[Watchdogs] FYI, CoServ members file lawsuit

Wed Feb 25 12:28:27 CST 2009

Dear Joe:  I was happy to see you at this meeting, good to meet you.  Unfortunately. your first hand, extensive knowledge of the business will always work against you.  I.m sorry that the $30m check for Garza upset your stomach.  Probably, there are lots more bonuses handed out on the QT.  Like Roosevelt used to say, "don't tell the people, it will just upset them."  
If you plan to attend these meetings, you are going to see and hear sights that will "drive a buzzard off a gut wagon".  
Best regards,  Paul Langston  830-598-1322

  ----- Original Message ----- 
  From: Joseph Fantozzi 
  To: Chris Perry 
  Cc: Lee Lawrence ; watchdogs at pec4u.org 
  Sent: Wednesday, February 25, 2009 11:04 AM
  Subject: Re: [Watchdogs] FYI, CoServ members file lawsuit

  Richard, Good to hear from you.....I have been round and round with the old TNRCC and could not get them to do their job to help the people with Aquasource or the Pilgrims Pride Chicken poluters........Just not gona happen.......saturatued with bought off processionary catapiller types..........no problem solvers........I just went to the last PEC board meeting in time to see them give Garza a $30,000 bonus check........had to leave after that...........weak stomach...........oh well at least we don't have a shortage of underpaid chief executives.........The question actually is can a nation go on with a constant worst foot forward scenario???????????????????????????   Best to Ya, Joe Fantozzi

  On Tue, Feb 24, 2009 at 3:02 PM, Chris Perry <cperry15 at earthlink.net> wrote:

    It also bears mentioning that electric industry restructuring in Texas (I won’t call it deregulation), which has seen less state oversight of Coops, is less than ten years in the making.  And while the Navigant investigation looked at only the last ten years of mismanagement, who believes that the practices uncovered by Navigant only sprouted up as a result of restructuring?  My point is that much of what has transpired at our Coop happened in a regulated environment.  This is to not dismiss the need for effective state regulation but there is no substitute for an active, inquiring membership and a Board with integrity that has its eyes open.  There is a balance that needs to be struck but we’re not there yet.  

    With that segue, I’ll also chime in to support Charles Tesar for accepting compensation for his time.  The can of worms is clearly deep and takes time and expertise to dig through.  I initially opposed compensation of Board members but have changed my mind after all that has transpired.  In my view, service on the Coop Board shouldn’t be a career but we probably won’t find people with the right credentials willing to put in the time required by the job by paying per diem only. 

    Chris

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    From: richardviktorin [mailto:richardviktorin at sbcglobal.net] 
    Sent: Tuesday, February 24, 2009 2:28 PM
    To: 'Chris Perry'; 'Lee Lawrence'; 'Bill Christensen'
    Cc: watchdogs at pec4u.org
    Subject: RE: [Watchdogs] FYI, CoServ members file lawsuit

    Watchdogs,

    Chris’s comments about ineffective oversight and lax regulation are so true….the SEC, the bond rating agencies, Congressional and state oversight, just to name a few, have failed so miserably they have perhaps brought our economy to its knees.  

    As a person who ran a revenue audit group for the Texas Natural Resource Conservation Commission (now TCEQ), I witnessed first hand an agency executive director, at the behest of city management and a powerful legislator, discard an almost ten million dollar audit finding against a major Texas city.  It was so disappointing to witness an agency executive director, a division head, a section head, and a manager, all roll over in the face of political pressure.  What is the point of working up an audit and its findings if agency management discards the same like a used paper towel?  Here we have auditors and regulators who function more as whitewash and window dressing – there to create the appearance of oversight and not much more.   By the way, at least half of the managers involved in burying the subject TCEQ revenue audit ended up being promoted, and one, even to agency executive director.

    There are a fair number of government workers who are merely drawing a paycheck, more focused on keeping their heads low until retirement than serving the public.  Apologies to those who work in the public sector who don’t fit this description, yet I am sure you have witnessed feckless coworkers and managers who do.  It’s a problem, a double problem: not only are these civil servants failing to protect the public they serve, their reward for not doing their job is to draw a pay check from our taxes, or utility bills.  

    How many people at PEC, either by commission, or the omission of turning their heads, were complicit in what went on?  Dozens for sure.  

    Kudos to the Watchdogs though, who through perseverance, strove for the public’s interest to produce the result we witness today.

    Richard Viktorin

    Audits in the Public Interest

    -----Original Message-----
    From: watchdogs-bounces at pec4u.org [mailto:watchdogs-bounces at pec4u.org] On Behalf Of Chris Perry
    Sent: Saturday, February 21, 2009 2:59 PM
    To: 'Lee Lawrence'; 'Bill Christensen'
    Cc: watchdogs at pec4u.org
    Subject: Re: [Watchdogs] FYI, CoServ members file lawsuit

    Lee,

    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.       

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    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 Lawrence

    On Sat, Feb 21, 2009 at 2:06 AM, Bill Christensen <billc_lists at greenbuilder.com> wrote:

    Hey folks,

    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 <http://CoServWatchdogs.org>.

    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.

    -- 
    Bill Christensen
    <http://greenbuilder.com/contact/>

    Green Building Professionals Directory: <http://directory.greenbuilder.com>
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