Neumann Systems Group lays off ‘about’ 11, blames mayor

Neumann Systems Group has laid off its vice president of marketing, along with “about 10″ other people, said Dave Neumann, founder and board president of the technology company.

And he says it’s all Mayor Steve Bach’s fault, because his staff and one City Council member have created a toxic environment for business.

The e-mail and its accusations are the latest in a months-long string of political wrangling that put the company in financial jeopardy.

Neumann

Neumann

“There will be no new product announcements for us in the near future because of the situation that currently exists with the mayor, the city attorney (Chris Melcher) and Councilmember (Tim) Leigh,” Neumann said in an e-mail. “Note that we have tried to set a meeting of our new CEO Todd Tiahrt with Mayor Bach to discuss our situation.”

And that’s where Neumann’s e-mail took an odd turn.

“The best we were offered was a clandestine meeting at a private residence at 6:30 a.m. with the Mayor and his planned new City Council president, Merv Bennett,” he said.

Neumann said he declined the secretive meeting, and “surrogates” of Bach told him that Bach planned to control the new council and “the first act of the new council will be to kill our contract with Colorado Springs Utilities. In addition, we were told ‘Don’t get emotional; deal with it and salvage as much as you can. It will go better for you if you go quietly. No scorched earth.’”

But city officials deny Neumann’s version of events.

“The City categorically denies Mr. Neumann’s allegations about the Mayor, the City Attorney, Councilmembers Bennett or Leigh, and the ‘unnamed surrogates’ who are unknown,” the cityofficials said in a statement. “It is unfortunate that Mr. Neumann has chosen to make desperate and baseless criticisms, rather than focusing on what appear to be serious difficulties with the company’s operations and business model.”

The layoffs, Neumann said, are because the company isn’t sure what might happen after the City Council elections in April.

“We currently do not know how a small, high-tech business like ours can survive the toxic Colorado Springs business environment being created by the mayor, the city attorney and Councilmember Leigh with their lies, threats, violations of the City Charter and Code of Ethics and behind-closed-door deals with Xcel and the Sierra Club,” Neumann said.

“The appearance to the nation of an unstable, unfriendly and autocratic city government with its unprovoked attacks against the strongest and one of the best performing public institutions in the nation – Colorado Springs Utilities – is doing tremendous damage.”

The city said he should contact CSU and the City Council about the status of his contract.

“The City recommends Mr. Neumann contact City Council and CSU management with regard to any questions about the status of the Neumann Systems contract, since Council and CSU management have full authority over Neumann Systems,” the statement said. “It is unfortunate that Neumann Systems is having trouble generating sufficient customers or revenue to sustain their business model and expenses. The City certainly wishes Neumann Systems well as they seek to be a viable and independent company in the future.”

Bach also issued a categorical denial of Neumann’s claims.

“Mr. Neumann’s allegations are false,” he said in an email. “Neither his firm, his new CEO  or he has attempted to make an appointment with me. I would be glad to meet with them, but do not see the relevance, given that Mr. Neumann’s company is a vendor for CSU which is controlled by City Council, acting as the Utility Board.”

The mayor said he was not impeding NSG’s company.

“Again, City Council acting as the Utility Board has statutory authority over CSU,” he said. “I have none. Mr. Neumann should take up his concern with Scott Hente, chairman of the Utility Board and Council President, who leads the Utility Board/Council.”

And Leigh denies having a particular beef with Neumann or the NeuStream. Instead, he said he was merely asking the questions needed to do his fiduciary duty as a Utilities board member.

“Neumann Systems Group’s part of the conversation is becoming less and less important,” Leigh said. “We’re about to be overrun by larger issues about coal — whether we want it or not.  A very large conversation at CSU needs to occur. It will quickly become apparent with new EPA mandates which are being generated by Washington that the NSG conversation will become significantly less important to the greater conversation which is, how we deliver the lowest cost, most reliable power to the city.”

Neumann isn’t going away quietly, despite the advice from the unnamed “surrogates.”

He’s fought allegations against NSG for more than a year, even filing an ethics complaint against Leigh, a member of City Council who has publicly said that the NeuStream isn’t good business for Utilities. As a member of City Council, Leigh sits on the Utilities Board of Directors. He’s repeatedly tried to get Neumann’s contract revoked , but the majority of Council is standing behind the multi-million project.

In the meantime, CSU continues to honor its contract with Neumann. Equipment has been ordered, and is waiting to be installed at the Martin Drake plant. CSU has already spent millions on the project, which started in 2007, and will remove 97 percent of sulfur dioxide from emissions. Traditional scrubbers only clean 90 percent of SOX from coal emissions – and the NeuStream is said to use less water, less electricity and less space than more traditional methods.

The NeuStream has received third-party approval through the Electric Power Research Institute, an independent nonprofit organization that performs research and development in the electricity industry. The Colorado Department of Public Health and Environment’s Air Quality Division followed progress on the NeuStream for more than three years before allowing CSU to use the technology to meet regional haze requirements.

The company has also received a grant from the Department of Energy to explore the possible use of the NeuStream to sequester carbon dioxide in coal emissions, and late last year was nominated for an Edison Award, which represent “game changing” products, services, excellence and leadership in innovation. NSG was nominated by a member of the awards organization’s steering committee.

 

But despite its apparent promise, NeuStream and NSG have both come under fire by some city leaders who claim it isn’t proven to work, it costs too much money and that the days of coal-fired power plants are numbered. Leigh, who’s running for office again, has been one of the most vocal opponents – saying CSU shouldn’t be in the research-and-development business.

