What has been the personal recording space for the band Live is now open to musicians from far and wide.
York Daily Record
A lawsuit filed Tuesday claims Bill Hynes and members of the rock band Live drained the company of tens of millions of dollars for personal use.
United Fiber & Data on Tuesday sued its founder and former CEO Bill Hynes, alleging that he acted in concert with others and engaged in a years-long “pattern of unlawful conduct” that included theft, fraud and self-dealing to “fund a lifestyle that he otherwise could not afford.”
In the 68-page lawsuit, United Fiber & Data, the Powder Mill Foundation and Louis Appell III assert that Hynes, 48, of York, and others have caused “substantial harm” to the telecommunications company, which built a 340-mile fiber-optic line connecting New York City to Ashburn, Virginia, a suburb of Washington, D.C.
The full extent of the damage is not yet known, the lawsuit states, but it amounts to tens of millions of dollars.
RELATED: 3 members of Live sue son of Louis Appell Jr. over control of United Fiber & Data
Hynes, a convicted felon who’s awaiting trial on charges including burglary, forgery and stalking, misused money to fund his racing career with Stadium Super Trucks; diverted cash to advance his reputation and purported celebrity status; and billed the business for a service to improve his reputation in online search results, according to court documents.
Chad Taylor, the lead guitarist for Live and a former CEO of the company, is named as a defendant. He’s accused of breaching his fiduciary duties of care and loyalty and taking part in self-dealing.
Inside the United Fiber & Data offices at 210 York St. in downtown York. (Photo: Neil Strebig, York Daily Record)
The lawsuit also names various companies including Think Loud Holdings LLC — comprising Live bandmates Taylor, Chad Gracey and Patrick Dahlheimer — and BKS Capital LLC — of which Hynes serves as managing member — as defendants. They started United Fiber & Data in 2012.
The legal action comes less than one week after Think Loud Holdings and BKS Capital sued United Fiber & Data and Appell III, alleging that Appell tried to hijack the board of managers and extort the members into surrendering their equity. The case was filed in York County but later refiled in Lehigh County.
Appell III is the son of the late businessman, philanthropist and civic leader Louis Appell Jr., who died at 92 in 2016. The Powder Mill Foundation is his charity.
In a statement, Hynes described the lawsuit as “a convenient narrative but lacks factual merit.”
“They schemed to manifest further public scrutiny of my reputation through threats, intimidation, and bully tactics,” he said. “I could either submit to their demands or step into the spotlight they intended to cast.”
He said he feels “an obligation to protect myself and my fellow shareholders through the public transparency provided by our legal system.”
Said Hynes: “The alternative, behind closed doors, felt 100% like a conspiracy to derail everything we built.”
“Sad, but anticipated,” Taylor said in an email. “We forecasted this behavior in the Complaint we filed here and then in Lehigh County, and will defend vigorously against these specious counterclaims.”
Andrew Paxton, president and general counsel of United Fiber & Data, said, “We do not comment on ongoing legal matters.”
The Appells and United Fiber & Data
People involved in starting United Fiber & Data approached Appell Jr. because they knew his family cared about the community and would be attracted to the mission of creating jobs and growth in York, according to the lawsuit.
Appell Jr. had served as president and CEO of Susquehanna Pfaltzgraff, a conglomerate with pottery, media and real estate arms. He and his family owned one of the largest radio station chains in the United States, which they later sold for $1.2 billion.
In 2012, Appell Jr. provided the initial $7 million loan to start United Fiber & Data, and later put in at least an additional $19.25 million to the business and another company. The Appell family has “infused millions of dollars” — and, at one point, their support was the only thing that allowed the business to remain open and continue building the fiber-optic line, according to the lawsuit.
Because of his family’s “significant interest in the startup, Appell III requested that the company review its governance structure in 2017. Hynes, Taylor, Gracey and Dahlheimer had solely controlled the business before that time, according to the lawsuit.
That’s when Appell III was appointed to a spot on the United Fiber & Data Board of Managers. But his access to information was “extremely limited,” the lawsuit states, and he was “actively kept in the dark” about the unlawful conduct.
