Challenge: EMC paid too little in settlement
by Nikki Wiley
January 24, 2014 12:55 AM | 6963 views | 4 4 comments | 19 19 recommendations | email to a friend | print
MARIETTA — A court filing against Cobb Electric Membership Corp. alleges a proposed $98 million class-action settlement offers too little money and makes it too difficult for recipients to get their rightfully-owed money.

An Alpharetta attorney is objecting on behalf of a Cherokee County woman to the proposed settlement of a lawsuit that accuses Marietta-based Cobb EMC of withholding millions of dollars in credits from its 175,000 customers, also called members.

At the end of each year, Cobb EMC puts its extra cash in an account where it is assigned to members based on how much electricity they use. The goal is to refund the money to customers.

But a class-action suit says $286 million that should have been returned to members was kept. The EMC has offered a settlement to pay $98 million, about one-third, of the amount of money originally involved in the lawsuit.

The remaining money would be “lost to (members) forever,” said Chester Arter, an attorney, wrote in the objection.

He called it all “smoke and mirrors” and said there is no reason to reduce the amount owed.

Customers doing business between the group’s founding in 1938 and Dec. 31, 2012, are eligible for the payments. That’s estimated to be about 900,000 members who are owed money.

The settlement gives customers two choices.

They can be paid based on “present day value,” which Arter says takes away $188 million from members. Customers can otherwise opt to receive 100 percent of what they are owed over the next 24.6 years, which Arter contends is an arbitrary number.

“This paradigm is a complete sham,” Arter wrote.

And for members to get their money, they have to file a claim.

“We’ve chopped it down to $96 million, and because we know not everybody is going to make a claim … all of a sudden the EMC is going to have a complete reversion,” Arter said Thursday.

So far, just 30,000 claims have been submitted by the more than 700,000 individuals who qualify, Arter said. That’s less than 10 percent of those eligible.

Kevin Moore, attorney for Cobb EMC, said he could not comment on the specifics of the objection.

“We must respect the integrity of the court,” Moore said.

Cobb Superior Court Judge Stephen Schuster signed a preliminary order in October but is scheduled to hold a final approval hearing at 9 a.m. Tuesday, Feb. 25.

Tracking down customers not easy

Until the lawsuit was filed in 2010, the last time Cobb EMC refunded money to its members was in 1976, when it returned $500,000.

The utility serves nine counties — Cobb, Bartow, Cherokee, Fulton and Paulding in the metro Atlanta area and Randolph, Calhoun, Quitman and Clay counties in southwest Georgia.

In June 2012, Cobb EMC announced its intention to pay $1.7 million to customers who had service from 1957 to 1971. The actual amount paid was based on a formula involving how much electricity was actually used.

The average refund was $267.

Cobb EMC mailed 38,000 notices to eligible current and former customers to their last known addresses, but 30,000 were returned.

“The thing that concerns me, there probably are millions of dollars out there that they’ll never locate the owners,” said Fletcher Thompson, a Cobb EMC critic and former U.S. Congressman who lives in east Cobb.

The question, he said, is what will happen to the remaining money. Cobb EMC is a nonprofit owned by its members and is not legally allowed to operate with profits.

“I would like to see that money go to the school board, the Board of Education, and the counties in which they lived, but I don’t think that’s going to happen,” said Thompson.

Attorney says opposing counsel will benefit

Both Arter and Thompson say the winners of the lawsuit will be lawyers for the class-action lawsuit. Samuel Pierce Jr. and Charles Gabriel, of the Roswell firm Pierce, Gabriel & Parker, are working on the suit.

“The people who make out like gangbusters are the attorneys,” Thompson said.

Arter said they will be “walking away with a butt load” of money.

The EMC has been embroiled in a long series of legal challenges in recent years.

In addition to the lawsuit alleging millions of dollars in profits were withheld, the group’s former CEO Dwight Brown found himself on the wrong side of a more than 30-count indictment alleging theft by taking, conspiracy and violating the Racketeer Influenced and Corrupt Organizations Act, among other criminal charges.

The first round of indictments against Brown were dropped by Cobb Superior Court Judge Robert Flournoy in March 2011 because he said it wasn’t delivered in open court.

Prosecutors sought indictment in July 2011. Brown has appealed and oral arguments are scheduled to be heard at 10 a.m. Feb. 3 at the Supreme Court of Georgia.

EMC Timeline

January 2011: Grand Jury indicts former Cobb EMC CEO Dwight Brown on 31 counts of racketeering, fraud and theft of assets. He is booked into Cobb Jail and released on a signature bond.

February 2011: EMC announces Brown’s retirement, but also that the board will ask the court’s permission to rehire him. Brown continues on as a consultant.

March 2011: Superior Court Judge Robert Flournoy throws out Brown’s indictment on grounds it wasn’t delivered in open court. Prosecutors later appeal.

June 2011: Court rejects the directors’ bid to rehire Brown.

July 2011: Brown is re-indicted on the same charges plus four more. This time, he rides to jail handcuffed in the back of the sheriff’s car.

January 2012: Lawsuit filed alleging that Marietta-based Cobb Electric Membership Corp. has withheld millions of dollars in credits from its customers.

June 2012: Cobb EMC announces payment of $7.1 million in capital credits to members who were customers during the years of 1957 to 1971. That money goes to eligible members based on an equation of how much electricity they used.

October 2013: Cobb Superior Court Judge Stephen Schuster signs preliminary order in settlement.

January 2014: Objection filed to class action settlement.

Comments-icon Post a Comment
Cobb EMC Member
January 24, 2014
Makes me sick to think of how Dwight Brown and his Board abused the membership for so many years. When will members be made whole ?

Settlement terms and conditions are riduculous - the Judge need to get serious and refuse this sorry offer.
Diamond Jim
January 24, 2014
Any money left over from customers that cannot be located or do not file claims should NOT be given to schools, or anyone else. It is the property of the members who paid into the co-op,and unclaimed money should be divided proportionately among those who did care enough to file a claim. And not an extra penny to the lawyers. Those vultures are always the winners in class action suits. Members of the class get $1.99 and the lawyers get millions.
Rick Z
January 24, 2014
Haven't the lawyers made enough off this already?
Former Member
January 29, 2014
I believe the members of the Board along with Dwight Brown who have benefited from this dishonest act should be named and punished for stealing millions from right under our nose. This was a blind trust on the members part and the guilty should be found out whether they have retired or not. The thieves should be the ones to pay the lawyer's fees.
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