BIDDEFORD — A Biddeford Internet provider claims that a Portland company misspent millions of federal stimulus dollars that were to be used to bring affordable Internet service to rural Maine.

Biddeford Internet Corp., doing business as GWI, is suing Maine Fiber Company, Inc., several of its subsidiaries and individuals Dwight Allison III of New Hampshire and Mainer Robert Monks Jr. GWI filed suit on Monday, at Cumberland County Superior Court in Portland.

Allison and Monks are the principals behind Maine Fiber. Monks is a well-known developer in Maine and was involved in the development of the mill district apartment building, The Mill at Saco Falls. The two men have done business together for several decades, said Allison.

According to the suit, GWI alleges that instead of bringing affordable Internet service to Maine’s rural communities, as Maine Fiber was contractually bound to do, it configured the Internet network, known as the Three Ring Binder, to make it easier for financial institutions in New York City and other metropolitan areas to transfer financial data and other information to other financial centers in Canada and Europe.

“We categorically deny the network was built improperly,” said Allison, in a telephone interview on Monday. GWI owes Maine Fiber a lot of money for use of the latter company’s network, he said, and the suit is an attempt by GWI to get out of paying them back.

The history of the lawsuit goes back to 2009 when GWI applied for a grant from the U.S. Department of Commerce’s National Telecommunications and Information Administration, or NTIA, to build an 1,100-mile, high-capacity, dark fiber optic cable that would serve much of rural Maine.

The dark fiber is needed for last-mile service providers, like GWI, to hook up to and provide service to individual homes and businesses.

Through the American Recovery and Reinvestment Act of 2009, the NTIA had $7.2 billion to spend to deploy broadband infrastructure around the nation. One of the intended uses for the funds was, according to the complaint, “to bridge the digital divide in remote and underserved areas of the United States.”

GWI applied for funds to build the Three Ring Binder, a three-ringed loop of dark fiber, likened to a highway. It would be necessary to construct many connection points, or off-ramps, from the highway that would fill a substantial amount of the gaps in service to Maine’s many rural areas. In addition to providing more access, the dark fiber was to be leased by Internet providers around the state at a more affordable rate than existing providers.

In December 2009, GWI learned it was awarded $25.6 million for the Three Ring Binder Project, which was to be matched by $6.2 million in private funds, for a total of $31.8 million to be used to fund the project.

To ensure the dark fiber provider would be neutral and non-discriminatory, GWI and other last-mile service providers determined a separate company should build and own the Three Ring Binder Project. That’s where Maine Fiber came in.

In August 2010, the ownership of the Three Ring Binder Project was transferred from GWI to Maine Fiber.

GWI and the other Internet providers entered agreements with Maine Fiber to lease the dark fiber it constructed.

However, according to GWI’s complaint, Maine Fiber’s construction of the Three Ring Binder Project is inconsistent with the grant application. It doesn’t fulfill the intended purpose of providing affordable and easy connection between last-mile service providers like GWI and the project’s dark fiber, thus reducing the benefits of savings and access that can be passed on to Maine residents and businesses.

Instead of routing the dark fiber to local community streets and other accessible locations for local uses, alleges GWI, the Three Ring Binder Project was directed to “more direct rural by-pass routings.” Also, the system was reconfigured to favor Maine Fiber’s non-Maine uses, alleges GWI.

Fletcher Kittredge, founder and CEO of GWI, said the Three Ring Binder Project was built in ways to make it cheaper, such as moving the route in places to have a more direct route from Dover, N.H. to Canada. He said to keep costs down they construction in much of rural Maine wasn’t built along the downtowns where most of the people and businesses are located as it was supposed to be.

In the spring of last year, said Kittredge, he realized the project wasn’t built as it was contractually obligated to be.

“We immediately started complaining and they (Maine Fiber) kept saying, ”˜We’ll go back and fix it,’” which, Kittredge said, never happened.

Furthermore, according to the complaint, Maine Fiber used subsidiaries and strategies to circumvent non-competition restrictions.

GWI alleges that Maine Fiber provided the wrong information and/or incomplete information to the NTIA to obtain the administration’s consent to divert funds to build fiber cable into southern New Hampshire and other areas outside of the state.

GWI also contends that Maine Fiber overcharged it more than $700,000 and stole business.

In its 11-count complaint against Maine Fiber, GWI is alleging breach of contract, fraud and negligent concealment, among other claims.

It states that in its contract with the company, if Maine Fiber doesn’t complete the work, GWI can purchase the Three Ring Binder Project. GWI is requesting to be allowed to purchase the project as one of the judgments. The company is also asking for the more than $700,000 it said it overpaid Maine Fiber, and more than $3 million in damages.

Allison denied the allegations of the complaint. The federal government approved every step of the project and no money was spent without prior authorization, he said. Along the way, GWI was also notified of the progress of the project’s construction.

That includes money spent on extending the project into New Hampshire, said Allison.

The Three Ring Binder Project was completed in July 2012, he said, adding that both the government and GWI “accepted it as complete.”

In response to allegations that there aren’t enough connections in rural Maine, Allison said that’s not the case. He said there are off-ramps approximately every 2,100 feet, and in some places, every 500 to 600 feet.

“GWI maintains it should be more than that; we say that’s not the case,” said Allison.

He also denied GWI’s allegation that Maine Fiber stole business from the company.

“We had a letter of intent from the company months before GWI ever heard of them,” said Allison.

He said he was surprised when he learned of Monday’s lawsuit, saying Maine Fiber and GWI had been in mediation to resolve issues regarding money he said GWI owes Maine Fiber. The two were to meet again on Jan. 22, but now, said Allison, he doesn’t know the status of that meeting.

Kittredge said he hopes the issue will be settled and hopes the meeting on Jan. 22 goes forward. Ultimately, said Kittredge, “I want the thing finished and the contract abided by. That’s the most important thing.”

— Staff Writer Dina Mendros can be contacted at 282-1535, ext. 324 or [email protected].