A Question Regarding a PEC Payment to Zachary Hudler

Hudler's engagement provides a convenient example, given his billing of over $12,000 for a little over two months’ work (a period that included Christmas and New Year's), for representing just one PEC employee. Wahlberg's and Calfas's engagements (see attached “Summary”) are almost as good as examples of our managers' (and directors') lack of concern for cost

E-mail from Milton Hawkins to pec4u watchdogs, media and legislators

Editor's Note: We rarely get an inside look at how our power cooperative, the PEC, spends its money. PEC has a long history of shady management and financial dealings. The Bennie Fuelberg/Bud Burnett days are gone for sure, but vestiges of the old guard remain. Milton Hawkins, a retired English professor, who makes his home in Blanco County near Johns0n City (the headquarters of the PEC), has spent more than two years digging and reporting on the remarkable changes inside and outside the PEC – from the end of the good old boy days to the reforms in governance and management now taking shape. But even now, things are going down that are a cause for concern to ratepayers. In his latest dispatches, Mr. Hawkins raises serious questions about payments for legal services made by PEC in the time leading up to, and during, the criminal investigations that led to the indictments against two former top executives. One of the trials is set to start in November in Fredericksburg.

In prior reports, Hawkins has exposed millions in spending that has every appearance of pure wastefulness. We're all paying for it in our electric rates – a small fraction, but still. See his examples below the E. B. Price question.

Contact Milton any time at milton.hawkins@gmail.com for the document attachments he refers to, or any other questions you might have. He can cite chapter and verse of his information sources. (We are unable to upload PDF attachments.)

Send your comments and news tips to roundup.editor@gmail.com, to Mr. Hawkins, or click on the "comments" button at the bottom of the story



Guest Commentary


By Milton Hawkins

Friends,

On the document “Summary of Outside Legal Statements from January 2008 – January 2010 related to Criminal investigation and Grand Jury Proceedings,” which was released at the 16 August 2010 Board meeting, a Zachary P. Hudler is shown as having represented “One Employee” from “11-10-2008 to 1-21-2009” for the sum of $12,004.00.

On 15 January 2009, Luis Garcia, Interim General Counsel, wrote Johnson City attorney Hudler and conveyed the following message: Please note that Pedernales Electric Cooperative will no longer pay for any further legal services on this matter effective January 1, 2009. Please accept the enclosed payment as our final payment on this matter.

QUESTION: Why, after writing this message to Hudler, did Luis Garcia approve a payment for “Legal Services Rendered” by Hudler for the period 1 January 2009 to 21 January 2009 in the amount of $3,225?

I’m attaching five documents: (1) the “Summary,” (2) Garcia’s letter to Hudler, (3) a copy of Hudler’s statement showing Garcia’s having signed as “Approver,” (4) Hudler’s complete statement of 10 February 2009, showing services rendered from 2 January 2009 through 21 January 2009, and (5) Hudler’s statement showing charges for formulating strategies and travel to and from Austin.

Is this just another instance of the corporate culture (“Cost doesn’t matter”) at work?

Even without Garcia’s approval of this payment of $3,225, we would have spent almost $9,000 in furnishing representation for this one employee, who was subpoenaed to appear and apparently did appear before the grand jury.

Given the extensive redactions, it’s difficult to determine what Hudler’s “services” consisted of, but here are a few words from his billing that may give us a clue: “review and analyze,” “travel to and from Austin,” and “formulate strategies.” One wonders what strategies were formulated, for what purpose, to cope with what contingency or contingencies.

That was expensive travel, by the way: 4 hours @ $250/hour = $1,000, plus 100 miles @ 44 cents/mile = $44, for a total of $1,044.

Of course all this begs the larger question: Why was any of this expense necessary in the first place?

Why didn’t PEC’s general counsel issue through the office of the general manager instructions that any PEC employee called by the grand jury was expected to cooperate fully, to produce whatever documents and records were requested, and, when asked to testify, to tell the truth, the whole truth, and nothing but the truth?

For employees who had nothing to hide, why wouldn’t that advice have been enough? Why did we need to pay tens of thousands of dollars so that attorneys could study and analyze and consult and strategize?


A Question Regarding the Representation of E.B. Price

As you may know, E.B. Price is a former PEC Board member, and for a time in 2008 he served as acting president of the Board. He is also the father of Bill Price, who is one of two individuals who figure prominently in the investigations leading to the indictments of Bennie Fuelberg and Walter Demond.

In the document “Summary of Outside Legal Statements from January 2008 – January 2010 related to Criminal investigation and Grand Jury Proceedings,” which was released at the 16 August 2010 Board meeting, the Minton, Burton, Foster & Collins law firm is listed as having represented “Ten Former Board Members” during the period “3-12-2009 to 6-17-2009” for a total payment of $17,540.82.

