Texland files suit against Cattleman’s bank
Texland Director Patrick Cox said the move is an attempt to assert the co-op’s ownership of the $565,000 account, which was uncovered by PEC auditors in July.
Texland was founded in 1978 as a joint project between PEC and the Bluebonnet Electric Cooperative intended to build coal-fired power plants. The project fell apart after the Texas Public Utility Commission denied the permits to build the plants.
Texland was thought defunct until the bank account was discovered, and a new Texland board including PEC directors Cox, Jim Williams and Kathryn Scanlon was formed.
Cox said Texland’s claim against Cattleman’s, filed in a Blanco state District Court, also seeks roughly $1 million in interest from the bank, which has held the account without interest since 1986.
“The $1 million in interest is a very conservative estimate,” Cox told The Daily Tribune Friday. “The board believes we should receive interest on that account going back to 1986.”
Cattleman’s last month filed an action in the same court, offering to place the money in the court’s trust until its owner could be identified. The money remains in the bank pending a resolution.
The entire matter also is under investigation by the Texas Attorney General’s Office, which continues a criminal probe of PEC’s leadership.
The account has remained largely inactive since the early 1990s, but PEC directors late last month learned that three former co-op executives took more than $373,000 out of the account starting in 1987.
Former co-op General Manager Bennie Fuelberg and former co-op President Bud Burnett each paid themselves $111,600 from the account in 1988, and former PEC general counsel A.W. Moursund, who died in 2004, was paid $150,000 in 1987, according to a letter Burnett and Fuelberg sent to PEC directors.
In an Aug. 31 letter to the Austin American-Statesman, Fuelberg and Burnett claimed the payouts were compensation for more than 10 years of work on PEC’s behalf, including lengthy settlement negotiations between Texland and the Lower Colorado River Authority after it sued the co-op in the mid-1980s.
“We worked on this for nearly a decade,” Fuelberg and Burnett said in the letter. “The settlement of the litigation created an opportunity to insulate Texland, PEC and Bluebonnet from financial risk. In the end, we entered into a financial settlement that benefited everyone.”
According to the letter, Texland received about $1.35 million from the settlement, some of which was paid out to cover litigation expenses.
“No money from PEC ratepayers went into Texland’s account,” the letter said. “It was a mistake to leave Texland’s money in a non-interest bearing account, and we are sorry about that.”
Cox, who gave a presentation on Texland’s finances at this week’s meeting, said the former executives’ letter doesn’t answer all of the questions related to the account.
“The records we have only cover the period from 1986 to 1993,” he said. “Of course, that doesn’t cover the entire record of Texland’s accounts since it was formed in 1978. We still have work to do.”
Cox said so far Burnett and Fuelburg haven’t offered to help the investigation.
“There’s a lot that is still up in the air,” he said. “We would love to be able to recover more of the Texland records, and it would certainly be welcome if (Burnett and Fuelberg) would provide any kind of records or data they have in their possession.”
Cox said recovered records show 20 separate transactions on the account during the seven-year period he’s investigated.
Texland’s efforts to secure the funds are intended to benefit the members of PEC and Bluebonnet, he added.
“We’re acting in what we believe is the best interest of the members of PEC, who are the owners of Texland,” he said. “We will continue to assert our ownership in Texland and recover the money.”
Fuelberg and Burnett resigned from PEC earlier this year, and the co-op recently ended its decades-long relationship with both Moursund’s family-owned law firm and Cattleman’s.
Moursund was also a co-founder of Cattleman’s, and Fuelberg once served on the bank’s board of directors.
Garza said the Texland account also is under investigation by Navigant, a Chicago-based contractor hired by the co-op to perform a full audit of PEC’s financial and governance processes.
“We will continue researching our own records and working with the Lower Colorado River Authority and Bluebonnet Electric Cooperative to inform our members and the public about all the confirmed details of this situation,” Garza said in a statement.
PEC, which is the largest member-owned electric co-op in the nation, has been under public scrutiny for more than a year, thanks to media reports last year revealing the high compensation its directors received.
Reports by The Daily Tribune revealed the utility’s board of directors had voted to pay themselves salaries in excess of $35,000 for a few hours of work a week, while approving bylaws restricting rank-and-file members from running in the annual board elections.
A civil lawsuit filed in the 250th District Court in 2007 sought to oust the utility’s seven voting and 10 nonvoting board members. It also called for the return of $226 million in so-called excess revenues collected by PEC from its members over several years.
Instead, the settlement ordered PEC to return $23 million in capital to members over a five-year period while calling for a full audit of the utility’s financial and governance practices. That settlement is currently under appeal.
Since the controversy began, PEC board members have enacted numerous reforms, including slashing directors’ pay by nearly 20 percent, adopting Texas Open Meetings laws and opening the board election process to any member with 25 petition signatures.
District Attorney Sam Oatman, who serves a portion of PEC’s service area, said details of the account’s re-discovery have been forwarded to the Attorney General’s Office.