CMEEC launches investigation following fraud arrests

The Board of Directors of the Connecticut Municipal Energy and Electric Cooperative has named several people to a special committee to oversee an investigation of allegations of embezzlement and fraud by several of CMEEC’s officers.

The Nov. 20 announcement represents a second phase in CMEEC’s response to the arrests of its CEO, chief financial officer and other officials on charges that they misappropriated the issuer’s money to pay for lavish “strategic retreats” to the Kentucky Derby and a luxury golf resort in West Virginia. A federal court unsealed indictments against CMEEC CEO Drew Rankin, CFO Edward Pryor, and board members James Sullivan, John Bilda, and Edward Demuzzio Nov. 8 and CMEEC disclosed the situation to bondholders in EMMA notices Nov. 16.

Norwich, Connecticut-based CMEEC also took action to place Rankin and Pryor on unpaid administrative leave and remove Bilda from his position on the board. Now, as the five men face the legal process their conduct will be simultaneously investigated by an outside law firm overseen by a special committee of five CMEEC board members.

CMEEC is owned by municipal utilities in the Connecticut cities of Groton and Norwich, the Borough of Jewett City, and two taxing districts of the City of Norwalk. It is responsible for the financing, acquisition and construction of generating resources and implementation of power supply contracts. It issues tax-exempt bonds in support of that mission. CMEEC’s most recent financial disclosures showed about $108 million of bonds outstanding as of Dec. 31, 2017. It most recently issued $75 million of revenue bonds in April 2013.

“The special committee is charged with overseeing the outside investigation, reviewing the findings, making recommendations to the full board regarding any actions it thinks would be appropriate to take, and addressing any related developments,” according to a CMEEC statement released Tuesday.

photo of ken sullivan

The members of the committee are Mark Oefinger from the City of Groton, Stewart Peil of the Norwich Utilities Commission, Debora Goldstein of the Norwalk Third Taxing District, Richard Tanger from Bozrah Light & Power, and Paul Yatcko of South Norwalk Electric and Water. None of the members of the special committee were connected with the conduct alleged by the Department of Justice, CMEEC said, in order to ensure the integrity of the process.

A message from CMEEC Chairman Ken Sullivan and Interim CEO Michael Lane also released Nov. 20 stated that CMEEC has updated its bylaws, put in place “strict” travel and ethics policies, and are implementing legislation to commission a forensic examination of the 2013-2017 period and to add a municipal consumer advocate and other ratepayer representatives to the board.

“We can assure you that CMEEC is fully operational and committed to fulfilling that mission by providing all of our customers with quality service and affordable rates without interruption or disruption,” wrote Ken Sullivan and Lane. "In fact, we are projecting upward of $175 million in value creation to our members over the period 2013 through 2018.”

The court is due to schedule further proceedings in the criminal cases next month.

For reprint and licensing requests for this article, click here.
Securities law Financial crimes Munis DoJ Washington DC Connecticut
MORE FROM BOND BUYER