Battling for control

Published 12:00 am Wednesday, March 17, 2004

A motion filed Monday in Butler County Circuit Court seeks to take control from Pioneer Electric Cooperative’s board of trustees and give it to a neutral custodian.

The motion, filed by Montgomery-based attorney J. Doyle Fuller on behalf of E. Wendell Phelps, Hoffmann Rhyne and Kenneth Stallworth, all members of the cooperative, also asks the Court to stop the board from amending its bylaws until the case proceeds to trial. A hearing on the motion is scheduled for April 8 at 9 a.m. at the Butler County Courthouse.

Cooperative attorney David Hymer disagrees. &uot;There has been no misappropriation whatsoever,&uot; he said. &uot;The cooperative made investments. All those were reasonable and defensible at the time they were made. It’s like any other business decision. You get five years down the road, and you look back, but the actions are not based on hindsight. Cooperatives all across the country have invested in propane businesses.&uot;

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Fuller’s motion stems from his lawsuit filed on Feb. 13 against the non-profit, electrical cooperative, which serves several counties, including Dallas.

A few allegations made against the cooperative include breach of contract, negligence and willful and wanton conduct.

According to Fuller, about $75 million of cooperative members’ funds has gone &uot;missing&uot; since 1997. Fuller cited several examples involving transactions between the cooperative and Pioneer Services Corporation. The suit states that the cooperative manages Pioneer Services and its subsidiary, Acme Propane Gas Company.

Defendants include cooperative manager J. Malloy Chandler, trustees of the cooperative and the propane gas company’s board of directors.

Fuller noted that over the years the cooperative has loaned money to Pioneer Services. As of Sept. 30, 2002, Pioneer Services owed $9.7 million, Fuller said. Fuller added that the cooperative’s auditors wrote the debt off. &uot;That’s $9.7 million that the cooperative has loaned to PSC that the auditors said was a bad debt,&uot; Fuller said. &uot;In spite of the fact that they’ve written off $10 million, in January 2003, the cooperative loaned PSC $33 million. When the cooperative’s auditors looked at it, they figured that 1/2 of the $33 million wasn’t collectable. They wrote off about $16 million.&uot;

Tallying funds either written off or &uot;missing&uot; over the years, Fuller came to the figure of $75 million. &uot;There’s about $75 million that we don’t know where it is,&uot; he said.

Fuller’s request to stop any change to the cooperative’s bylaws stemmed from his opinion that the cooperative was attempting to take more control away from its members. &uot;They’re saying that it’s just to update the bylaws, but it hasn’t been done in 35 years,&uot; Fuller said. &uot;Why do it two weeks after a lawsuit has been filed? It’s obviously a response to this lawsuit.&uot;

Cooperative members are scheduled to meet at the Greenville High School on April 3 at 9 a.m. to vote on amending the bylaws.

Fuller said that Second Judicial Circuit Court Judge Edward McFerrin has ordered a hearing on the motion, which is scheduled for April 8. According to Hymer, McFerrin isn’t expected to rule on the motion at that time. Instead, he may use April 8 to schedule a hearing date.

Concerning placing a neutral custodian in control of the cooperative, Hymer said that no basis existed in Alabama law for the action. &uot;We think any judge or jury would find that the cooperative has operated under its bylaws and made fiscally responsible decisions,&uot; he said. &uot;We will establish through the evidence that these allegations are baseless.&uot;

The cooperative invested in Acme Propane Gas Company in order to benefit its members, Hymer said. However, because the past few winters have been mild, propane hasn’t sold well. &uot;The board has wide discretion and all they’re required to do is exercise that discretion in reasonable faith,&uot; Hymer said.

Hymer said he expected the case would go to trial in spring or summer 2005.