Visit the The Free Press website
December 17, 2008
Investigative report on PEC outlines wrong-doings
BUDA, Texas (STPNS) -- An exhaustive report investigating ten years of management practices at Pedernales Electric Cooperative (PEC) paints a grim picture of an iron-fisted former general manager enabled by a complacent board of directors, wasteful spending, and questionable financial transactions.
The report released Tuesday by Navigant Consulting provides the most in-depth glimpse yet available into the member-owned cooperative previously known for its secretive and cloistered nature.
While many PEC insiders cooperated with the investigation, former General Manager Bennie Fuelberg and former Board President W.W. "Bud" Burnett declined to be interviewed.
The report states that after his resignation last year, Fuelberg apparently intentionally destroyed information on several laptop computers, as well as hard copies of documents.
Navigant spotlighted a number of issues that have previously been reported, such as lavish travel spending by management and board members, $500,000 dollars sitting for two decades in a secret non-interest bearing bank account, and tens of millions of dollars, under the name of Texland Cooperative, hemorrhaged on unsuccessful side ventures such as software and internet service companies.
In new findings, the report says that the co-op's long-time law firm of Clark Thomas & Winters appeared to funnel $510,000 in PEC funds to Fuelberg's brother, lobbyist Curtis Fuelberg, and to the son of former director E.B. Price, attorney William Price. Navigant said it is still investigating those payments.
Two area lawmakers who have called for reform at the co-op, State Representative Patrick Rose (D-Dripping Springs) and State Senator Troy Fraser (R- Horseshoe Bay), said they were "outraged" over the findings in the Navigant report.
"The allegations that Bennie Fuelberg, former general manager, ordered documents to be shredded, erased data from computers, and funneled over $500,000 in cooperative funds for questionable purposes through the Clark, Thomas & Winters law firm come as no surprise," Rose and Fraser said in a joint statement. "These actions are consistent with Mr. Fuelberg's management style and his long standing policy of keeping cooperative information from members."
The co-op has been rocked by two years of controversy, including congressional hearings, an ongoing criminal investigation, a member-led lawsuit alleging financial mismanagement, furor over high board salaries and lavish spending by management, and the election of reform candidates to the board. Fuelberg resigned and was replaced early this year by the reform-minded manager Juan Garza.
"I want to be clear that this report will be of great benefit to us as we continue to chart our new and different course for this great company," Garza said.
Though the majority of members of the 17-member board have resigned or been voted out of office in the last year as the co-op has been rocked by controversy, four long-time voting members remain in office: board president R.B. Felps, O.C. Harmon, Val Smith and Vi Cloud.
The report is particularly scathing in its description of the PEC board of directors, saying their "inaction and passivity" in ceding control to Fuelberg "put the cooperative and its members at risk."
"During Mr. Fuelberg's tenure, it appears that the board answered to him rather than the General Manager answering to the board," the report states.
Pacified by generous salaries and easily cowed by Fuelberg's public displays of anger, the board granted the general manager unusually broad blanket authority, let him set policy and determine board agendas, and rubber-stamped large capital outlays with little due diligence, the report said.
"The board had a responsibility to insist on receiving adequate information," the report says.
The Navigant report paints a picture of an Orwellian world in which Fuelberg used "abusive management practices" to control the co-op with an iron fist, skirted oversight by other employees and limited communication within the company.
"The former General Manager exercised virtually complete control over PEC and its personnel during the period under investigation," the report states.
Fuelberg frequently rotated managers among departments. In one such case, a licensed attorney hired as PEC's legal services manager was sent to the human resources department, then reassigned as manager of the information technology department. Some employees told investigators that Fuelberg rotated managers as a punishment tool and to keep managers "off-balance."
Because of restricted communication, the board was largely unaware of dissatisfaction that PEC employees felt about Fuelberg's management style, according to the Navigant findings.
The report provides an in-depth look at the way Fuelberg and other top managers wielded the company credit card, including a detailed chart showing 21 chocolate and candy purchases over the course of four years amounting to $10,684. In ten years, Fuelberg charged more than $500,000 in travel and other expenses.
Fuelberg encouraged board members and their spouses to fly first class, the report says, telling them "this was a perk" at PEC. Fuelberg himself often stayed at luxurious hotels such as the Ritz Carlton, The Four Seasons and the Jefferson hotel. The report details hotel rates as high as $1,600 per night.
Fuelberg also charged to the expense account "leisure-added" trips for himself and his wife, arriving a few days early or staying a few days late after a business-related event. On one such trip, Fuelberg attended a meeting in New Hampshire on Oct. 9 and the morning of Oct. 10, 2008. He and his wife used the co-op credit card for hotel and meal charges from Oct. 3 - Oct. 12, the report states, racking up more than $4,400 in hotel costs.
In producing the 390-page report, Todd Lester, a director at Navigant who led the eight-month investigation, said his team examined 150,000 pages of documents, 23 gigabytes of electronic information and 25,000 emails, as well as interviewing 80 individuals with knowledge of PEC.
PEC officials said they couldn't speculate if the report would lead to criminal charges being filed against former co-op management.
"It is imperative that the Office of the Attorney General continues to aggressively pursue its criminal case against the former leadership at PEC and we support General Greg Abbott in those efforts," Rose and Fraser said.
© 2017 The Free Press
Buda, Texas. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from STPNS