Cobb Electric Membership Corporation (Cobb EMC) is a Georgia electric cooperative serving 195,000 consumers. It was formed in 1938. In 2009, Cobb EMC sold more than 3.8 billion kilowatt hours of electricity. Cobb EMC is regulated by a board of ten directors, who name the chief executive officer, who in turn is responsible for appointing the management staff that operates and maintains the system. As of 2010, Cobb EMC's President/CEO is Dwight Brown.
Since 2007, CEO Brown has been the target of two customer lawsuits and an ongoing criminal probe of possible theft and racketeering by management. That management -- including Brown and the co-op's board -- remained in charge during the investigations, despite a court order that should have allowed the co-op's customers to install a new board. Continuing litigation blocked board elections. As of October 2010, Cobb EMC customers haven't elected a board member since 2007.
Theft and racketeering charges
In 2007, east Cobb County resident Sims Maddox stood up at a meeting and asked Cobb EMC CEO Dwight Brown: “Who are we in bed with? I want to know." The question was in response to a series of articles by the Atlanta Journal-Constitution (AJC) which first raised questions about Cobb EMC in late August 2007 based on arrangements that appeared to create financial conflicts of interest. The first lawsuit was filed the next month. As outlined in the AJC articles, and later fleshed out in court, the co-op had turned over its work force and its electric meters to a for-profit company called Cobb Energy in 1998, giving that company a 40-year contract to operate its electric business. Cobb Energy charged a markup, which rose from 2 percent to 11 percent. It also started ventures -- including mortgage brokering, private security and pest control -- far outside its core electric business. Most of the ventures lost money, court documents said. The company's profts was the operating contract with Cobb EMC.
Brown was CEO of both companies, drawing a $300,000 annual salary from each. He also was a preferred stockholder in Cobb Energy, having purchased $3 million worth of the company's stock using loans from the co-op and Cobb Energy. The $3 million loan is being gradually forgiven. Add his salary, the $265,000 per year he received in Cobb Energy stock dividends and the loan forgiveness, and Brown's annual compensation was about $1.2 million.
Some of the co-op's "volunteer" board members were also well compensated, receiving $107,000 to $130,000 in retirement benefits upon joining the board. Some co-op board members also owned dividend-paying preferred stock in Cobb Energy. The co-op, which owned roughly 30 percent of Cobb Energy's stock, received no dividends. Even a committee of co-op board members later questioned one of Brown's actions, a 2005 decision to nearly double the markup the co-op paid Cobb Energy without co-op board approval. The hike took effect five days after Cobb Energy announced that it would pay $20 million for naming rights at the Cobb Energy Performing Arts Center.
Maddox filed the first lawsuit against the co-op and its affiliate in September 2007, then withdrew it to join a second lawsuit, filed the next month by Cobb County businessmen Edgar "Bo" Pounds and Butch Thompson and others. The lawsuit was settled in December 2009 under terms that galled some plaintiffs even as they signed off on the deal. The settlement required Cobb EMC to pay $47 million to buy out Cobb Energy shareholders, including Brown; assume Cobb Energy's liabilities; and buy out Cobb Energy's contract with Brown. In exchange, it got back $112 million in assets and got out from under the 40-year contract that would have cost it $170 million over time. The agreement allowed Brown to stay as Cobb EMC's head. His contract expires early next year. But the deal also set a schedule of 2009 elections that would potentially allow co-op members to oust most of the co-op's Brown-friendly board by the end of last year.
Both sides signed the deal in early December 2008. The deal called for the plaintiffs to draft language to be put before members for the first of the ordered meetings, asking whether they wanted to allow mail-in voting for board members and limit board compensation. Instead, the co-op board quietly amended its bylaws to create a new method of voting that appeared to favor co-op management. It also restricted customers' ability to participate in annual meetings. Spokeswoman Carol Cookerly said then that the changes would open up voting and rein in disruption at meetings. She said the board was confident that "the truth will prevail that these (incumbent) directors are the very best people to protect the ratepayers."