The lawsuit alleges that Hynes repeatedly assured Appell III that his investments would be used for legitimate purposes, construction of the line was almost complete and that customers were lined up to execute contracts. Those representations were “knowingly false,” according to the lawsuit.
Instead, Hynes, Taylor, Gracey and Dahlheimer or their affiliated entities diverted money to “finance lifestyles that they could not otherwise afford” or other personal projects, according to the lawsuit.
“This conduct caused significant harm to UFD, including delays in completing the fiber optic line and damage to UFD’s reputation and its potential customer relationships,” the lawsuit reads.
‘His personal piggy bank’
In 2014, the Corbett administration awarded a $5 million grant from the Redevelopment Assistance Capital Program to the 210 York St. project, which included renovating a 53,000-square-foot warehouse near York’s independent league baseball stadium. The white building now says “Think Loud” on the front.
Next, in 2015, the administration awarded an additional $2 million grant.
Hynes convinced Appell III to provide a $5 million line of credit to meet the investment necessary to qualify for the first grant, the lawsuit states, on the condition that he’d be immediately repaid once the state reimbursed for construction costs.
Appell III advanced more than $4.03 million and later started asking about the status of the grant money. For more than one year, Hynes stated that the company hadn’t received reimbursement, according to the lawsuit.
But United Fiber & Data had already received a check for $3.38 million. Hynes then “immediately and unilaterally” transferred the entire amount to 120 York LLC, which he, Taylor, Gracey and Dahlheimer own and control. That company owns the Think Loud building.
The lawsuit alleges that Hynes conducted four transfers to avoid additional bank approvals.
“This was a straightforward and blatant act of theft,” the lawsuit states.
Bill Hynes, founder and former CEO of United Fiber & Data, handles a strand of fiber-optic cable, one of many that is encased in a cable bundle like the section in the frame below, in this photo from May 14, 2019. (Photo: Paul Kuehnel, York Daily Record)
Next, the lawsuit alleges, Hynes used at least $275,000 of company money to pay for commercials and promotion related to racing Stadium Super Trucks.
Later, the lawsuit states, Hynes appeared on an episode of “The Celebrity Apprentice” that featured Kate Gosselin of “Jon & Kate Plus 8” fame and donated $30,000 to Geraldo Rivera’s charity, Life WORC.
He’s said he personally made the donation. But the money came from United Fiber & Data, according to the lawsuit.
The lawsuit contains numerous other allegations including that Hynes used the company as “his personal piggy bank” and engaged in the following conduct:
- Transferred $108,000 from United Fiber & Data to his personal account for “a non-existent software application.”
- Withdrew $15,000 “without any business justification.”
- Submitted and received reimbursement for at least $50,000 for hiring Social Czars, an agency that “specializes in removing or suppressing negative content in Google search results for executive, celebrity, professional athlete, and high-net-worth clients.”
‘Wasteful and unnecessary:’ Andretti Autosport
In 2013, Hynes and Taylor entered into two sponsorship deals with Andretti Autosport. According to the lawsuit, the “wasteful and unnecessary” sponsorships forced UFD a “start-up with no customers at the time and little cash” to pay out $11 million annually.
The lawsuit claims Michael Andretti is a “personal friend” of Hynes.
The sponsorships were used to advance Hynes’ personal interest and racing career, according to the lawsuit. He began racing Stadium Super Trucks in 2013.
Hynes and Taylor entered a three-year sponsorship agreement in July 2013 and later extended the initial deal to continue through Dec. 31, 2021, at $3 million per year. A second sponsorship was agreed upon in October 2013 and would expire in December 2021 at a rate of $8 million per year, according to the lawsuit.
The lawsuit alleges that Hynes and Taylor entered the agreements with Andretti Autosport without the approval of anyone else within the company. Hynes would later note that Think Loud Investments LLC, a company owned by Taylor, invested into the racing sponsorships not UFD.
As a “major associate sponsor” UFD was granted several privileges including the right to use the Andretti name in advertising, logos on two Andretti Autosport race team cars, and various VIP perks at race events. The sponsorship perks “were essentially worthless for UFD,” according to court documents.
