Federal judge denies motions to dismiss charges in CMEEC Kentucky Derby trips
A New Haven federal court judge on Friday denied nearly all motions to dismiss charges against the five defendants indicted 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.
U.S. District Judge Jeffrey A. Meyer issued a 37-page ruling Friday denying several motions to dismiss the charges of conspiracy and theft from a federally funded program. The five former CMEEC officials had argued in motions, and during a July 15 court hearing on the motions, that the entire case should be dismissed as an overreach of government authority on conduct allowed by the state law that created CMEEC.
“I conclude that the indictment on its face validly alleges that the five defendants conspired to and misappropriated funds for personal purposes,” Meyer wrote in his decision, “notwithstanding their fact-based arguments that they acted for valid corporate purposes.”
The five officials, former CMEEC CEO Drew Rankin, who was fired by CMEEC May 9; 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, 2018, 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.
Meyer did dismiss one count against Sullivan because he had left CMEEC in October 2015 and was not there during the 2016 Kentucky Derby trip planning and did not attend the 2016 trip.
Addressing each motion separately, Meyer concluded on some motions that the arguments made by the five defendants were points they could make in their defense during a trial.
The trial is tentatively scheduled to start in February.
Among their points, the former CMEEC officials had argued that the board of directors was fully aware of the Kentucky Derby trips and had authorized them through the budget. They also argued that the trips were legitimate “strategic retreats” and that state law had granted CMEEC the authority of private corporations, which often hold corporate retreats.
Meyer countered that the specific state law that formed CMEEC gave the cooperative corporate authority but only in its capacity to purchase power for the lowest possible prices on behalf of its member municipal utilities.
“Even if I were to adopt a reading of the indictment that the board fully approved of these trips,” Meyer wrote, “it does not follow that the indictment would thereby fail as a matter of law to allege the crimes of conspiracy and misappropriation of funds. Indeed, if all the leaders of a company join en masse to loot the company for their private benefit, the fact of board approval would not mean that no crime occurred.”
Meyer wrote regarding the argument that the trips were strategic retreats that the indictments showed there was no business conducted during the trips. He wrote that calling them strategic retreats “reflects that these characterizations were made as window-dressing and with awareness that there was no legitimate connection between the horse-racing and golfing ventures and CMEEC’s business to efficiently furnish low-cost energy for the benefit of CMEEC’s member towns.”
CMEEC is owned by six member municipal utilities: Norwich Public Utilities, Groton Utilities, Bozrah Light & Power, Jewett City Department of Public Utilities and Third Taxing District and South Norwalk Electric and Water, both in Norwalk.
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