THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, July 18, 1995 TAG: 9507180279
SECTION: LOCAL PAGE: B1 EDITION: NORTH CAROLINA
SOURCE: BY LANE DEGREGORY, STAFF WRITER
DATELINE: BUXTON LENGTH: Medium: 65 lines
Six weeks before a Virginia jury was scheduled to hear testimony in federal court, lawyers for the Cape Hatteras Electric Membership Cooperative and their former accounting firm settled their suits.
Monday night, the manager of the member-owned Outer Banks utility announced that the co-op would agree to drop a $700,000 lawsuit against its former accountants, Johnson & Dooley, if the Danville, Va., accountants would drop their $16 million countersuit against the Hatteras Island Power Co.
``We think they overbilled us by about $100,000. They, of course, wanted us to cover everything left in their contract with us . . . a total of about $212,000,'' power company manager James Sherfey said Monday at a monthly board meeting.
``In our final agreement, each party will withdraw its lawsuit. I felt we had a very high chance of prevailing in the court. But settlement, in the long run, is a good business venture.''
According to terms of the settlement published in a one-page release, Johnson & Dooley will waive about $123,000 in unpaid accounting bills sent to Cape Hatteras electric and $89,600 outstanding from a monthly accounting contract scheduled to end next April.
In exchange, Johnson & Dooley will perform $20,000 worth of future accounting services for the co-op and pay Cape Hatteras electric $15,000 from its insurance carrier.
The settlement was reached after a nine-hour meeting Friday of representatives and lawyers for both sides. Both parties split the cost of a professional mediator. Sherfey said he did not know the co-op's cost of the litigation. ``If it had gone to trial,'' the co-op manager said, ``lawyers fees would have been at least $75,000 more.''
Sparks have been flying between Cape Hatteras Electric Co-op officials and their former accountantsfor almost a year.
In October, former power company manager John A. Echols resigned after only four months on the job. Echols said co-op directors were meddling too much in daily operations and were paying their accountants too much money.
He released financial statements showing that Johnson & Dooley had charged the power company more than $400,000 for accounting and consulting services between November 1993 and October 1994.
Cape Hatteras Electric directors fired Johnson & Dooley in January, after an outside auditor said the Danville accountants had overbilled the power company by more than $100,000.
The electric co-op then filed a civil suit in U.S. District Court in Richmond, asking the accountants for at least $700,000 in damages.
Last month, Johnson & Dooley's attorneys filed a countersuit in the same court. The countersuit said the accountants properly billed the electric co-op - but co-op officials ``falsely accused Johnson & Dooley of misconduct and unjustly terminated Johnson & Dooley in hopes that critics of Cape Hatteras Electric would be stilled by those actions.''
The countersuit sought $16 million in damages plus $123,503 for services and expenses and $89,600 for early termination of a monthly services agreement.
Johnson & Dooley had worked for the electric co-op since 1979.
A nonprofit cooperative owned by its 3,800 Outer Banks members, Cape Hatteras Electric Membership Co-op employs about 20 people full time and serves all Hatteras Island homes and businesses. by CNB