Another wrench was thrown into its business plan late last year, when the Sierra Club threatened to sue CSU for violations of the federal Clean Air Act. No suit has yet been filed, and the Sierra Club acknowledges its real goal is to shut down the coal-fired power plant.

For his part, Neumann said the company is proud of its “proven and independently validated technology and the potential it offers for cleaning our air and over time, bringing thousands of jobs to the Springs.”

But he is shocked by the behind-the-scenes political maneuvering.

“We are appalled that a very small group of very rich developers and wealthy individuals think they can own the Council (as they now own the Mayor) and can get the Council to act in a way that hurts our people but feeds their greedy self-interests,” he said.

The text of Neumann’s e-mail:

Rob Fredell has been laid off along with a total of about ten others. There will be no new product announcements for us in the near future because of the situation that currently exists with the Mayor, the City Attorney and Councilmember Leigh. Note that we have tried to set a meeting of our new CEO Todd Tiahrt with Mayor Bach to discuss our situation. He would not meet Mr. Tiahrt in his office. The best we were offered was a clandestine meeting at a private residence at 6:30AM with the Mayor and his planned new President of the Council, Merv Bennett. After we declined this style of meeting, we were told through these same surrogates of Mayor Bach that he will control the new Council and the first act of that new Council will be to kill our contract with CSU. In addition we were told (paraphrasing) “Don’t get emotional, deal with it and salvage as much as you can. It will go better for you if you go quietly. No scorched earth.”

We have no choice but to be prepared for the worst in April based on these threats. We currently do not know how a small, high tech business like ours can survive the toxic Colorado Springs business environment being created by the Mayor, the City Attorney and Councilmember Leigh with their lies, threats, violations of the City Charter and Code of Ethics and behind closed door deals with Xcel and the Sierra Club. The appearance to the nation of an unstable, unfriendly and autocratic City government with its unprovoked attacks against the strongest and one of the best performing public institutions in the nation–Colorado Springs Utilities, is doing tremendous damage. Furthermore, we are appalled that a very small group of very rich developers and wealthy individuals think that they can own the Council (as they now own the Mayor) and can get the Council to act in a way that hurts our people but feeds their greedy self-interests. As always we at NSG are proud of our proven and independently validated technology and the potential it offers for cleaning our air and over time bringing thousands of jobs to the Springs.

Text of City’s statement:

“The City recommends Mr. Neumann contact City Council and CSU management with regard to any questions about the status of the Neumann Systems contract, since Council and CSU management have full authority over Neumann Systems.  It is unfortunate that Neumann Systems is having trouble generating sufficient customers or revenue to sustain their business model and expenses.  The City certainly wishes Neumann Systems well as they seek to be a viable and independent company in the future.  The City categorically denies Mr. Neumann’s allegations about the Mayor, the City Attorney, Councilmembers Bennett or Leigh, and the “unnamed surrogates” who are unknown.  It is unfortunate that Mr. Neumann has chosen to make desperate and baseless criticisms, rather than focusing on what appear to be serious difficulties with the company’s operations and business model.”

 

6 Responses to Neumann Systems Group lays off ‘about’ 11, blames mayor

  1. Damage Control: RLF/RBA Anybody?

    Rick Wehner
    February 28, 2013 at 6:23 pm

  2. Interesting comment from CSU EAG:

    “Bob Greene and I were warned by an organization leader who works closely with the Mayor that, “you don’t want to upset the Mayor or he will take you out at the knees.” We were trying to find a safe way for our employees to participate in the political process without fear of retribution.”

    Is it time to step back from the whole contentious Utilities process before it becomes yet a further detriment to firms considering Colorado Springs as a potential site? Major firms who might consider Colorado Springs as a potential site seem slow in bringing the 6000 new jobs a year to the region as it is. How many of the firms already in town are giving thought to leaving?

    Maybe a ‘time-out’ is in order until cooler heads are elected to office.

    Donna Knight
    March 1, 2013 at 8:53 am

  3. Amy, Thank you for having a much more balanced article this time around. Great reporting! you are really going to bring it out with this one!

    Joe
    March 1, 2013 at 10:14 am

  4. Words cannot describe how lucky we feel to be leaving this burg. If this company was so hot, it would have other markets out side Colorado Springs. His email reads like one from someone afraid the CIA and FBI are following them.. Nuts.

    Not sure well stay
    March 1, 2013 at 6:27 pm

  5. Are you folks glad now that Field Marshal Bach was elected? An airport with little or no direct service, a local political climate that is radioactive at best, and a true lack of leadership/vision personify Colorado Springs. Ever wonder WHY businesses are NOT beating a path to our little village?

    Northern Colorado prospers while the Pikes Peak Region holds on to antiquated notions like “You can always eat scenery!” Wonder what happens when some of the bloated programs from the military industrial complex here begin to slim down due to budget cuts! Well we can begin to write the story … “Once upon a time ….”

    RJF
    March 4, 2013 at 12:03 pm

  6. A concern we should all have is what will happen to our utility rates if Colorado Springs Utility is sold (to XCEL), as appears to be the path of the city government. Neumann Systems appears to be a cost-effective and efficient solution to stringent EPA guidelines for coal-fired plants. Coal is still an extremely viable and low-cost powerplant solution, especially when compared to the cost of building a new plant. Colorado Springs consumers and businesses will pay dearly in years to come for such short-term political gaming.

    concerned
    March 4, 2013 at 6:13 pm