Hynes stated that Andretti introduced UFD to potential customers including Verizon, Vonage, GoDaddy and DHL. “To this day no customers have signed up with UFD through the Andretti relationship,” the lawsuit reads.
In this file photo from Feb. 28, 2013, fans take photos of a race car with the multi-platinum-selling rock band Live’s logo on it in front of what was then called the Strand-Capitol Performing Arts Center in York. Bill Hynes and three members of Live, Chad Taylor, Chad Gracey and Patrick Dahlheimer, introduced their telecommunications startup, United Fiber & Data, at the elaborate news conference. (Photo: Kate Penn, York Daily Record)
According to the lawsuit, Hynes and Taylor used the Andretti sponsorship as a means of personal benefit to gain “access to the racing world” and fueled their “celebrity lifestyle” which included attending races, travel and time spent with “UFD girls” or raceday cheerleaders.
The Appells provided capital to UFD in either debt or equity and were informed the funding was going to the completion of the fiber optic line. When questioned about the sponsorship, Hynes said it was a “handshake deal for one car at a discounted rate,” the lawsuit reads.
When the company could not finance the sponsorship, it was terminated and a settlement with Andretti Autosport was reached in 2015 for $9 million. Hynes informed the Appells that the company had exited out of the sponsorships for “a small fee,” according to the lawsuit.
In total, the Andretti Autosport sponsorships cost UFD over $15.6 million and “represented a significant portion of the entire estimated cost” for the construction of UFD’s 340-mile dark fiber-optic line.
(Read the lawsuit)
Two floors for nine employees
In November 2013, Hynes, Taylor, Gracey and Dahlheimer entered a lease agreement for the Think Loud building. Think Loud Holdings purchased the building for $164,000 in 2012.
UFD was granted access to the first and second floors of the building per the lease agreement. The company had nine employees at the time and “had not started significant construction of the fiber optic line, let alone generated material revenue” when the lease was signed, according to the lawsuit.
The lawsuit alleges the lease space, over 14,000 square feet, had been more than a start-up like UFD needed at the time and the rent was above market rate, resulting in an “overcharge of hundreds of thousands of per year” for UFD.
United Fiber & Data entered into the lease in 2013, however, the construction of UFD’s office space was not complete until 2017. Employees used co-working space in the building, which was not for the sole or exclusive use of UFD, per terms of the agreed upon lease, which carries through until 2028, according to the lawsuit.
In addition, UFD did not need the “lavish” amenities the building offered including a recording studio owned by the defendants. Such features were not used and “completely unnecessary for a small start-up company,” according to the lawsuit.
While United Fiber & Data occupied the first two floors, the lawsuit claims that the other two floors in the four-story building were used as residential space specifically for use by Hynes, Taylor, Gracey and Dahlheimer.
Taylor signed the lease on behalf of UFD as the tenant and Gracey signed on behalf of 120 York as the landlord. “It was an obvious example of blatant self-dealing at the expense of UFD,” the lawsuit reads.
The lawsuit claims that without UFD locked in as long-term tenant “Hynes and Taylor would have been unable to obtain the funding they needed to construct their recording studio, residential space and their office space for their affiliated entities.”
During the time the lease was signed in 2013, UFD was paying rent to 120 York, “at Taylor’s and Hynes’ direction.” In dual roles as tenant and landlord Hynes and Taylor made several million dollars worth of payments between UFD to 120 York. The payments were marked as “rent” or “pre-paid rent on the 210 York Lease,” according to the lawsuit.
On Sept. 25, 120 York issued a notice of default to United Fiber & Data for unpaid rent, the balance of which is upward of millions of dollars, the lawsuit states.
“If this were in fact true, then it is even clearer that the millions of dollars taken from UFD for ‘pre-paid rent’ or ‘rent’ were made without any business purpose whatsoever,” the lawsuit states, “and instead constitute multiple instances of pure theft/embezzlement of Company funds.”
Contact Dylan Segelbaum at 717-771-2102 and Neil Strebig at 717-825-6582.
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