Cobb EMC raids stall image repair

Wednesday’s raids on offices and homes connected with Marietta-based Cobb EMC did more than signal a criminal investigation of the embattled electric cooperative’s leaders.

The raids put a crimp in what had been a full-speed campaign to reclaim Cobb EMC’s reputation, discredit its critics and protect its management and board in the wake of a bruising civil lawsuit that ended last year.

The public relations campaign ads clamored from the pages of the Marietta Daily Journal as the co-op fought to put its troubles behind it. Supporters bought ads, wrote letters and issued press releases blasting “a small group of self-serving individuals” attacking “our EMC … Enough is enough,” one release said.

The co-op also continues a legal battle to control a series of court-ordered membership elections that put its current board at risk.

But the stakes for Cobb EMC just went up.

District Attorney Pat Head confirmed Wednesday that his office searched Cobb EMC’s offices and the homes of Cobb EMC Chief Executive Dwight Brown and three of its board members as part of a criminal investigation of theft and racketeering. Authorities sought personal banking and tax records in addition to corporate files related to allegations that co-op officials siphoned its assets for their own benefit. The evidence will be examined by a grand jury.

The move stunned the community. Head isn’t known for drama or grandstanding. And his targets have been known as community pillars for years.

“These are all community leaders,” said Stan Wise, a Georgia Public Service commissioner and longtime Cobb County political figure. “I know most of that board and respect them.”

One board member, retired veterinarian Frank Boone, founded the Kennesaw Business Association.

“There’s not a finer, more upstanding man,” Realtor and civic leader Paul Chastain said of Boone. “He’s never had a selfish moment in his life.”

Wednesday’s searches followed almost two years of trouble for the customer-owned co-op that began with a series of investigative stories in The Atlanta Journal-Constitution.

A group of customers sued the co-op and its management in 2007, saying that the co-op’s ties with a for-profit affiliate, Cobb Energy, had diverted co-op assets and enriched insiders.

Also headed by Brown, Cobb Energy operated the nonprofit co-op under a 40-year contract, charging a markup that eventually hit 11 percent. It also operated a range of side businesses, most of which, court records would reveal, lost money.

Cobb Energy paid regular dividends to a group of preferred stockholders, including Brown and two of the board members whose homes were searched this week.

Affidavits filed in court said Cobb Energy paid out $5.1 million in dividends from 1998 through 2006 and lost $7.4 million in that period. They said the nonprofit co-op was subsidizing Cobb Energy and its payouts.

The co-op settled with the plaintiffs in early December, in a deal that folded Cobb Energy into Cobb EMC, ending the 40-year contract and its mark-up.

The deal cost the co-op millions. According to plaintiff’s attorneys, it saved them more, because it “stops the bleeding.”

The deal left Brown and the co-op board in place. But it also set a series of elections for the co-op’s customers, which would allow them to oust most of the board this year if they chose.

For years, incumbents were routinely re-elected at elections that required customers to attend annual meetings. The court order required that the co-op hold a member meeting by late January for a vote on allowing mail-in voting, too.

Customers would then hold a 2008 election delayed by the litigation to elect four board members.

That deadline passed two weeks ago.

Neither vote has happened.

In violation of agreement

Cobb EMC emerged from its battle with customers unapologetic and unbowed.

Ordered to let plaintiffs call the shots for the first of three membership elections, the co-op moved aggressively to take control instead, violating the terms of the settlement order within weeks, according to a January court ruling.

The ruling said the co-op was trying to “unfairly tilt the voting process” in its favor and ordered it to back down.

Cobb EMC didn’t. It said the court no longer had jurisdiction, since the case had been settled. One appeal, in Superior Court, is pending, with a ruling expected soon.

The co-op says it will go to the state Supreme Court if it loses, leaving it unclear when members will get a chance to elect co-op board members.

The campaign to sway public opinion began in earnest last month.

Co-op spokeswoman Carol Cookerly said that while she had contact with the campaign, it was an “organic” effort by the co-op’s supporters.

In letters and ads, those supporters extolled co-op benefits like stable rates and claimed the co-op had been vindicated in court.

Most of the activity came from a group called Friends of Cobb EMC, co-chaired by businessman Jim Payne and the co-op’s former public relations chief, Bob Elsberry.

In a March press release, the group said “enough is enough” and that it intended to “undo the damage done by a small group of individuals.”

It said the eight lawsuit plaintiffs had engaged in a “smear campaign” and “attacked management and the board of directors with malicious allegations.”

A later full-page newspaper ad said plaintiffs were engaged in a “transparent effort to gain control of the co-op.”

Two weeks later, another ad appeared in the Marietta paper on behalf of co-op employees, 300 of whom had signed petitions at co-op offices.

Less combative than the Friends of Cobb missives, the employees ad praised Brown and the co-op board. Cobb’s “commitment to members is a direct reflection of the level of commitment by Dwight Brown and the board of directors,” the March 31, full-page ad said in part.

Unbeknownst to the co-op, Head’s criminal investigation was quietly moving forward. He began assembling a search warrant team later that week.