Legal costs in CMEEC federal criminal case now top $2.6 million
Legal bills now exceed $2.6 million in connection with five former utility cooperative officials indicted on federal corruption charges for their roles in planning lavish trips to the Kentucky Derby and a West Virginia golf resort.
Because the five defendants were executive staff or board members of the Connecticut Municipal Electric Energy Cooperative when the trips occurred, their legal costs are being covered by the cooperative. CMEEC, however, has filed a federal civil lawsuit against the insurance company, which it feels should be paying the legal costs.
CMEEC officials and the state municipal ratepayer advocate are pursuing other avenues for possible reimbursement of the costs from the five defendants.
Former CMEEC CEO Drew Rankin; former CMEEC Chief Financial Officer Edward Pryor; former Norwich Public Utilities General Manager John Bilda, the former board vice chairman; former board Chairman James Sullivan of Norwich; and former board Treasurer Edward DeMuzzio of Groton face charges of conspiracy and theft from a program receiving federal funds. CMEEC hosted trips to the Kentucky Derby called board retreats from 2013 through 2016 for top staff, board members, family and dozens of invited guests. Two trips were taken to The Greenbrier resort in West Virginia.
The trial is scheduled to begin in October in the U.S. District Court in New Haven. The defendants are seeking to move the trial to the Hartford district, which would not draw potential jurors from municipalities of CMEEC ratepayers or a judge's ruling to exempt CMEEC ratepayers from jury selection.
David Silverstone, the state independent municipal ratepayer consumer advocate, said he has contacted the Victims Assistance Unit of the U.S. Attorney’s Office to seek to recover legal costs in the criminal case, should there be a plea agreement or a finding of guilty in the case.
“The real victims of the alleged actions are the consumers of the CMEEC members,” Silverstone said in a written statement to The Day. “These consumers have suffered financially as a result of the actions of the defendants. As a further injury to these consumers, CMEEC, and hence its customers, have been forced to pay legal fees for these defendants.”
According to information provided by CMEEC to The Day this week, the total legal costs from November 2016 — when CMEEC received the first federal subpoenas at the start of the criminal investigation — through January 2020 totaled $2,157,461, divided among several law firms.
In addition to paying defendants' legal fees, CMEEC is incurring its own legal costs, totaling $483,273 through January 2020 starting with initial response to federal subpoenas prior to the indictments and continuing in response to requests for numerous additional documents in the criminal proceedings.
The firm Finn, Dixon & Herling, representing Pryor, has submitted the highest total legal bills at $1,015,150. Pryor separately sued CMEEC in a civil case in federal court at the start of the criminal proceedings to ensure that CMEEC would advance the five defendants their legal costs for the criminal cases. U.S. District Judge Jeffrey A. Meyer ordered CMEEC to pay, with the cooperative reserving the right to challenge the payments later “based on concerns for its ratepayers, among other reasons,” the order stated.
Rankin’s attorneys from the firm Izard, Kindall & Raabe submitted bills totaling $399,298, and the firm Cowdrey & Murphy representing Bilda has billed CMEEC $375,999. Sullivan’s attorneys at the Law Offices of Hubert Santos have billed $209,307. DeMuzzio started with the firm Geraghty & Bonnano, which had billed CMEEC $1,350, before switching to Jacobs & Dow, which has billed $156,356 through January.
CMEEC officials said this week that the cooperative’s general funds have been paying for the legal costs, and the costs will be allocated to the cooperative’s member utilities “in the same manner as CMEEC’s other costs.”
CMEEC is owned by six municipally owned electric utilities: Norwich Public Utilities, Groton Utilities, Bozrah Light & Power, Jewett City Department of Public Utilities and the Third Taxing District and South Norwalk Water and Electric, both in Norwalk. Groton Utilities owns 39% of CMEEC, BL&P owns 18%, and NPU owns just over 27%, officials from those utilities said.
“The amount of legal fees and costs associated with the subpoenas and the indictments is significant,” new CMEEC CEO Dave Meisinger said in a written statement to The Day. “CMEEC and its members are currently covering these costs as they are incurred, but ratepayers should be confident that CMEEC is doing everything within its legal rights to minimize these fees and costs as well as position itself to be reimbursed for these costs.”
In the summer of 2018, prior to the criminal indictments, all five CMEEC officials then under investigation and later indicted signed an “Affirmation and Undertaking” statement each saying they acted “in good faith and in a manner that I reasonably believed to be in, or not opposed to, the best interests of CMEEC, and I had reasonable belief that my conduct was lawful.”
The statement continued, “if it is ultimately determined” the person is not entitled to indemnification, “I will promptly repay CMEEC on request for the amounts of legal fees, expenses and other costs that CMEEC has advanced or reimbursed on my behalf for legal fees and expenses.”
Meisinger said CMEEC would “pursue the indicted individuals for reimbursement of these fees if they are found guilty or are otherwise not exonerated in the criminal case,” according to the affirmation agreements.
The CMEEC board fired former CEO Rankin last May, and Rankin is challenging the termination through a state arbitration process. Meisinger said CMEEC is seeking reparation as part of that arbitration process.
After the National Union Fire Insurance Co. of Pittsburgh denied coverage of the legal costs under CMEEC’s indemnification insurance policy, CMEEC filed a federal civil suit against the company. The case is pending, also in the New Haven District Court.
Along with the requirement to cover attorneys’ fees for the defendants, CMEEC would be obligated to pay reasonable fees of expert witnesses the defendants plan to call in the case. In a court filing in late December, the defendants said they plan to call accounting, income tax and internal investigations expert John Salomon, of the Chicago firm Berkeley Research Group LLC, to testify on their behalf.
CMEEC officials said the cooperative does scrutinize all submitted legal bills and costs to determine whether they are “reasonable costs” and several times sent invoices back to the law firms with questions about the “reasonableness of the fees and/or costs.”
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