti and who asked not to be identified. That procurement officer contacted us this week after reading our earlier reports about Data Knight 365.

When the Networx deal fell through, Allen told Memphis media that the “fix was in” and that the McLean Group was not a competent organization to judge his credentials. The McLean Group’s managing director is Dennis Roberts, a former bank President, certified valuation analyst and a teacher and writer on mergers & acquisitions, business valuation and corporate finance. The McLean Group’s board of advisors includes former Congressman Vic Fazio, former White House National Security Director Robert McFarlane, who also served as US Ambassador to the Middle East and retired Navy Vice Admiral Al Burkhalter Jr.

The county and Data Knight 365 announced a deal last week for plans to spend more than $20 million for a “world class data center” in Floyd’s industrial park. Allen has said the deal is done and the land is his but no contract has been signed and no money has changed hands. There is a performance agreement in place and it outlines things that Data Knight 365 must deliver before the deal can move forward. Two supervisors told us they need more information and some questions answered about Paul Allen and the DK3 deal but the board will not have a role in this transaction unless the Economic Development Authority wants the county to spend money. From what we have been told, the county is not granting any concessions or spending any taxpayer funds.

(Updated to include new information)

Power Direct: A company of aliases and problems

Power Direct, the telemarketing company behind Data Knight 365, the shadowy firm that announced last week it would spend more than $20 million to build a "world class data center" in Floyd’s industrial park, is an operation of aliases, multiple listings of "dbas" (doing business as) and run-ins with consumers and the law.

It’s a privately-held company sometimes known as Power Direct, but also known as D.R.D. Inc., R D D Inc. and several other names we have discovered in a search of business databases, public records and corporation filings.

D.R.D. stems from the initials of Daniel R. Delfino, the owner of record of the many different identities of Power Direct. In his biography on the Power Direct web site, Delfino sounds like a man of many great accomplishments:

Dan Delfino brings over 20 years experience in the call center and data/marketing arenas. Multiple Fortune 1000 companies can credit their wealth and prestige to his unique revenue generating strategies. He sampled the telemarketing industry at Dun & Bradstreet where he marketed its list management services and quickly acquired more responsibilities. His progressive success and leadership in developing marketing strategies led him to consulting in the publishing and telecommunications fields. And in 1994 his own company, Power Direct was born. Dan’s ambition and entrepreneurial spirit has never wavered as Power Direct holds its own as a call center powerhouse. He upholds his initial vision of providing clients with turnkey marketing solutions, inbound/outbound telemarketing and database mining solutions. Dan earned his Bachelor of Arts in Business Administration at Baldwin Wallace College. The school also honored him as a 1998 Football Hall of Fame inductee, remembering his contribution to its 1978 Division III National Championship.

Baldwin Wallace College is a private, Methodist-oriented liberal arts school in Berea, Ohio, about 20 minutes outside of Cleveland. Delfino graduated from the school in 1981 and was inducted into the school’s "Hall of Fame" in 1998.  It is an athletic hall of fame specific to the school and includes alumni who contribued "in other ways" to the school along with past school officials.  It is not part of the College Football Hall of Fame located in South Bend, Indiana.

Delfino and DRD Inc. were also "honored" on December 14, 2006, by the Federal Trade Commission with fines and injunctions because Delfino and his company violated the "Do Not Call" rules of the commission.  The FTC press release:

The Federal Trade Commission today announced it has entered into court settlements with the final defendants charged with violating the Do Not Call (DNC) provisions of the Telemarketing Sales Rule (TSR) by calling consumers whose numbers were on the DNC Registry in an attempt to sell them DIRECTV satellite television subscriptions. The orders require the defendants to pay a total of $100,000 in penalties and bar them from future TSR violations.

In December 2005, the Commission charged DIRECTV and other defendants that telemarketed on DIRECTV’s behalf – including those settling today – with violating the DNC Rule and the TSR by calling consumers, despite the fact that their numbers were on the National DNC Registry. In settling the charges, DIRECTV paid $5.3 million, representing the largest-ever DNC penalty obtained by the Commission.

The final court orders announced today settle the Commission’s charges against the following defendants: D.R.D., Inc., also d/b/a Power Direct; Daniel R. Delfino, individually and as an officer of D.R.D.; Global Satellite, LLC., also d/b/a Mavcomm; William King, individually and as an officer of Global Satellite; and Michael Gleason, individually and as an officer of Global Satellite.

The FTC placed Delfino, D.R.D. and Power Direct under a special monitoring program to keep an eye on future telemarketing abuses, noting:

The stipulated final judgments and orders against the D.R.D. and Global Satellite defendants contain both monetary penalties and conduct provisions…Finally, both orders bar the defendants from violating the TSR in the future and contains monitoring and record keeping provisions to ensure their compliance.

Detailed information on a privately-held company is not always easy to get because public disclosure filings are not required. Manta, which tracks small businesses says this about Power Direct:

Power Direct is a private company categorized under Nonclassified Establishments and located in Cleveland, OH. Our records show it was established in 1994* and incorporated in Ohio*. Current estimates show this company has an annual revenue of unknown and employs a staff of approximately 1 to 4.