The fight was back in court by January 2009, putting elections on hold. A few months later, Cobb County sheriff's deputies served search warrants on the co-op and the homes of Brown and three board members. In its 2009 annual report, the co-op said the investigation is focused on alleged theft and racketeering. In April 2010, an appeals court ruled that the co-op had violated its settlement agreement and ordered elections to go forward as that agreement spells out.
As of October 2010, the Georgia Supreme Court could rule any day on whether to allow a 21-month legal fight over Cobb EMC board elections to continue. The co-op wants the court to hear an appeal of a spring appellate court ruling on the elections process. If the court decides not to hear that appeal, the co-op's board elections could go forward for the first time in more than three years.
January 2011: Power4Georgian Organizer Dwight Brown indicted
In January 2011, Dwight Brown, Chief Executive of Cobb EMC and the organizer of Power4Georgians, was indicted by the Cobb County District Attorney for theft and racketeering. Cobb EMC was already embroiled in litigation questioning the EMC's financial accountability to its members. Questions have also been raised about Cobb EMC’s involvement in the proposed construction of two coal-fired power plants - Washington Plant and the Ben Hill Plant - which could cost over $4 billion. As CEO of Cobb EMC and of Cobb Energy, Brown organized Power4Georgians, a corporation with five other EMCs, to build and operate the two coal-fired plants.
Four of the original ten EMCs pulled out of Brown’s Plant Washington project, citing high cost concerns, but under Dwight Brown's leadership, Cobb EMC proceeded. During the hearing on the Plant Washington air permit in October 2010, Dean Alford of Power4Georgians testified that Power4Georgians received a no-bid contract to develop the proposed coal-fired power plant. According to the Marietta Daily Journal, “the indictment alleges that Brown used Cobb Electric Membership Corporation as a piggybank to fund various operations and activities of Cobb Energy without approval by the cooperative’s members, as required in EMC’s bylaws.” It is estimated that the development of Plant Washington has cost $27 million to date, of which Cobb EMC paid a significant portion that has never been approved by the coop’s members.
Katherine Cummings, Director of the Fall-Line Alliance for Clean Energy (FACE) and a customer of Washington County EMC, a member of Power4Georgians, wondered, “Will Washington EMC be able to get its rate-payers’ money back from Dwight Brown’s Plant Washington scheme?”
Cobb EMC is part of POWER4Georgians, a consortium of ten Georgia electric membership cooperatives: (EMC) (Central Georgia EMC, Cobb EMC, Diverse Power, Excelsior EMC, GreyStone Power, Jackson EMC, Pataula EMC, Snapping Shoals EMC, Upson EMC, and Washington EMC). The domain name for the consortium was registered in late December 2007 by Bob Vickery from Allied Energy Services.
In January 2008 the consortium announced plans to build a $2 billion, 850-megawatt (MW) supercritical coal plant in Washington County, Georgia. Applications for air permits were filed with the Georgia Environmental Protection Division. On April 8, 2010, the Environmental Protection Division issued final permits for operation of the Plant, green-lighting construction. (See Washington Plant for more details).
1000 EMC Parkway
Marietta, GA 30060
Telephone: (770) 429-2100
Articles and Resources
- "Cobb EMC: About Us", Cobb EMC website, accessed October 2010.
- Margaret Newkirk, "Three years after suing Cobb EMC, customer-owners may get chance to choose its board" Atlanta Business Board, Sep. 23, 2010.
- "Brown Indictment & Coal Plant Financial Concerns: Financial Concerns about Coal Plants Spread as Cobb EMC Chief Dwight Brown Is Indicted Brown’s Business Schemes Included Power4Georgians" cleanenergy.org, January 7, 2011.
- "power4georgians.com", Joker.com, accessed April 2008.
- "Co-ops Propose $2 Billion Coal-Fired Plant in Georgia", Reuters UK, Jan. 24, 2008.
- Brandon Wilson,"Ga. OKs Plant Washington construction" The Marietta Daily Journal, April 9, 2010.
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