Tracking Legal Events involving Electric & Telephone Cooperatives

News


The Lovely County Citizen
Friday, July 3, 2009

A lawsuit filed June 10 in Benton County against Carroll Electric [Cooperative] Corporation (CECC) alleges the company has oppressed shareholders and violated its fiduciary duties for unjust enrichment.

CECC spokeswoman Nancy Plagge had no comment on the lawsuit because it has not yet been reviewed by the CECC attorney. The complaint by Joe Capps, of Siloam Springs, individually and on behalf of all other present and former coop members, said as a non-profit corporation, CECC cannot earn a profit.

$170 million

"The cooperative is obligated to pay by credits to a capital account for each patron, all such amounts in excess of operating costs and expenses," the complaint filed in Benton County Circuit Court states. "Carroll Electric possess over $170 million of 'patronage capital' or 'capital credits.' Carroll Electric pays neither interest nor dividends for use or on account of the patronage capitol ... the cooperative does not return patronage capital to former members, or excess capital to current members." . . . .

The lawsuit alleges the board has irresponsibly endangered the coop's tax-exempt status by retaining the capital credits.

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Man Sues Carrol Electric

The Morning News
Thursday, June 18, 2009

BENTONVILLE --  A Siloam Springs man has a gripe against Carroll Cooperative, and in filing a lawsuit Wednesday claims the corporation has failed to refund more than $170 million in capital credits to past and present members.

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Carroll Electric herbicide opponents get short shrift at annual meeting

The Lovely County Citizen
Monday, June 1, 2009

BERRYVILLE -- About 150 people who came out to the Carroll Electric Cooperative Corp. (CECC) annual meeting May 28 to request the utility reduce or eliminate herbicide spraying on right-of-ways found that their pleas didn't fall on deaf ears. They fell on no ears at all.

IRS Form 990s

As non-profit corporation the Internal Revenue Service requires Rural Electric Cooperatives to file an informational return much like a corporate income tax return each year.  These "IRS Form 990s" are public information and Coops are obligate to provide access to copies to interested persons.

A study of these 990s can reveal interesting information about these Coops including things like salaries of executives and ownership of other for profit corporations.  This is a list of the most recently available 990s for Carroll Electric:


Often Coops that are having financial problems or are involved in litigation do not timely file their IRS 990s as the IRS does little to monitor compliance or accuracy.  So, while our list may be complete, some Coops may simply have not filed their 990s.

    This class action lawsuit was filed in the Circuit Court of Benton County, Arkansas on June 10, 2009.  The Plaintiff seeks recovery on behalf of a class of current and former members of Carroll Electric Cooperative Corporation for a portion of more than $170 Million in patronage capital or capital credits owed by former members of the Coop.

    This lawsuit was only recently filed and in the very early stages of the litigation.

     For a complete list of all the allegations see the Original Class Action Complaint.

The Lovely County Citizen
Friday, July 3, 2009

One of the most dearly held tenets of living in a democracy is that citizens have a right to speak out.  Before major decisions are made, normally public hearings are held where people speak out, expecting that their views will be taken into consideration. . . .

It appears Carroll Electric Cooperative Corp. (CECC) has gone one step farther than the Delphi Technique.  Although it is a non-profit, member-owned cooperative, it doesn't even pretend to operate in a democratic fashion.  Members are not allowed to attend board meetings or get full minutes of board meetings.  Members are not allowed to speak or ask questions at the annual meeting.  And bylaws have been rewritten so it's virtually impossible for members to nominate someone to the CECC board or put a resolution before CECC members.

While claiming they are spraying herbicides to save money, CECC board members (the only ones who get to decide who else is on the board) are compensated at more than $30,000 per year, and last year (not a good year for the economy!) handed the CEO a $100,000 per year pay raise.  And a recent lawsuit alleges CEO is hoarding members' money for "unjust enrichment."

Service Area

Rural Electric Cooperatives provide electrical service to customers within a geographical area know as a "Service Area" or "Service Territory".  These Service Areas often look like highly "gerrymandered" political boundaries and occasionally there will be areas or pockets withing the boundary where the Coop does not provide service like a small town or city serviced by another electric utility.

Within these Service Areas the Coop typically has an effective monopoly with no meaningful competition.

According to its website, this is Carroll Electric's Service Area:


Coop Website

Most Rural Electric Cooperatives maintain websites but they rarely provide material information about important aspects of their operations.  In fact this failure by a Coop to be forthcoming about its policies involving patronage or capital credits is a red flag that its policies and practices are suspect.

This is Carroll Electric's website: