Toward the end of the 75-minute hearing, Schuster took the opportunity of actually seeing the 10 members of the electric cooperative’s board in person to lecture them on their “dawdling, delaying and derailing” of the terms of the settlement reached in 2008 to settle a lawsuit brought by members, as well as the “firestorm” they created by asking the court’s permission to rehire embattled CEO Dwight Brown.
“Hopefully, we’re past that,” the judge said. But just to make sure, he wants to know how much Brown was paid since the settlement was reached in the fall of 2008; how much he has been paid since the end of February, when he retired but retained as a consultant; “and what, if anything, he’s received, directly or indirectly, to date. Continuously,” the judge said.
Brown’s compensation information is to be provided during monthly meetings that the judge ordered will be held in his office regarding the trust that is liquidating the spin-off companies created under the for-profit Cobb Energy.
The purpose of the meetings, Schuster told the sides, is “just so we all have a full understanding of why, 2½ years later, certain things haven’t been liquidated.”
Schuster told the directors that he already gets reports on the trust, but those reports are “rather vague. They don’t tell me anything.”
As for the issue with Brown, Schuster calmly but clearly spelled out to the directors themselves the frustration felt by at least some of the electric co-operative’s nearly 200,000 members.
It’s not clear how much of the judge’s speech the directors agreed with. Chairman Larry Chadwick was seen shaking his head at some of the judge’s comments, and most of the directors sat stonefaced throughout his 12-minute lecture. Early in the hearing, the directors were seated all around the gallery of the packed, oversized courtroom, but he soon asked them all to sit together in the front rows.
“It’s hard for me as a judge to believe that Dwight Brown is the only person capable of running the EMC,” he told the directors. “There are probably 20 people in this room — including you directors with your experience — who could run the EMC.”
And despite the agreement they signed in late 2008 that mandated Brown’s retirement by February 2011, “we went all the way to the February deadline” to start interviewing finalists for the job.
“You reached an agreement in December of 2008 that gave you 2½ years to replace him, and then you come back, the day passes, he retires, and nothing changes,” Schuster said. “You can’t be surprised about the firestorm that caused.”
Schuster said he was happy not to be hearing the criminal case against Brown — who was originally indicted in January on 31 counts of fraud, theft and mismanagement before that indictment was thrown out, and then re-indicted last month on additional charges. But the judge contacted other judges around the country about what corporations should do when an officer is accused of crimes involving the company.
“He should have been put on a leave of absence till that issue was resolved,” Schuster said. “And that didn’t happen.”
Earlier in the hearing, attorney Dwight Davis, of King & Spalding in Atlanta, introduced each of the directors to the court, and listed each one’s ties to the community. He even noted that Friday was Area 2 director David Herndon’s 44th wedding anniversary.
The first order of business was the election schedule and location of the Sept. 17 meeting. Davis said they were looking at two churches and the Galleria as possible sites.
“Any reason we’re not using the Cobb Energy Centre?” the judge asked, drawing much laughter from the gallery. That site is booked that day, Davis said.
At that meeting, set for 10:15 a.m., members will decide two issues: whether to allow voting by mail-in ballots at future elections and whether to amend the electric cooperative’s bylaws to limit director compensation to a daily rate while also prohibiting future directors from being paid retirement benefits. Previously vested benefits would not be affected.
Then on Nov. 12, the first election for directors since 2007 would be held. Elections for seats in Areas 1 (now held by Don Barnett); 6 (Al Fortney); 7 (RJ Patel); and 10 (Henry Balkcom) would be decided at that meeting, and those elected would serve until the annual meeting in September 2014.
Next, on Feb. 18, 2012, would be elections for seats in Areas 2 (David Herndon); 3 (David McGinnis); and 9 (Larry Chadwick). Those elected at this meeting would serve until the annual meeting in September 2015.
Finally, on May 12, 2012, seats in Areas 4 (Johnny Gresham); 5 (Kay Anderson); and 8 (Sarah Brown) would be decided, with the winners serving until the annual meeting in September 2016.
There would be no elections in 2013.
“It’s bizarre, but the purpose is to get them back on the election cycle according to the EMC bylaws,” said Pitts Carr, the attorney for the member plaintiffs who brought suit in October 2007.
But the big sticking point is whether the directors can use EMC funds to campaign for or against candidates for the directors’ seats. The plaintiffs call it a neutrality issue, and want an equal number of mailings, emails or other advertisements, but the directors say their opponents are trying to muzzle them.
The judge said he would rule on the issue by next Friday.
But how the 3,200 EMC members in south Georgia will participate in the Sept. 17 meeting was more clear-cut, with the judge ruling that since no provision for satellite conferences is in the bylaws, they must appear in person.
About 70 spectators filled the seats in the courtroom for the hearing, which was at times a bit raucous, with laughter and some groans. The EMC’s new chief executive officer, Chip Nelson, was also in the courtroom. He was named to the top job on July 11.
The directors mostly declined to comment after the meeting, though a statement from the cooperative’s spokesman later in the day reported that all 10 will seek re-election.
Cheryl Baer, a retiree from Acworth who attended with her husband, Ron, said she thought Schuster’s lecture to the directors “was a good dressing-down in a very polite way.”
“We probably shouldn’t have laughed a couple times, but it was comical when he (Davis) said the board has kept rates low.”
Don Dressell, a 26-year Cobb EMC member who lives in east Cobb has followed the litigation closely.
“Dwight Brown has, evidently, been a big part of the problem,” he said. “How involved they were in that, I can’t say because we don’t have any minutes or records or documents to really know what’s been going on. But I do think that they really have lost the public trust.”