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Receiver sues former FRII owners for transfer of assets

FORT COLLINS — A receiver appointed to wind down the operations of Front Range Internet Inc., an internet services provider based in Fort Collins, has filed a lawsuit against a related company, FRII NRCM 1 LLC and Front Range’s previous owners, brothers Halton and Howard Peters.

The lawsuit claims that the defendants caused cash to be transferred out of FRII bank accounts in an attempt to defraud creditors of the failing internet services business. The lawsuit also alleges that the brothers moved two light delivery vehicles away from the Fort Collins location to Memphis, Tennessee, and refused to return them. The vehicles had been sold to Vistabeam, a Nebraska internet services company that bought Front Range’s wireless business; the deal included the vehicles.

Front Range Internet, a pioneer in Northern Colorado in the internet services business, gave notice in September 2022 that it would shut down at the end of the year. Client Woodward Inc. (Nasdaq: WWD) and landlord Katmai Energy LLC claimed that “erratic behavior” by the company’s owners could cause disruptions in services for Woodward and other clients. They sought a restraining order, dissolution of the company and appointment of a receiver. In October, Judge Gregory Lammons agreed and appointed a receiver, Cordes and Co.

Other companies also filed motions, including Zayo Group LLC of Boulder and Platte River Power Authority, which sued for nonpayment for the usage of its fiber network. PRPA’s motion for a default judgment was approved and the electrical utility was awarded $407,955. 

In the receiver’s first report to the court, it noted that two service vans had been removed to Memphis. The vans, valued at a combined nearly $60,000, were stored at Chelsea Automart in Memphis. The receiver paid $26,549 to recover them. When finally delivered to Vistabeam, the new owners discovered that catalytic converters had been removed, which cost more than $9,000 to repair.

The lawsuit also alleges that the Peters brothers caused a total of $57,033 to be removed from FRII accounts and transferred to FRII NRCM 1 on Sept. 21 and Sept. 22 “with intent to hinder, delay, and defraud FRII’s creditors,” the lawsuit said.

Those dates precede the appointment of the receiver but the lawsuit alleges that the transfers were made knowing that remaining assets would not be enough to cover obligations of Front Range and that the transfers did not provide a reasonable or equivalent benefit to FRII.

In addition to fraudulent actions, the lawsuit claims theft, unjust enrichment and conversion. It seeks a jury trial.

An email sent to the attorney for Howard and Halton Peters was not acknowledged by publication time.

The case is Cordes & Co. v. FRII NRCM 1 LLC, Halton Peters and Howard Peters, filed July 19, 2023, in Larimer County District Court, case number 2023cv30556.

Source: BizWest

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