THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, January 29, 1995 TAG: 9501290097
SECTION: LOCAL PAGE: B1 EDITION: NORTH CAROLINA
SOURCE: STAFF REPORT
DATELINE: BUXTON LENGTH: Medium: 54 lines
Contending that it was defrauded by unauthorized and excessive billings, the Cape Hatteras Electric Membership Cooperative said Saturday that it has filed a civil suit in federal court against its longtime accounting firm, Johnson and Dooley of Danville, Va.
The suit, filed Friday with the U.S. District Court in Richmond, seeks at least $200,000 in compensatory damages, $500,000 in punitive damages and attorney fees. The firm representing the cooperative, Vandeventer, Black, Meredith & Marlin, with offices in Dare County and Norfolk, has requested a jury trial. The suit was filed in Virginia because that is the home base of Johnson and Dooley, a spokesman said.
The filing was the latest development in a controversy that has been the talk of the island for several months.
The disclosure last fall that the cooperative had paid more than $430,000 to the accountants in the previous year touched off an uprising among the utility's 3,800 members on Hatteras Island. An outside auditor was hired to check payments to Johnson and Dooley and reported that the accountants had overbilled the cooperative more than $100,000 in the past year.
The utility then terminated its contract with Johnson and Dooley, which had kept the utility's books since 1979. Last Thursday the cooperative's board of directors voted to hired McGladrey & Pullen of New Bern and Morehead City to conduct the annual audit at a cost of $23,650 for 360 hours of work.
A public meeting demanded by petitioning members who have complained about electric rates, secrecy and payments to the accountants is scheduled at Cape Hatteras School on Wednesday night.
The cooperative released copies of its lawsuit Saturday. Attorney Tony Hornthal of Elizabeth City, who represents Johnson and Dooley in North Carolina, said he has not seen the suit and could not comment. He said the defendants have 20 days in which to reply.
The suit contends that the cooperative ``was intentionally and fraudulently overbilled'' by Johnson and Dooley and said the accountants charged for airplane trips that were not authorized or were made for other clients. The suit also says charges of $164,076.89 for efforts to restore power after the Bonner Bridge was knocked down by a drifting dredge in 1991 ``were excessive and unreasonable.''
The cooperative serves all Hatteras Island residents, and employs about 20 people full time. The non-profit, tax-exempt co-op is owned by power customers. On Oct. 18, Manager John A. Echols resigned after less than four months, saying that the directors were meddling and that there were improper spending practices. He disclosed the payments to the accountants. by CNB