THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, December 21, 1994 TAG: 9412210239
SECTION: LOCAL PAGE: B1 EDITION: NORTH CAROLINA
SOURCE: BY LANE DEGREGORY, STAFF WRITER
DATELINE: BUXTON LENGTH: Long : 128 lines
When elected officials at the Cape Hatteras Electric Membership Corp. hold a regular monthly meeting at 7:30 tonight, some residents plan to request a gathering of their own.
Hatteras Islanders began questioning the power company's spending practices about six weeks ago.
Since then, the board of directors has decided to spend $22,500 on a public relations firm to assess community concerns, has mailed four-page newsletters to every power customer's home, and has signed a contract with an independent auditor to investigate the co-op's accounting practices.
But what many of the people of Hatteras Island say they want is free: a meeting of the co-op's entire membership.
A citizens group plans to ask for that tonight - and make another, undisclosed request as well.
Members of the co-op's nine-member board of directors said they will have a surprise announcement of their own.
``The members of this co-op need a face-to-face meeting with the board so they can ask some questions - and get some answers - directly from their elected officials,'' said Frisco resident Jack Leatherwood, spokesman for the Citizens' Committee for Responsible Utilities. ``We want an open forum where board members will have to take questions from the floor.''
Leatherwood said he will present petitions signed by more than 500 Hatteras Island residents and property owners at tonight's meeting. The petitions demand that utility officials schedule a full, open session for all co-op members, as soon as possible.
``We put the petitions out in various businesses around the island. We didn't push them,'' Leatherwood said. ``People just saw them - and signed them. They're pretty worked up about this whole thing.''
During the Nov. 21 gathering of the electric co-op's board, Leatherwood asked elected leaders numerous questions about finances, spending practices and accounting procedures at the public utility. He also asked for a full membership meeting of the co-op. But since one has not yet been scheduled, he wants to back up his request with the signatures.
Co-op board member Dale Burrus said a membership meeting will be scheduled - soon. He said the same thing after last month's regular meeting.
``We're already looking into plans for a full membership meeting. It's just been a matter of us being able to get the information to answer questions correctly,'' Burrus said Tuesday. ``There won't be any hassle over calling a membership meeting. The by-laws just require 40 days to set one up.''
Cape Hatteras EMC - a rural electric cooperative that serves all Hatteras Island residents - has about 3,825 customers and employs about 20 people full-time. The non-profit, tax-exempt co-op is owned by power customers. But officials hold only one general meeting per year.
On Oct. 18, the manager of the cooperative, John A. Echols, resigned after less than four months on the job. He quit, he said, because the board of directors was meddling too much in daily operations. He also cited improper spending practices by power company officials.
In November, Echols released documents showing that the co-op had paid a Virginia accounting firm more than $434,206 during the past year. Those figures include a total of $22,380 - spent over a 12-month period - for private chartered air flights from the accountants' office in Danville, Va., to Buxton. An additional $10,429 was spent for the accountants' meals, hotel rooms and travel expenses.
The accounting firm, Johnson and Dooley, received at least $30,000 each month of this year - more than $382,791 so far for 1994. Board members say the expenses were justified because the accountants were helping the co-op secure a $14.8 million loan for a new 115-volt transmission line. Johnson and Dooley were consultants more than accountants, said the board members.
Besides the accounting fees, Echols contended that the co-op pays some of its employees too much. Echols earned $75,000 annually as manager. His assistant, Claudine Williams, who is now acting general manager, makes $64,000 a year.
``We want to know how accounting fees can go from $7,000 in one month to $40,000 the next,'' Leatherwood said. ``They still haven't explained that one. We also want board members to justify these salaries for managers, assistants and directors.''
Since citizens' concerns about spending practices surfaced, the co-op has ``broken all personal contacts with Johnson and Dooley,'' said Burrus, the board member.
The utility's board hired an outside auditor to go over the books and see whether expenditures were justified. Burrus would not name the firm. Nor would he say how much the outside inquiry will cost.
``It's a Big Six firm that's doing the work for us. They're as large or larger than Arthur Andersen,'' Burrus said. ``They started work about two weeks ago. But they requested that we not publish their name because of possible prejudice during their investigation.
``Once their work is finished, it will be complete public knowledge. Whichever way it goes, we'll let our members know. The chips will fall where they may.''
Burrus said he expects to receive the audit results within 30 days. No ceiling has been set for audit costs, he said. And he is not sure who will end up paying for it.
``We asked Johnson and Dooley to pay for it themselves,'' Burrus said. ``But I don't know whether they will.''
If the co-op has to pay for the audit, Burrus said he did not know where funds would come from. He directed questions about the 1995 budget to the cooperative's public relations firm. A spokesman for the firm - Brickell & Associates Public Relations of Virginia Beach - said budget figures were unavailable Tuesday evening.
Asked Leatherwood: ``Do they even have a budget? Did they ever lay one out? If they did, where is all this money for public relations and outside audits coming from? These are just some of the things we want to ask.''
Electric co-op customer Jean T. Meyer, who leads the 300-member Avon Property Owners Association, said her group, too, has a lot of questions for Cape Hatteras Electric leaders.
In early November, she sent a letter to the Rural Electrification Administration in Washington, asking that the federal group which lends money to rural electric co-ops look into all aspects of the Hatteras utility. As of Tuesday, Meyer had received no response from the federal REA.
An agency spokesman, Jim McKenna in Washington, ``The REA felt that nothing was really brought to its attention at this time that would merit an investigation of Cape Hatteras Electric. Some charges were made to us. But nothing that would necessitate an investigation.
``There's no irregularity as far as REA is concerned with its loan funds,'' McKenna said.
Meyer said she does not plan to give up. Tonight, she and other Avon residents plan to attend the board of directors meeting at the co-op. They want answers about accounting, salaries, expenditures - and many other issues.
``We still have a lot of questions. People are still quite upset about the assistant manager's wages. And I don't feel the board should continue to spend, spend, spend on all this public relations stuff,'' Meyer said.
``That's what this fight is all about - the amount of money they've been throwing away. They keep signing new contracts, spending more and more. At the same time, our electricity rates keep going up.'' by CNB