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Rushville broadband firm sued by companies it acquired

October 26, 2010

The honeymoon is over between Rushville-based Omnicity Corp., the fast-growing provider of wireless broadband service, and a handful of owners whose companies it purchased.

Founded in 2003, Omnicity has grown to provide wireless broadband service to roughly 12,000 rural subscribers in Indiana and Ohio, largely by acquiring about a dozen smaller competitors.

But at least three of those firms' owners have brought lawsuits against Omnicity, charging that it failed to pay them completely for the purchases. All told, the owners say they're owed more than $1.2 million.

“It’s been a pretty rocky road for me, because I’ve lost my company and my employment,” said Steve Narducci, who sold the assets of Alexandria-based NDWave LLC to Omnicity in February 2009.

He sued the company Sept. 29 in Rush Circuit Court, claiming Omnicity owes him $405,911, plus interest, in addition to roughly $6,500 in wages and reimbursements.

Omnicity brought Narducci on as its vice president of field services in June 2008, before the acquisition was complete, but terminated his employment Aug. 30 of this year, according to the complaint.

Narducci’s suit was preceded by another against Omnicity filed Sept. 16 in a Holmes County court in Ohio.

Kyle Yoder, owner of Digital Network Solutions Inc. in Berlin, Ohio, agreed to sell the assets of that company to Omnicity on March 31 for $750,000 in cash at closing. The deal also called for $500,000 to be paid in quarterly installments over four years, and Yoder was to receive $150,000 in company stock.

Prior to closing, Yoder agreed to Omnicity’s request to defer $50,000 of the $750,000 initial payment until later, according to the suit.

Omnicity gave him the $700,000, the complaint said, but it failed to pay the first installment of the $500,000 note, triggering a clause in the agreement that made the entire balance due immediately.

Yoder also alleges he is owed the $50,000 he agreed to defer, and the $150,000 in company stock, as well as damages to be determined by the court relating to his employment with Omnicity.

Yoder claims he is owed severance and vacation pay, in addition to two paychecks, after Omnicity fired him as general manager of its Berlin-based operation on July 12.
     
A third suit, filed in Rush Circuit Court on Sept. 1, makes similar default allegations. That complaint was brought by Peru, Ind.-based North Central Communications Inc., which Omnicity acquired in April 2009.

North Central owner Kevin Sexton charges in his suit that Omnicity owes him $159,903, plus interest, after the company defaulted on a payment in August.

Reached by phone, Omnicity CEO Greg Jarman maintained that disagreements are bound to arise when numerous acquisitions are made.

“In all cases, hundreds of thousands of dollars have been paid to [the plaintiffs],” he said. “The fact is, we have done a lot of acquisitions and we’re continuing to do that.”

Jarman added that Omnicity will “strongly defend” itself in court.

Jarman, Omnicity’s former chief operating officer, became CEO in June 2009. He replaced Dick Beltzhoover, a private investor in the company.

In its most recent annual report, the company lost said it $2.6 million on revenue of $1.6 million for the fiscal year ended July 31, 2009, compared with a loss of $979,861 on $1 million in revenue the previous fiscal year.

For the three months ended April 30, 2010, the company lost $743,000 on revenue of $837,000, according to the most recent quarterly report the company filed.

In August 2009, Omnicity announced its plans to create 100 jobs within the next three years by investing $2.5 million in wireless infrastructure and a new corporate headquarters.

The new headquarters, to be built in the North Rushville Industrial Park, will house the company’s call center, collections and distribution operations.

Omnicity said it planned to hire customer-service representatives, field-service personnel and managers to meet growing demand from recent acquisitions and new fiber-optic construction contracts.  

Indiana Economic Development Corp. offered Omnicity up to $25,000 in training grants and said it would provide Rushville officials with a $110,000 grant to assist in off-site infrastructure improvements needed for the project. The city of Rushville said it would provide additional property tax abatement.

Omnicity has added 30 of the 100 employees the company pledged to hire and has a total of 56 employees, Jarman said. Omnicity is renting space in Rushville but still plans to build a corporate headquarters, he said.

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