PEC settlement robs co-op membership

The members who were looking for closure, for atonement, for justice, will have to look elsewhere. But not in civil court. That boat has sailed

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Editor's Note: The following editorial is from Marble Falls-based The River Cities Daily Tribune March 10, 2009 edition, page 4:

Right about now, the 220,000 members of the Pedernales Electric Cooperative might be thinking, "We were robbed."

And they would have every right to do so.

The Texas Third Court of Appeals decided last week to uphold a lower court's decision to settle a civil suit against the co-op that protects PEC leadership from any further legal action.

The appellate court also reaffirmed 250th state District Judge John Dietz's decision to award only $23 million in capital credit rebates to members, not the original $226 million sought by the litigants.

PEC has argued it needs all those millions to continue investing in growth, new technology and member services. Fair enough. As Dietz said, it is important to make sure the lights turn on every time a PEC member flips a switch.

Yet a quick calculation that takes into account directors' and advisory directors' salaries covering the time when the lawsuit was filed two years ago adds up to a hefty sum not re-invested but squandered by a self-indulgent board of directors.

What is also galling is the fact the settlement protects PEC board members who were in power at the time the suit was filed from further civil action.

They literally get to walk away, an outrageous proposition at best. In a nutshell, PEC members have been robbed of the right to redress any wrongs in a future civil action against those responsible for questionable or disastrous business practices that plagued the co-op for years.

These are the same leaders who ran up tremendous expense accounts on Las Vegas shows, lived the high life at fancy restaurants, overpaid themselves tremendously simply by attending a couple of meetings a month, maintained a closed election system that anointed hand-picked successors, invested in subsidiary companies that lost millions and awarded themselves checks from a forgotten bank account because they felt like they were doing a good job.

PEC would say any further civil action could result in the members themselves having to pony up for more legal fees and damages.

The members who were looking for closure, for atonement, for justice, will have to look elsewhere. But not in civil court. That boat has sailed.

The only true winners are the lawyers on both sides who walked away from the proceedings with plenty of capital lining their own pockets after the settlement was reached.

What emerged from the original filing was a watered-down agreement that indemnified an ethics challenged board and guaranteed that justice was put out of reach.

There may still be hope. A Blanco County grand jury is looking into possible criminal violations at PEC, and the settlement from the civil suit does not absolve any PEC leader from criminal charges.

In the meantime, Appeals Court Judge Diane M. Henson's 27-page opinion upholds the settlement in the civil lawsuit, which was issued in May 2008 by Dietz in Travis County.

David Allen Hall of Blanco, who filed the appeal, said he is not sure whether he'll continue to seek redress, which would involve turning to the state Supreme Court.

The class-action suit filed in 2007 by plaintiffs John Worrall, Glenn Van Shellenbeck and Linda Evans accused the co-op's board of directors of negligence and breach of contract, claiming directors wrongly overcompensated themselves while overcharging PEC members and refusing to return the extra cash.

The plaintiffs also called for the immediate resignation of the co-op's board of directors and senior leadership.

More than 260 co-op members voiced or wrote their objections to the settlement. They were in an uproar.

They should be in even more of an uproar now.

To be sure, PEC has undertaken a wave of reforms. There is new leadership that has been progressive, open and willing to change.

The co-op also commissioned an outside audit that revealed decades of questionable business practices.

Yet four original board members continue to sit and draw pay though they looked the other way as PEC took a wrong turn: Vi Cloud, R.B. Felps, O.C. Harmon and Val Smith.

In this instance history will show the judge sold co-op members short.

As the old boxer once opined, "We wuz robbed!" And when it comes to this fight, PEC ko'd its own members, thanks to a legal decision that was certainly unfair.