According to an e-mail message from Rebecca Haddock, legal assistant to Samuel Bassett, an attorney in the law firm of Minton, Burton, Foster & Collins, the following Board members were represented at the grand jury hearings: Vi Cloud, Barbara Shaffer, DL Ruff, Rusty Allen, Robert Reed, Ola Armstrong, Stuart Nunnally, OC Harmon, Val Smith, and RB Felps. That is a total of ten (10) represented by the Minton firm.

On the “Summary” listing, no other firm is shown as having represented Board members.

It is well attested that Mr. Price appeared before the grand jury, yet his name does not appear in Ms. Haddock’s list, which does include ten former directors.

QUESTION: Did PEC furnish representation for its former Board member and acting Board president E.B. Price? If it did, why is the firm providing the representation not listed on the document distributed at the 16 August Board meeting? If PEC did not furnish representation, was a request for representation made and denied? And if a request were made and denied, what was the basis for the denial?

I’m attaching three documents: (1) the “Summary,” (2) a copy of Rebecca Haddock’s e-mail message listing the ten former directors represented by the Minton firm’s attorneys, and (3) a listing of people appearing before the grand jury.


The infamous survey, the River Palace and expensive payment centers

Readers may remember the infamous survey conducted by Decision Analyst in which, in exchange for responding to some questions, 1,000 PEC owner-members were to receive $10 each. That survey was conducted (to quote from former general manager Juan Garza’s defense of it) as a part of PEC’s comprehensive website design. PEC agreed to have research conducted that would enable our web partner, Tocquigny, to group responses according to similar values and engagement with PEC. The research, called a segmentation study, is standard practice and part of a comprehensive initiative to help PEC better communicate with members and deliver improved services through the PEC website.

Those responding to the survey got a total of $10,000. I do not know how much was paid to Decision Analyst, but I do now know how much the services of our “web partner,” Tocquigny, are costing us. Tocquigny’s part in this “comprehensive initiative” involving our web site is costing us $735,325.

Now I’m no web design expert, nor have I commissioned a survey of users, but as one who has used the PEC web site extensively, I cannot believe that a comprehensive “segmentation study” and the expenditure of three quarters of a million dollars are required to improve the existing site.

I and I’m sure many others would have been happy to offer suggestions for free, and surely in an employee force of over 900 people, with some sixteen or so in communications and over thirty in IT, we could have made significant improvements on our own, and brought in technical experts as necessary on an hourly basis. Better navigation and the addition of content in more accessible form don’t require interminable briefings, PowerPoint presentations, and after-the-contract-has-been-let sales jobs.

Did anyone ever ask whether or not the web site could be improved for less? Or was the decision to launch this expensive project made without due consideration of the cost involved?

Here’s a second example. Readers may recall that PEC owns a very large building just north of the city limits of Johnson City. Formerly known as the River Palace, it is now the PEC Training Center. Mr. Fuelberg and the Board (actually we owners) paid $900,000 for this building back in 2004, and I suspect that over the years we have plowed another $900,000 or more into improvements. To say that this facility is underutilized would be an understatement of the first order.

Yet, very recently, in order to accommodate the people working on the LINKS project, we have leased two portable buildings for two years and positioned them on PEC property on the southern edge of the city. One is costing $33,600 a year, for a two-year projected total cost of $67,292; the other is costing $8,400 a year, with a projected contract total of $16,823. In addition, we have obtained cubicles for these buildings at a projected contract cost of $46,843. And we appear to have spent another $42,376 on “landscaping” for these buildings.

Why, when we have available space in a building we already own, one conveniently located, well equipped, with plenty of parking and landscaping in place, would we lease and equip portable buildings? Was any consideration given to the cost involved?

Here’s a third example. We have some seventeen fully staffed payment centers at a time when payments can be made automatically or made with a click or a call, not to mention a stamp. To keep each center in operation, we must pay rent or maintain an investment in property and improvements. In addition, we have the cost of utilities, insurance, taxes, maintenance, cleaning, equipment, service contracts, staffing, and travel, to mention only the most obvious.

To illustrate, the payment office in Blanco has an assessed value of $467,760, and the 2009 tax bill was $8,283.10. (We have filed an appeal regarding this assessment, but those are the current figures.) The office is open from 7:00 a.m. to 5:30 p.m., Monday through Friday, so the staffing cost is significant. We pay $600 a year just for cleaning. (I do not yet have figures for the other expenses.)

Now some will say that we need to maintain a local presence, that some people like to pay in person, and that we’re supporting the local community. Yes, but at what cost? That is the question, for this and every other payment center. Given the multiple ways to pay, and in this case the fact that Blanco is only a ten-minute drive from Johnson City, is keeping this payment center open a wise use of resources?