Cobb EMC office, officials’ homes searched

The Cobb County district attorney’s office and local and state law enforcement agencies executed search warrants Wednesday at five locations concerning the Cobb Electric Membership Corp.

The search warrants, unsealed Wednesday, said agents were seeking evidence related to theft and racketeering at the electric cooperative.

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Brant Sanderlin / bsanderlin@ajc.com

The Cobb County Sheriff’s Office and GBI searched the home of Cobb EMC CEO Dwight Brown.

Read the warrants (pdf): 1 | 2 | 3 | 4

Related:

• Photos

Previous articles:

• Cobb EMC returning to court over governing issues
• Judge approves Cobb EMC deal
• Cobb EMC agrees to buyout deal
• Crowd seeks Cobb EMC board?s ouster | Photos
• Co-op agrees to double fee paid to Cobb Energy
• Filing: Cobb Energy has sapped co-op
• Cobb EMC chief blasts customers who sued
• Utility's secret wasn't kept
• Cobb EMC: From co-op to conglomerate
• Cobb EMC members sue over CEO's financial dealings

Recent headlines:

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Two Cobb County Sheriff’s Department cars and several unmarked vehicles were parked outside the Marietta home of CEO Dwight Brown. A GBI agent and a Cobb deputy were seen going in and out of the Cobb EMC headquarters.

Cobb District Attorney Pat Head confirmed that searches were being conducted at the Cobb EMC office and the homes of Brown and three EMC board members. Head declined further comment because the investigation is pending.

Cobb EMC spokeswoman Carol Cookerly declined to comment. Attorneys for the three board members, though, said the searches were both a surprise and unnecessary.

“It’s a pretty outrageous overreaction,” said Lester Tate, who represented board Chairman Larry Chadwick in a recently settled civil case against Cobb EMC.

Wednesday’s developments “came out of the clear blue sky,” said Leo Reichart, on behalf of board members David McGinnis and Frank Boone.

Both attorneys said the civil case had produced any information law enforcement would have needed.

“All they had to do was ask,” Reichart said.

Attorney Pitts Carr, who represented customers in the civil case, said he received a grand jury subpoena for his records Tuesday. Carr said the criminal probe is “completely separate from anything we were involved in.”

Cobb EMC is the electric provider for 190,000 customers in four northeast suburban counties.

The searches follow almost two years of trouble for the customer-owned co-op that began with a series of investigative stories in The Atlanta Journal-Constitution. The lawsuit targeted the co-op’s relationship with for-profit Cobb Energy, which the co-op formed in 1997. Cobb Energy operated the nonprofit cooperative for a markup that eventually reached 11 percent.

The suit said the arrangement siphoned co-op assets and enriched insiders. Brown was CEO of both companies.

The co-op settled its suit with customers in December, under a deal that folded Cobb Energy into the co-op.

The details in the warrants are just enough to get the court’s approval to collect evidence. But they suggest criminal investigators are treading on some of the civil case’s ground.

The warrants allege theft of co-op assets by Brown, Chadwick, McGinnis and Boone.

They say assets were transferred unlawfully from Cobb EMC to Cobb Energy and that Brown and the others “put them to personal use.”

The warrants list several allegedly unlawful transactions, including some dating from Cobb Energy’s creation.

They include the co-op’s $431,500 payment for 49.5 percent of Cobb Energy stock. The deal “was not possible without substantial detriment to Cobb EMC,” the warrants said, “since Cobb EMC already owned 100 percent of the stock” and “no stock was issued to Cobb EMC in exchange.”

The warrants also said the EMC transferred electric meters appraised at $15.5 million to Cobb Energy for $9.7 million, and that Cobb Energy charged the co-op a markup for reading meters when a separate company was doing that job.

The warrants said Brown, Chadwick, Boone and McGinnis or their relatives owned dividend-paying preferred stock in Cobb Energy. Brown bought his $3 million stake with the proceeds of a $3 million loan from both companies, a loan that was then gradually forgiven.

The dividends, the warrant alleged, were “paid indirectly with funds derived from Cobb EMC through breaches of fiduciary duty.”

The five warrants asked for records from January 1997 until present, including tax and bank records for Brown and his wife and records related to eight Cobb Energy affiliates and two individuals with ties to Cobb Energy.

The individuals were Anis Sherali of Energy Consulting Group and Buster Sylar of Marble-Pirkle Services. Both companies are Cobb Energy affiliates. According to depositions in the civil case, both men were involved in out-of-state property ventures with Brown.