Kentucky Derby defendants ask judge to dismiss charges

New Haven — The five defendants charged in federal indictments with conspiracy and theft in connection with lavish trips to the Kentucky Derby and a West Virginia golf resort when they were members of the Connecticut Municipal Electric Energy Cooperative argued before a federal judge Monday that the entire criminal case should be dismissed as an overreach of government authority on conduct allowed by the state law that created CMEEC.

U.S. District Judge Jeffrey A. Meyer heard arguments from attorneys representing the indicted defendants for three hours Thursday regarding their motions to dismiss all charges. Following the hearing, Meyer thanked the participants and said he would issue a ruling as soon as possible.

The five officials, former CMEEC CEO Drew Rankin, who was fired by CMEEC May 9 following a closed-door meeting; former CMEEC Chief Financial Officer Edward Pryor; former Norwich Public Utilities General Manager John Bilda; and former CMEEC board members James Sullivan of Norwich and Edward DeMuzzio of Groton were indicted Nov. 8 following a two-year investigation by the FBI and IRS.

Each was charged with one count of conspiracy and three counts of theft from a program receiving federal funds for their roles in planning CMEEC-hosted and -funded trips to the Kentucky Derby for CMEEC board members, top staff, family members and dozens of invited guests, including vendors and local politicians. The trips from 2013 through 2016, plus unrefunded deposits for a 2017 trip, collectively cost $1.2 million using the cooperative’s profit margin account revenues otherwise designated for electric rate stabilization for member municipal utilities.

Rankin and Sullivan face the same charges in a second indictment for CMEEC’s payments of nearly $100,000 in alleged personal expenses and travel for Sullivan. Sullivan, the former cooperative board chairman, is a federal lobbyist but was not a registered lobbyist for CMEEC. 

Attorney Craig A. Raabe, representing Rankin, led the defendants’ arguments, calling the federal charges an overreach of authority, and contending that the information was based on false and misleading information provided to the grand jury that the Kentucky Derby trips were not authorized by the CMEEC board of directors. One motion called the indictments “baseless media-driven prosecution.”

Raabe argued that the trips were not “wholly personal expenses” for the five indicted participants, but rather were a much broader corporate retreat allowed under the state law that created CMEEC and authorized the energy cooperative to act as a corporation. Raabe said the 2016 trip alone, with 40 tickets to the Derby, could not have been meant for just the five defendants.

Meyer countered that as he read the state law that created CMEEC in 1976, it did not give a blanket authority to act as a corporation but prefaced that with the authority to create power purchase contracts and agreements to provide lower cost power to members.

Raabe argued that the trips were beneficial to CMEEC and its municipal member utilities’ ratepayers, because they fostered better cooperation and team building among the board members and vendors. He said corporations routinely go on retreats for those purposes.

“The federal government shouldn’t be meddling into these decisions after the fact,” Raabe said.

Meyer asked Raabe whether that logic also would apply if the CMEEC board proposed spending $40,000 to buy diamond rings for their spouses to foster cooperation and team building.

Raabe responded that the proper limits on CMEEC’s authority rested with the state legislature, which did enact changes to the law to restrict CMEEC retreats to within the state of Connecticut and mandated that they contain business agendas.

Assistant U.S. Attorney Sarah P. Karwan argued that the evidence clearly showed the alleged co-conspirators worked to hide the trip expenses within the CMEEC budget as “board expenses” drawn from the so-called Margin Fund containing the cooperative’s business profit money, which is distributed to members for rate stabilization. Karwan said member CMEEC municipalities were unaware of the trips.

Similar to the question posed to Raabe on the diamond rings, Meyer asked Karwan if CMEEC would have been OK to authorize a retreat to a Hartford Yard Goats minor league baseball game instead of the Kentucky Derby for a corporate retreat.

Karwan pointed to conditions in federal grants CMEEC and member towns received — one in the millions of dollars — prohibit gifts in excess of $5,000. She said if a total spent on trips to ballgames or other retreats exceeded those limits, they too would not be allowed.

Attorney Thomas Murphy, representing Bilda, argued that money in the Margin Fund belongs to CMEEC until the money is allocated to the member utilities. He said the government’s position that all CMEEC money belongs to the member utilities as soon as it comes in is erroneous.

Karwan countered that if the money were not coming from the Margin account, then the CMEEC leaders would not have needed to create a “contra-margin account,” as was done to move money for the Derby trips. She added that the indictment alleges theft from both CMEEC and its member utilities.

The indictment alleges that under the membership agreement, all revenue generated be allocated to the member utilities, “and that didn’t happen.”

Attorneys representing Pryor and DeMuzzio also argued that the indictments should be dismissed against their clients specifically. In Pryor’s case, attorney Michael Q. English said federal investigators misled Pryor in that they at first called him in for questioning as a witness, and then suddenly at one point informed him he would be a potential defendant and informed him he should obtain an attorney.

DeMuzzio’s attorney argued DeMuzzio was merely a board member and did not have authority to act alone in the alleged conspiracy. Karwan countered that DeMuzzio was one of four CMEEC officials who went on the initial trip to The Greenbrier resort in West Virginia.

Regarding the second indictment of Sullivan and Rankin, attorney Raabe for Rankin and attorney Trent LaLima representing Sullivan both argued that the indictment should be thrown out for lack of details in the alleged personal expenses. LaLima said the list of expenses provided by the government contained no details of what the expenses were for.

Karwan said the government would show at a trial that the expenses were for personal expenses.

LaLima said Sullivan could have been in Washington, D.C., gathering information for CMEEC on energy issues or pending legislation on energy issues during his repeated trips there. Sullivan is a registered federal lobbyist but is not a registered lobbyist for CMEEC.

Meyer cited specifics from the indictment alleging Rankin approved the expenses without board approval, which LaLima argued was Rankin’s appropriate role as the CEO.

“That sounds like a jury argument,” Meyer said.

c.bessette@theday.com

READER COMMENTS

Loading comments...
Hide Comments

TRENDING

PODCASTS