THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, November 10, 1994 TAG: 9411100649
SECTION: LOCAL PAGE: B01 EDITION: NORTH CAROLINA
SOURCE: BY LANE DEGREGORY, STAFF WRITER
DATELINE: BUXTON LENGTH: Long : 122 lines
A federal agency that lends money to rural electric cooperatives has been asked to investigate what a letter from members calls ``some severe problems, perhaps even malfeasance'' at the Cape Hatteras Electric Membership Cooperative.
In the letter to the chief administrator of the Rural Electrification Administration in Washington, the Avon Property Owners Association - whose 300 members also are members of the co-op - asked that the federal group look into all aspects of the Hatteras operation as soon as possible.
``As members of the Cape Hatteras Electric Membership Cooperative, we feel that our rates are exorbitant, our outages too frequent, salaries and accounting procedures need scrutiny and that closed meetings by the Board of Directors are unethical,'' said the one-page letter dated Wednesday.
``The Executive Board of the Avon Property Owners Association has unanimously voted to request that an official investigation, on the highest level, be conducted into all aspects of the operation of this co-op.''
Although the Rural Electrification Administration is not a regulatory body, said spokesman Jim McKenna in Washington, it does have an interest in the security of money it lends to rural cooperatives, including Cape Hatteras'. It would consider an inquiry if requested, he said, but would have to do its own checking first.
Avon Property Owners Association President Jean T. Meyer said her association called a special meeting last weekend to discuss the electric co-op.
Also on Wednesday, some Hatteras Island residents began circulating a petition demanding that the co-op hold a public meeting for its members. ``The meeting agenda,'' the petition said, ``will be for the directors to explain what appears to be extremely excessive payments to accounting and attorney's fees for 1993-94; disclosure of director and employees' salaries; and questions from the floor.''
Owned by its members, the Cape Hatteras Electric Membership Cooperative serves about 5,000 Outer Banks homes and businesses from Rodanthe to Hatteras Village.
The co-op holds one open membership meeting per year - in October. The Board of Directors meets monthly behind closed doors. Members and press are not allowed to attend the board meetings.
Last week, former co-op manager John A. Echols released documents showing that the nonprofit, tax-exempt co-op paid a Virginia accounting firm more than $434,206 during the past 12 months.
Those figures include a total of $22,380 for a private chartered plane to fly the accountants from their Danville office to Buxton. Another $10,429 was spent for the accountants' meals, hotel rooms and other travel expenses. The accounting firm, Johnson and Dooley, received at least $30,000 every month of this year - $382,791 so far for 1994.
Echols resigned as manager of the co-op Oct. 18 after less than four months on the job. He said he quit because the Board of Directors was meddling in daily operations too much. Its interference, Echols said, created problems that hurt service and endangered linemen.
Besides the accounting fees, Echols contended that the co-op pays some of its employees too much. As manager, Echols earned $75,000 annually. His assistant, Claudine Williams, who now is acting general manager, makes $64,000 a year, Echols said.
Co-op Attorney Norman W. Shearin Jr. said last week that his clients ``have nothing to hide.'' But the Nags Head lawyer refused to confirm or deny accounting payments or employees' salaries at Cape Hatteras Electric. On Friday, Shearin said the nine-member Board of Directors was going to hold a special meeting Monday night to discuss some of the financial concerns. After that meeting, Shearin said, he would release some numbers.
Despite 10 separate messages on Tuesday, Shearin did not return any phone calls. He was in the office most of the day, his secretary said. On Wednesday, Shearin did not return two calls. At 4:45 p.m., his secretary said he had left town until Friday.
Board of Directors President Jack S. Gray refused to say what his group discussed in closed session Monday night. ``I have no comment for you,'' Gray said Tuesday. ``You will have to talk to our attorney.''
McKenna, spokesman for the federal Rural Electrification Administration, said his agency had not yet received the Avon Property Owners Association letter. ``We are a lending organization for the rural co-ops - not a regulatory body,'' McKenna said. ``Our only involvement with the co-ops is that we're concerned about the security of our funds.
``We have field accountants - auditors - who visit the co-ops that borrow money from us. They look to see that the loan funds are being spent for what the co-ops say they will be. We might look into this if requested,'' said McKenna, whose agency has lent Cape Hatteras Electric $14.8 million to upgrade power capacity. ``But just because a co-op membership asks for an investigation doesn't mean we'd necessarily do it. We'll have to look into this first ourselves.''
Because they are owned by their members, rural electric co-ops are not regulated by any state or federal agencies. ``The members control the co-op by electing the Boards of Directors,'' McKenna said. ``The very people who receive the services regulate the co-ops.''
That's tough to do, Meyer said, when members are denied access to information about their co-op.
``I don't go for closed decision-making. We pay our $5 to join the co-op, and we have a right to know what's going on,'' Meyer said. ``They just don't have anyone watching over them - so they do what they please.''
To get information from Cape Hatteras Electric, members have to read three pages of rules and fill out a two-page request form. The request forms ``will be reviewed as soon as possible by the general manager, who . . . will consult with the Cooperative's general counsel,'' Policy Bulletin No. 88 says. ``If the two of them conclude (1) that the request is sincere (2) that the information requested . . . is materially germane to the requesting person's status and (3) that furnishing the requested information will not be adverse to the Cooperative's best interest, they may provide for . . . making such information available.''
The policy goes on to say, ``In no event will the Cooperative allow a member merely to go on a fishing expedition in the hopes of discovering information upon which to oppose the Cooperative.'' Access to board minutes, hourly wages or salaries of employees ``will not be furnished except pursuant to a court order.''
According to the Rural Electrification Administration and North Carolina Power, Hatteras Island residents pay an average of 30 percent more per month for electricity than residents of nearby Nags Head, who receive their electricity from North Carolina Power.
In January, Cape Hatteras Electric nearly doubled its monthly service charge - from $8 to $15.
``The Board of Directors sets all our rates,'' Meyer said. ``That has us concerned. Right now, the co-op is the talk of the town.'' by CNB