Prosecutors, defendants trade shots as Connecticut cooperative's rating affirmed

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U.S. attorneys are urging a federal judge to uphold indictments of Drew Rankin and others who stand accused of using positions of power on the Connecticut Municipal Energy and Electric Cooperative board to embezzle funds, imperiling CMEEC's credit.

Prosecutors filed that motion Tuesday in U.S. District Court for the District of Connecticut, urging the court to reject motions to dismiss filed by former CMEEC CEO Rankin, former CFO Edward Pryor, and former CMEEC board members James Sullivan, John Bilda, and Edward Demuzzio last month. The men were arrested in November 2018, charged with stealing from ratepayers to pay for lavish trips to the Kentucky Derby and to a luxury golf resort in West Virginia for themselves, for associates, family, and friends.

“A common theme in the defendants’ motions to dismiss is that these trips were legitimate ‘corporate retreats’ for the senior leadership of an agency that essentially could act like a private corporation,” Justice Department lawyers told the court. “The indictment, however, tells a different story: that the defendants raided a public agency and public money, treating those funds as their own personal piggy banks to reward and enrich themselves, their families, and their friends.”

Rankin allegedly used in excess of $800,000 of CMEEC funds from the cooperative’s margin account as well as funds from CMEEC member towns to pay for outings to the 2015, 2016, and 2017 Kentucky Derby horse races, according to the indictment.

In addition to disputing the allegations, which the prosecutors’ motion said was improper in a motion to dismiss, Rankin also alleged government wrongdoing. The government misled the grand jury by not presenting to jurors information provided to prosecutors by Rankin, his motion to dismiss alleged, a charge prosecutors portrayed as baseless and outside the scope of a grand jury’s role.

It will be up to the judge to decide whether the trial should go forward and against which defendants.

Against the backdrop of the courtroom proceedings came some good news for CMEEC, which 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. Fitch Ratings, which had put the cooperative’s more than $100 million debt portfolio on a negative watch following the arrests, announced June 13 that it was removing that watch and affirming CMEEC’s revenue bonds at A-plus. Fitch had cited concern about turnover at the top of the cooperative’s small staff and the turmoil associated with the investigation.

The latest decision by the rating agency followed the conclusion of CMEEC’s own internal investigation of the matter, which led to its May 9 decision to fire Rankin. Fitch had said it expected to take action on its rating watch after evaluating CMEEC’s findings.

“After careful, thoughtful consideration of the facts, we are confident that the decision to terminate Mr. Rankin’s employment is in the best interests of CMEEC, our member municipalities and ratepayers in the communities where we operate,” CMEEC said in a statement. “As a public entity, we fully recognize the important role we play in our communities and the responsibility we all have to ensure CMEEC is operating at the highest standards of organizational integrity. We will continue working diligently to regain the trust of our members and ratepayers as we deliver on our commitment to provide lower-cost energy solutions for years to come.”

Pryor had already announced his intention to retire before his arrest. None of the accused are still serving on the CMEEC board. Fitch cited the resolution of CMEEC’s investigation in its rating announcement. The investigation “resulted in constructive recommendations aimed at strengthening CMEEC’s internal controls,” Fitch said. "The board has adopted most of the recommendations."

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