Lawsuit filed on Pioneer

Published 12:00 am Wednesday, February 18, 2004

Three Pioneer Electric Cooperative members filed suit against the cooperative, its’ management and board of trustees on Friday in Butler County Circuit Court.

Wendell Phelps of Butler County, Hoffman Rhyne of Lowndes County and Kenneth Stallworth of Wilcox County are the plaintiffs in the case, claiming Pioneer’s management and trustees allegedly mismanaged funds.

Defendants include cooperative manager J. Malloy Chandler, trustees of the cooperative and the Acme Propane Gas Company’s board of directors including Hugh Strickland, Harold Powell, Thelma Mixon, Wood Till Jr., David Lyon Jr., Herbert Blackmon and Melvia Carter; Lynn Powell, an Acme officer and James H. Strickland, an officer of Pioneer Services.

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According to J. Doyle Fuller, an attorney from Montgomery, the suit stems from the alleged disappearance of more than $18 million of cooperative members’ funds over the course of a year. The suit seeks to discover how the funds disappeared and if the defendants were negligent, wanton or reckless in their management of the cooperative.

PEC officials said Tuesday that the suit by the three is &uot;factually misguided and void of truth.&uot;

&uot;We feel this is a blatant attempt to mislead our members for the personal gain of three individuals,&uot; said PEC spokesman Terry Wilhite, in a prepared statement. &uot;There are absolutely no missing funds. The money they question involves funding the launch of Acme Propane four years ago. Like any new business, you have to invest money to get it started and you eventually recoup that outlay as the business becomes successful.

The cooperative believes Acme, like all of Pioneer’s past ventures, will be profitable and eventually prove to be a very wise investment for all our members. However, it should be recognized that Pioneer members can enhance Acme’s profitability by purchasing its propane thereby investing their money in the local communities.&uot;

Fuller said too many questions exist over the funds the suit claims were illegally redirected.

&uot;There are lots of questions that need answering,&uot; Fuller said. &uot;We have to go to court to get those answers.&uot;

The suit, which only gives plaintiffs’ side of the suit, states that Acme is a subsidiary of Pioneer Services Corporation and that the cooperative manages Pioneer Services and Acme. A series of financial transactions beginning in 2001, which includes an agreement to guarantee up to $20 million worth of loans for Pioneer Services, led to the missing $18 million the suit states.

The private investigation began after Phelps, a local insurance representative, visited the Butler County Courthouse and found a $30 million mortgage by Pioneer Electric Cooperative for Pioneer Services.

According to Montgomery attorney Susan Copeland with Fuller’s firm,

the mortgage was made to pay the debt owed to the nonprofit National Cooperative Services Corporation.

&uot;After looking at some of the financial records, there are many questions about transactions,&uot; she said Tuesday morning during a telephone interview.

&uot;At the end of the fiscal year 2001, the cooperative showed an amount of $18 million in member equity. This equates to excess revenues.

However, by the end of fiscal year 2002, that figure was in the negative.&uot;

She said that raises the question of &uot;what happened to the money?&uot;

&uot;In the course of one year, the cooperative went from an excess of $18 million to a negative, that shows at a minimum there is some mismanagement of funds,&uot; she said.

&uot;For this to happen, that is a problem.&uot;

Fuller said it appeared that the cooperative’s management was the problem. A board of trustees, members of which are also officers with Acme Propane Gas Company, manages the cooperative. According to Fuller, it appeared that the cooperative’s assets were used to pay off gas company debts.

&uot;If nothing else, it’s gross mismanagement of the cooperative,&uot; Fuller said. &uot;Employees and officers of the cooperative are also officers of the propane company, but the cooperative has no ownership interest in the propane company.&uot;

Wilhite said Pioneer welcomes the opportunity to get the truth to its members.

&uot;We are confident that all allegations contained in this suit are false and will eventually be proven to be so,&uot; he said. &uot;We feel this suit is in no way accurately representative of our membership. In fact, an independent survey conducted just last month found that nine out of ten of our members were satisfied with the services Pioneer provides.&uot;

Copeland said while a case like is this slow to start, momentum will be building and more information will be forthcoming.

&uot;Once you get people under oath, then you have the vehicle needed for obtaining documents that they currently don’t release like municipalities,&uot; she said.

So what do the three men want if they win the suit?

&uot;They’re asking the court to appoint a receiver, which means someone will take over the cooperative,&uot; she said.

&uot;Once in place, they’ll look at the records and get everything settled.

They also want the current board of directors removed and a whole new board appointed.&uot;

Fuller said he expects the defense will file a motion to dismiss, which will bring both sides before a judge in Butler County in about 45 days.

The cooperative is based in Butler County, but the cooperative also serves Dallas, Lowndes and Wilcox counties.

Margaret Pierce, president of Rural Electric Member Action Committee (R.E.M.A.C.) that formed as a grass roots group to study PEC, said the suit was the next logical step.

&uot;As REMAC continued investigations into the board of trustees and management of Pioneer Electric, many issues and questions came to light, that led us to seek legal counsel to assist us in our efforts,&uot; she said.

&uot;To this end, we obtained the services of an outstanding legal team in Montgomery, and this lawsuit was brought upon their advice.&uot;

Pierce reiterated that REMAC’s purpose is to work for the benefit of PEC members.

&uot;We’ll continue to be focused on the goals of the organization,&uot; she said.

&uot;We will also work to preserve Pioneer Electric for all its members.&uot;

Chandler was not available for comment, but Cleveland Poole, Pioneer’s Vice President of Corporate and Legal Affairs said the cooperative’s intentions are to resolve the lawsuit for the betterment of all the cooperative’s members.

&uot;To protect the interests of all its members, Pioneer is currently exploring all its options in response to this suit,&uot; he said.

Selma Times-Journal Reporter Alan Riquelmy contributed to this report.