More questionable spending by CMEEC uncovered in audit

Norwich — The utility cooperative at the center of controversial trips to the Kentucky Derby that led to federal indictments of five officials also spent more than $27,000 on golf outings, live bands, food and gift certificates at employee parties and even $350 for “attire for the governor’s ball,” a five-year forensic audit has revealed.

In addition, the Connecticut Municipal Electric Energy Cooperative paid more than $99,000 in donations to a chamber of commerce over the five-year period covered by the audit and another $70,000 to an initiative related to the effort to create a memorial in Groton with the USS Groton submarine sail.

The expenses were revealed through questions posed by Connecticut Municipal Ratepayer Advocate Bill Kowalski, who sought more detailed information on questionable CMEEC expenses discovered by forensic auditor CohnReznick. The audit was required in a 2017 state law that called for closer examination of CMEEC’s finances in light of the Kentucky Derby controversy.

CMEEC spent more than $1.1 million on lavish trips to the Kentucky Derby from 2013 through 2016 for board members, top staff, invited guests and family members. CMEEC CEO Drew Rankin, then-Chief Financial Officer Edward Pryor, then-Norwich Public Utilities General Manager John Bilda and former board members James Sullivan of Norwich and Edward DeMuzzio of Groton were indicted Nov. 8 on federal charges of one count each of conspiracy and three counts each of theft from a program receiving federal funds.

Rankin is on unpaid administrative leave pending a CMEEC board committee’s investigation into his actions. Pryor also was placed on unpaid leave Nov. 9, but he retired as of Jan. 1. The Norwich Board of Public Utilities Commissioners reached a separation agreement with Bilda that calls for him to retire in April.

The types of expenses discovered in the forensic audit indicate the need for “additional oversight and continued review of CMEEC’s operations,” Kowalski said to the board of directors at Thursday’s meeting.

Kowalski had requested an itemized list of expenses for which the auditor “could not find a legitimate business purpose.” The information he received included:

  • Over $4,600 for board of directors golf outings in 2015 and 2016
  • Over $13,700 for bands, food and massage gift certificates for employee parties over three years
  • Over $8,700 for artwork
  • Over $350 for “attire for the governor’s ball”

“Why are CMEEC downstream ratepayers subsidizing CMEEC staff clothing purchases?” Kowalski said Thursday.

He also questioned the return on investment from CMEEC's $99,000 in donations to the chamber of commerce over the five-year audit period and over $70,000 to an initiative related to the USS Groton.

CMEEC officials did not respond to Kowalski’s comments, given during public comment period at the start of Thursday’s board meeting.

During a break in the meeting, Groton City Mayor and CMEEC board member Keith Hedrick said the USS Groton Sail Foundation had asked CMEEC for a donation as part of its fundraising to create a memorial in Groton using the sail — the tower atop a submarine — from the decommissioned USS Groton, a Los Angeles-class fast-attack submarine. Hedrick said an agreement with CMEEC was made several years ago and signed by Rankin to donate to the project.

Information presented Thursday did not specify which chamber or chambers received CMEEC donations. Rankin had served as vice chairman of the Chamber of Commerce of Eastern Connecticut board, and DeMuzzio was treasurer. Both resigned following the indictments.

Chamber of Commerce of Eastern Connecticut President Tony Sheridan, who did not attend the CMEEC meeting, said later Thursday that as a benefactor — those that contribute more than their dues, to support the business community — CMEEC pays $20,000 per year. But Sheridan said he did not recall whether CMEEC had been a benefactor for five years, and he would be “very surprised” if CMEEC had contributed as much as $99,000 to the chamber, indicating perhaps some of that money was for other chambers.

The benefits of being a benefactor include free access to all programs, promotion on the chamber website, lobbying work and more, Sheridan said. The Day also is a chamber benefactor.

Kowalski applauded “in concept” CMEEC’s plan to create a new donation policy but said: “I reserve full support until given the opportunity to review a draft and suggest revisions.”

CMEEC interim CEO Mike Lane told the board Thursday all charitable contributions and philanthropic donations are on hold until the new policy is adopted by the board. The 2019 CMEEC budget includes $100,000 for charitable donations, he said.

“A public electric cooperative made up of public entities needs to limit its expenditures to those which directly serve the public, through the provision of low-cost electric power,” Kowalski said. “There is no benefit to ratepayers from expensive artwork, golf outings, excessive donations to pet projects and live bands at office parties. Based on evidence presented by the forensic audit, it would appear that self-regulation alone has not been in the downstream ratepayers’ best interests to date, and that some form of additional oversight is warranted.”

Day Staff Writer Erica Moser contributed to this report.

c.bessette@theday.com

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