Dun & Bradstreet, however, lists Power Direct’s "estimated" annual revenue at $17 million and says the company has 577 employees.

While Delfino’s background does involve the collection of data and information, it does not match Data Knight 365’s claim that:

For the past 15 years, DK3 senior management staff has operated and managed Data Center storage and management facilities, collocation facilities, and private fiber networks providing connectivity services that ensure clients are able to run their businesses with maximum efficientcy and reliabiliy.

Fifteen years is the length of time Delfino’s operations have been in business but DK3’s connection to the data center business appears to be Don Sabin, a former salesman for Fiber Media in Hollywood, Florida. Fiber Media was founded in 2000.

Complaints about D.R.D., R.D.D. and Power Direct continued to flow into the Better Business Bureau and web sites that monitor telemarketing abuses long after the FTC fined the company and ordered it to stop violating telemarketing laws. The web site 800 Notes cataloged complaints about telemarketing abuses from phone number (216) 453-1979 through June of last year. The number backtraces to Delfino’s companies.   Delfino’s three call centers in Cleveland use several different numbers and recently changed some because of consumer complaints.

Power Direct’s web site uses photos not of the company and its personnel but "stock" photos from an agency that sells the images for generic use. The "news" section of Power Direct’s web site lists seven stories about the company from August 2005 to May 2008 but does not link to a single outside source for the "news."  Two of the stories announce the company was on Crain’s Ohio Business list of "Leading Edge" for two years but Crain’s dropped the company from the list this year with no explanation. Three stories tout the company’s listing on the "Weatherhead" list of fastest growing companies in Northeast Ohio.

We checked the Weatherhead list. Power Direct is 92nd. In Northeast Ohio, just about every company that didn’t lose money the previous five years makes the list. Companies can apply to make the list. They are not nominated. The key is to be in the top 25.

Click here to read the PDF file of the FTC order against Delfino and D.R.D. Inc.

Data center's publicly-listed owner is an "Amish entrepreneur" who sells wood, not data services

How did an "Amish entrepreneur" who owns wood products stores in Ohio become the owner of record for Data Knight 365, the mysterious company that announced last week it will build a "world class" data center in Floyd’s industrial park.

Good question, but Bill Byler of West Farmington, Ohio, is better known as the co-owner of Amish wood product companies in Middlefield and Cleveland as well as a demolition company.

In November 2007, the Cleveland Plain Dealer profiled Byler, reporting:

Each weekday morning, Bill Byler gets up well before dawn and puts on wool pants, a cotton shirt and a straw hat.

Up to that point, it’s a typical routine for any Amish man.

But few Amish ever do what Byler does next. Rather than climb into a buggy and head for the fields, Byler grabs his cell phone, hops into a taxi and rides 45 miles from his home in rural Middlefield to a spot on West 25th Street just south of Lorain Avenue. Like many other commuters, he leaves early to avoid rush-hour traffic.

Byler is an Amish entrepreneur in the city. Along with his father, Wally, and sister, Ellen, he owns and operates a store in Cleveland called Amish Heritage Wood Floors and Furnishings. The store sells the handiwork of 12 area Amish families, everything from hardwood flooring, tables and entertainment centers to honey, pies, artwork and quilts. 

Byler and his father also own Cherokee Hardwoods in Middlefield. The address for that store was the one he used to register the domain name for Data Knight 365 last April. The domain is registered in his name, not the name of the proposed data center company.

Byler is also listed as a partner in Cherokee Demolition of Burton, Ohio.  Cherokee has demolition contracts primarily in the Cleveland area.

These days, Byler is not in the woodworking shops, or blowing things up near Lake Erie, but staying in one of two apartments rented by Data Knight 365 in The Station of South Locust, the mixed use project across the street from the Floyd Country Store. While Byler looks and dresses Amish, those who have met him say using a cell phone isn’t the only non-Amish habit he has acquired.

Data Knight 365 didn’t exist until April 13, 2009, the day a Cleveland law firm filed articles of incorporation with the Ohio Secretary of State’s office. No company officers were listed in that filing. The company’s original filing as an LLC (limited liability corporation) was amended on August 7 — three days ago — to appoint an agent for LLP (limited liability partners) for the company.

The partners: William W. Byler and Laura Mae Byler of West Farmington, Ohio.

The presence of an Amish woodworking shop owner on Data Knight 365’s team is just one other oddity in an operation that is keeping Floyd’s rumor mill going and while others shake their heads and wonder what the heck is going on.

"They’re an odd bunch, that’s for sure," says one local businessman who asked not to be identified. "They sure claim to know a lot about the data center business but the talk is usually a bit short on specifics."

The lack of specifics seems to be a growing problem for the DK3 team. Some who have dealt with the crew cite a growing list of claims that don’t check out. One such claim says the group has built 15 data centers worldwide but a search of public records failed to find a single data center either built or maintained by DK3.

We’re continuing to look into claims made by the DK3 team. The closer we look, the weirder this whole thing gets.

(Updated on August 10 to include additional information on Byler and DK3’s corporate filings.)