[Watchdogs] FYI, CoServ members file lawsuit
cperry15 at earthlink.net
Sat Feb 21 14:58:36 CST 2009
One of the tragic dilemmas we are witnessing is what happens when there is
no one watching the watchers. The SEC has apparently utterly failed in its
duty to regulate the securities industry - the collapse of the Ponzi scheme
known as the Stanford Financial Group being only this week's example. How
many tiers of oversight are needed to ensure the integrity of management of
any entity - whether coop, investor owned utility, or financial services
firm? There are numerous other examples of regulatory failure in the
securities, energy, and other commodities industries. Regulators can be
just as corrupt or inept as management of the regulated entity. Member
ownership and control is also no guarantee of financial integrity and
competence if the members are complacent and take comfort that someone else
is watching the store.
From: watchdogs-bounces at pec4u.org [mailto:watchdogs-bounces at pec4u.org] On
Behalf Of Lee Lawrence
Sent: Saturday, February 21, 2009 2:23 PM
To: Bill Christensen
Cc: watchdogs at pec4u.org
Subject: Re: [Watchdogs] FYI, CoServ members file lawsuit
Bill, Thanks for posting this information about CoServ. Electric cooperative
members in co-ops beyond PEC have suffered from a failure of coop management
to always put members' interest first. Hopefully the new bill sponsored by
Senator Fraser and Representative Rose will move toward rectifying a lack of
state oversight. Can we rely on co-op management to regulate themselves?
Have security traders or banks done a good job of regulating themselves? If
not monitored, do any of us always do the right thing?
The way I look at it, state regulation of the co-op industry has been
outsourced to private lawyers. They are our privatized regulators. They take
a risk and they seek a reward for that risk. I see first hand how much
effort is needed to take on entrenched groups of powerful utility managers.
Many people have ideological differences with the idea of outsourcing
regulation to lawyers, but when the state or federal government doesn't
regulate, who else will? We are told that co-ops are member regulated. But
most co-op members don't have the time, money, or expertise to devote to
such a difficult and risky task. Electric cooperatives operate with very
little regulatory oversight, and we have seen the results.
Thankfully we are a nation with a rule of law, and when corporations break
laws there are still consequences. The bill proposed by Senator Fraser and
Representative Rose will attempt to put layer of bureacracy in place which
might help in some cases, since it would allow the PUC to have a role in
arbitration between co-op members and co-op management. But will the PUC now
have a role that gives the commission real power? If the proposed bill had
been in place two years ago, would it have resulted in the Navigant report's
revelations? Could the PUC have forced new election rules at PEC, or could
the PUC have brought us a new General Manager at PEC? I applaud the bill,
but I don't want the current climate against lawyers to mean that Texas
co-op members have no recourse to ultimately turn to the courts for support
if necessary. Genuine change comes about when courts force bad actors to
follow the law, and lawyers are the conduit to that change. It worked for
PEC and I hope it works for the members at CoServ as well.
My husband Paul is involved in the CoServ lawsuit, after being approached by
one of their members. It is never easy to take on huge corporations who use
members' money to sabotage anyone who challenges the system. It's like David
fighting Goliath. The lawyers at least supply David with a slingshot. Lee
On Sat, Feb 21, 2009 at 2:06 AM, Bill Christensen
<billc_lists at greenbuilder.com> wrote:
Inspired by the changes at PEC over the last several years a group of
members of CoServ, the SECOND largest electrical coop in Texas with ~142,000
members, has recently filed suit.
In a lot of ways, it looks like similar shenanigans have been going on up
there. Rigged elections, multiple money-losing "for-profit" subsidiaries,
problems with Capital Credits, cronyism, Golden Parachutes, you name it.
A couple of big differences though: One is that there's already a
dissident, reform-minded Board member (Mark Glover has posted some info on
the watchdogs at pec4u.org list in the past). The other biggie is that they
got themselves in enough trouble with their subsidiaries that they went
Chapter 11 in 2002 (and after dumping a bunch of the subsidiaries and
pretending to dump their CEO and in-house legal counsel, crawled back out in
2003). Of course, many of the Board members who drove them to Chap 11 are
still on board today. The former CEO is now their insurance agent and an
"advisor", and the legal counsel affiliated himself with another law firm
which was already doing business with CoServ, changed his business cards,
and didn't even move out of his office. No hidden bank accounts have turned
up yet, but other than that these guys may have been slipperier snakes than
Bennie and Bud!
You'll be able to keep an eye on the goings-on at
I suspect we'll see other similar efforts coming up in other areas as well.
We've gotten a number of queries over the past year or two from members of
other Coops around the nation wanting to know how we did it.
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