Cobb Energy, a for-profit affiliate of Marietta-based electric co-op Cobb EMC, has lost millions but paid generous dividends and benefits to management, board members and other insiders, according to experts hired by customers suing the companies.

Cobb Energy paid out $5.1 million in dividends from 1998 through 2006 and lost $7.4 million in that period, according to the experts' analyses, contained in affidavits filed in court Wednesday.

The electric co-op, meanwhile, paid millions of dollars in fees to Cobb Energy, while its investment in Cobb Energy increased only $200,000 over the same time period, one affidavit alleges.

The electric co-op created Cobb Energy in 1997 to operate the utility and to branch out into other businesses. At the time, officials said the move would save money for the co-op and its customers by spreading costs over other ventures.

Wednesday's court filings allege that the opposite occurred.

"Cobb Energy's overall financial performance has been abysmal," one affidavit said. "It appears that Cobb EMC has been subsidizing Cobb Energy during Cobb Energy's existence."

The four experts, hired by the customers suing the co-op, include three accountants specializing in electric cooperative finances and the director of Georgia State University's Center for Ethics and Corporate Responsibility.

Customers sued Cobb EMC and Cobb Energy in October, saying the for-profit and its management had siphoned assets belonging to the co-op and its customers, unjustly enriching several insiders.

The lawsuit is headed to mediation Aug. 1 and, if necessary, trial in November.

Carol Cookerly, a spokeswoman for both companies, called the allegations "inflammatory" and said the timing "seems less than a coincidence" as the parties near mediation. Nevertheless, she said, the co-op will act in good faith on earlier findings of a committee of Cobb EMC's board that has also assessed the allegations in the lawsuit.

The losses were among a number of allegations contained in a request to postpone Cobb EMC's planned Sept. 4 annual meeting. Among the plaintiffs' new allegations:

• Cobb EMC compensated some board members lavishly. It put $107,000 to $130,000 apiece into retirement accounts for the three members who joined the board most recently. One affidavit said, under state law and the co-op's bylaws, board members should receive only a per-diem payment for attending meetings and reimbursement for out-of-pocket expenses.

• Cobb EMC has had substantially higher operating costs than similar cooperatives. Operating costs, excluding power, were $8 — or 38 percent — higher per consumer per month than at Jackson EMC, which serves Atlanta's northwestern suburbs.

• Cobb Energy lost money in all but one of its seven non-electric businesses, such

as mortgage brokering,

pest control and home security.

• One Cobb Energy subsidiary, a call center, charged Cobb EMC a 50 percent markup on its labor costs.

• Four experts hired by the plaintiffs say they found multiple examples of conflict of interest and self-dealing in the relationship between Cobb EMC and Cobb Energy. They said material facts about the relationship, such as EMC officers' and directors' ownership of Cobb Energy stock, were withheld from members.

Dwight Brown, CEO of both companies, owns $3 million of Cobb Energy stock, earning dividends of $265,500 a year since 2002. The Atlanta Journal-Constitution reported the details of the ownership in May.

Other present and former stockholders include at least three Cobb EMC directors, two executives of Cobb Energy affiliates and one Cobb Energy director. At Cobb Energy's request, a Cobb judge has sealed stock ownership information about five other insiders.

According to one affidavit, Cobb Energy did not turn a profit until the co-op agreed to pay the company a 6 percent markup for its services. But those revenue gains were reduced by regular losses from Cobb Energy's non-electric businesses.

A committee of the EMC's board concluded in a July 7 report that the co-op's board and management had acted in good faith and on the advice of lawyers.

It also concluded that Cobb Energy, the affiliate, owed Cobb EMC $13 million and directed it to eliminate conflicts of interest among officials who hold responsibilities at both companies.

Last week, Brown sent letters to employees, customers and community leaders that said the report vindicated the co-op and exonerated its management and board.

The letter outraged the plaintiffs.

"Mr. Brown's summary was a complete and utter mischaracterization" of the report and, "at best, constitutes a serious intent to mislead the members and others in the community," Wednesday's filing said. "At worst, it is downright fraudulent concealment of the truth."

The Wednesday filing cites Brown's letter as one reason to postpone the Sept. 4 annual meeting, at which four board members might stand for re-election.

The filing said co-op members could not make informed decisions about co-op leadership without understanding the ongoing financial drain created by Cobb Energy.

"Cobb Energy continues to gush red ink at a horrifying rate," it said.