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With the announcement of felony indictments of its former general manager and millions received in settlement of claims of attorney malfeasance, the Pedernales Electric Cooperative membership elected new members to serve on its board of directors and chart its path into the future.

Director Patrick Cox of Wimberley ran unopposed and was re-elected to Pictured l to r: Larry Landaker, Patrick Cox, and Cristi Clement.

the board. Newcomers Cristi Clement of Meadowlakes tallied 7,713 votes, edging out Mark Mayfield by 108 votes in the District 1 race. Larry Landaker of Wimberley garnered 5,152 votes, to surpass David Bethancourt by 664 votes for the District 6 position.

A total of 23,125 votes were cast, including 19,315 by mail, 3,723 online, and 87 in person at the annual meeting on Saturday. Voter turnout was approximately 12% of the total of 194,012 PEC members eligible to vote in the election.

Although they were declared the winners, Cox, Clement and Landaker were not sworn in as directors on Saturday due to the board’s action on June 15 to delay installing the newly elected directors until June 29.

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Late Wednesday afternoon, the special Blanco County Grand Jury empanelled to hear evidence of alleged wrongdoing at the PEC, returned two sets of criminal indictments. The grand jury indictments contain three counts against PEC’s former general manager Bennie Fuelberg and long time outside attorney Walter Demond, who was a partner with the Austin firm Clark, Thomas & Winters.

According to the indictments, Fuelberg, who ran the cooperative for more than 30 years, and Demond directed payments exceeding $200,000 to Curtis Fuelberg, a lobbyist who is Fuelberg’s brother, and William Price, an attorney who is the son of former PEC director E.B. Price.

Curtis Fuelberg has said the payments were legitimate. William Price’s lawyer has said his client did nothing wrong.

Both Fuelberg and Demond are named in the indictments on three identical felony counts — misapplication of fiduciary property, theft and money laundering.

The misapplication of fiduciary property count of the indictment states that Fuelberg and Demond engaged in a “continuing course of conduct” that breached their fiduciary agreement with PEC and “intentionally and knowingly misapplied” PEC money by paying Curtis Fuelberg and Price more than $200,000 between Nov. 14, 1996, and March 13, 2007.

The theft count of the indictment states that Fuelberg and Demond “unlawfully appropriated” more than $200,000 of PEC money “by deception” during that same time period and made payments to Curtis Fuelberg and Price.

The money laundering count of the indictment alleges that Fuelberg and Demond engaged in a scheme to transfer “the proceeds of a criminal activity” involving the theft of $100,000 but less than $200,000 of PEC money from Sept. 1, 2005 to March 13, 2007.

Attorneys for Fuelberg and Demond have said their clients would not take money they did not earn. Fuelberg and Demond turned themselves in last week and were released on $30,000 bond each. They are set to be arraigned before District Judge Dan Mills in Blanco on July 17 at 10:30 a.m.

Misapplication of fiduciary property and theft over $200,000 are first degree felonies which carry punishment of up to 99 years in prison and penalties up to $10,000. Money laundering between $100,000 and $200,000 is a second degree felony which carries punishment of up to 20 years in prison and a fine of up to $10,000.

Jerry Strickland, spokesman for the Texas Attorney General’s Office said Monday that the Blanco County Grand Jury “is still empanelled and the Attorney General’s investigation is ongoing.” The special grand jury was convened in February for a seven month term, with possible extensions. The AG’s office had no comment on whether any additional indictments would be forthcoming.

On June 18, PEC announced it had settled its claims against the Clark, Thomas & Winters law firm. The settlement states that PEC will receive $4.1 million by July 15 relating to matters in dispute, including legal work, billings, payment by the law firm “to relatives of PEC employees or directors,” and “other aspects of the relationship between” the law firm and PEC.

While the settlement agreement releases all claims PEC and the law firm may have against each other, it expressly does not release any claim either party “may have against its own present or former employees or directors, including but not limited to the former PEC General Manager Bennie Fuelberg, his brother Curtis Fuelberg, William Price, and former PEC Board President W.W. Bud Burnett.”

Payments funneled through the law firm to Curtis Fuelberg and Price were revealed by the Navigant Consulting governance report that was made public in December 2008. The report disclosed that Clark, Thomas & Winters may have funneled $510,000 in PEC funds to Curtis Fuelberg and Price between 1998 and 2004.

Curtis Fuelberg is a registered lobbyist. According to records maintained by the Texas Ethics Commission, for the years 1998 through 2008, Curtis Fuelberg listed a number of clients but never showed PEC as a client. However, from 2003 through 2008, Fuelberg listed the Lower Colorado River Authority as one of his lobbying clients. The PEC purchases energy from LCRA. It remains unknown why Clark Thomas would invoice PEC for large sums of money that it allegedly passed on to a lobbyist for LCRA who was the brother of PEC’s general manager.

Austin attorney Martha Dickie, retained by Clark, Thomas & Winters as part of its review of PEC billing issues, issued a statement following the settlement announcement. “The attorney who authorized the payments to outside consultants resigned at the request of the firm earlier this year. When Clark, Thomas & Winters’ management became aware in December 2008 of the details of the payments to outside consultants and PEC’s reimbursement of some of those payments, it promptly notified both PEC management and the Office of the Attorney General. The firm has cooperated fully with subsequent investigations by both.”

The settlement agreement states it is “a compromise of a disputed claim,” is not “an admission of liability,” and Clark, Thomas & Winters does not “admit to any liability, negligence or fault.”

PEC General Manager Juan Garza said, “This settlement represents a prudent business decision that allows us to effectively sever all ties to Clark, Thomas & Winters, recoup damages suffered by PEC and its members, and focus our attention on providing safe, reliable electric service at the fairest price.”

After PEC announced the settlement of its claims against Clark, Thomas & Winter, State Senator Troy Fraser and State Representative Patrick Rose issued a joint statement questioning the timing, terms and wisdom of the settlement.

“We are outraged that the Pedernales Electric Cooperative Board of Directors would agree to indemnify its former law firm by agreeing to a settlement the same week that the Blanco County Grand Jury indicted a principal partner with that firm.

“This action by the legacy directors is consistent with the tactics used by Bennie Fuelberg, the former general manager, to hide information from the members and employees. It is unbelievable that five days before a new board is elected by the members, the old guard is still making major decisions. These decisions should wait until the new board of directors duly elected by the members is sworn in.”

Jimmy Williamson, the Houston attorney hired by PEC in January to pursue the claim against Demond and his law firm, will receive one third of the $4.1 million as his contingency fee. Fraser and Rose voiced their displeasure with that fee arrangement.

Luis Garcia, general counsel to PEC, said that prior to hiring Williamson he interviewed many law firms throughout the state who handle legal malpractice cases, and all asked for a contingent fee arrangement, asking for up to 40% of the amount recovered. Garcia said that when PEC hired Williamson in January, there was no way to calculate how long the investigation would last, whether insurance coverage for the claims in question would be exhausted, or the eventual cost to PEC if it had chosen to hire an attorney on an hourly rate.

PEC members have questioned whether $4.1 million is actually a positive recovery for PEC since PEC paid Navigant approximately $3 million for their report, allegedly lost at least $510,000 in improper billings funneled through the law firm, and will have to pay over $1.3 million to Williamson under the terms of the contingent fee agreement.

Fraser and Rose said the PEC board’s recent actions confirm that cooperative members need protection through legislation.

The newly elected directors are scheduled to be seated at a special organizational meeting on Monday, June 29 in Johnson City