Tag: scandal

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Opinion

Keeping It Unreal

So the government fired five shots at John Ford and hit him once, federal prosecutors kept their Tennessee Waltz winning streak unbroken, and the E-Cycle FBI Actors Repertory Company closed another Memphis performance.

This one was a little shaky. Prosecutors said they are sending out a strong message of deterrence. But four years after its inception, Operation Tennessee Waltz still looks more like a sting targeting Democrats in Memphis and Chattanooga than a purge of “systemic corruption” in state government. Its success is due to secret tapes of a handful of public officials taking bribes from a fake company that their colleagues were too honest, too smart, or too irrelevant to deal with.

Or maybe they just know how to Google.

Type “Joe Carson” and “FBI undercover” in a Google search and you find that Joe Carroll, whose FBI undercover name is Joe Carson, starred in at least two FBI undercover productions before Tennessee Waltz. In “Operation Lightning Strike” from 1991 to 1994, he posed as a big shot for Eastern Tech Manufacturing Company, a phony business seeking crooked contracts in the aerospace industry in Houston. His undercover name? Joe Carson. The sting resulted in indictments and a mistrial.

In 2001, Carroll and the FBI resurrected “Joe Carson” in a Maryland undercover operation targeting state lawmakers. His phony Atlanta-based company was seeking crooked deals with Comcast for fiber-optic contracts. A former state senator, Thomas Bromwell, is under federal indictment but has not yet gone on trial.

Give the FBI, Carson, L.C. McNeil, and Tim Willis credit for pulling off a two-year Tennessee undercover operation, including the 2004 and 2005 legislative sessions, without a leak. The Ford tapes were so powerful that the defense barely tried to explain them away. They left no doubt that money was exchanged for special legislation. The sting worked, but it hasn’t yet exposed corruption in real deals in high places.

Operation Tennessee Waltz started in 2003, after FBI agents investigating phony contracts in Shelby County Juvenile Court found evidence of “systemic corruption” in state government. Seven of the 11 Tennessee Waltz indictments were announced at a press conference in Memphis on May 26, 2005. The investigation, convictions, and guilty pleas since 2003 have produced no indictments for bribery or other wrongdoing by any full-time state employee, lobbyist, or contractor. On tape, Ford boasts that he is the man who “does the deals” and “control[s] the votes,” but his trial was all about E-Cycle and legislation that never got beyond committee.

“Systemic corruption,” it seems, is a product of Shelby County and Hamilton County, two of the 95 counties in Tennessee. Five Memphians have been convicted or pleaded guilty. In a conversation with agent McNeil in 2004, Barry Myers, the bag man who later became a government witness, explained why lawmakers were wary of the free-spending black millionaire: “To be honest with ya’, most of the money I used to pick up come from white folks, white males, established businessmen that would send money to Kathryn, Lois, Roscoe, and John. That’s where the real money came from.”

Who spent the “real money” for “the big juice” — Ford, Roscoe Dixon, Kathryn Bowers, and Lois DeBerry? We don’t know. The payment of “consulting fees” by real companies is at the heart of Ford’s pending case in Nashville, which is not part of Tennessee Waltz. He has a hearing on May 3rd. Eli Richardson, assistant U.S. attorney in Nashville, said “it remains to be seen” how the Memphis case will mesh with the Nashville case, which apparently relies on old-fashioned evidence and witnesses.

“The conviction in Memphis opens up all kinds of possibilities for plea negotiation that didn’t exist before,” said Bud Cummins, a former federal prosecutor in Arkansas. “But there is not a whole lot of pressure on the government. They are still holding most of the cards. My best guess is they’re pretty intent on going to trial.”

Ford could appeal his Memphis conviction and request a sentencing delay until after he is tried in Nashville. If he is sentenced and goes to prison before his appeal is resolved, he could still be tried on the Nashville charges.

“We try people all the time who are sitting there in prison clothes,” Cummins said, although Ford would probably be unrestrained and in civilian clothes in the courtroom, with a federal marshal standing behind him.

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Opinion

Miami Vice

What happens in Vegas stays in Vegas, but what happened in Miami in 2004 during three days and nights of partying involving John Ford, an undercover FBI agent, and their dates was courtroom fodder this week in Ford’s corruption trial.

Ford’s girlfriend, Mina Nicole Knox, 26, took the witness stand for nearly two hours as the defense closed out its case in short order. Ford did not testify, and the defense presented only three witnesses, including Knox, attorney Allan Wade, and Ford’s friend William Watson.

At Flyer press time, prosecutors were undecided whether to call a rebuttal witness. Otherwise, U.S. district judge Daniel Breen said the two sides would make closing arguments Tuesday afternoon and the case could go to the jury after that. The trial is in its third week.

Knox, who described her relationship with Ford as “personal,” is a petite former model and professional cheerleader and aspiring actress. She answered questions in a sweet, perky voice as defense attorney Michael Scholl and assistant prosecutor Lorraine Craig asked her about details of her weekend with Ford, Tim Willis, and undercover agent L.C. McNeil in Miami in July 2004. The weekend included a party aboard the now famous E-Cycle yacht, which was in fact an FBI prop, where undercover FBI agents smoked cigars, had drinks, and danced salsa with Knox and several of her male and female friends, including Ford.

Under questioning by Scholl, Knox told jurors that McNeil spent the night with one of her girlfriends in a hotel room and a second night with another woman from their party. McNeil testified last week that in his undercover role he “mirrored” Ford’s party style, but he insisted there was no sexual relationship, drug use, or anything “inappropriate” in his role-playing. In real life, McNeil is an ordained minister and specialist in undercover operations who said “it is a challenge to separate the two” lives he leads.

The weekend in Miami is important because it marked the beginning of the buddy-buddy relationship between Ford and McNeil and established the terms by which McNeil would pay Ford $55,000 in what the government says were bribes over the next nine months. Scholl spent more than three days cross-examining McNeil, who made all the payments and recorded them.

When it came his turn to present witnesses, however, Scholl elected to make it short and sweet. Wade, who represents developer Rusty Hyneman, said he never saw Hyneman give Ford an expensive Rolex watch and that Ford did not really save Hyneman any money on a state environmental matter, as Ford boasts on a secret tape. The other witness, a clothing designer who has known Ford for 20 years, also testified about the Rolex.

Then it was Knox’s turn. She said the purpose of the trip to Miami was to attend a black film festival. She did not recall hearing anything about E-Cycle Management. The defense contends Ford was targeted by the FBI and entrapped.

Prosecutors changed tactics by having Craig, instead of assistant U.S. attorney Tim DiScenza, handle the cross-examination. She asked Knox why three versions of the weekend in Miami that she wrote differed in detail, especially about McNeil’s implied romantic involvement. Knox said the first account was written hastily and in broad terms. Her final account of the weekend was written earlier this month just before the trial began. Craig suggested Ford might have coached Knox, but she denied having any help.

Jurors appeared to be listening intently to Knox, in sharp contrast to previous days in which witness testimony dragged on and was often interrupted by private conversations between the judge and lawyers. The courtroom was also unusually crowded with Ford supporters.

After Knox testified, there was a bench conference, after which Breen announced that the proof was complete unless the government decided during the lunch break to produce a rebuttal witness.

The anti-climactic end of the testimony left spectators and reporters guessing about the outcome and offering their opinions about the high and low points of the trial. With Ford declining to take the stand, the role of star witness must fall to either McNeil or undercover informant Tim Willis.

McNeil got the most face time, and the tapes of his payoffs to Ford were devastating, but for my money the trial’s most dramatic testimony came from Willis when he recounted his visit to Ford’s office in February 2005.

Willis was nervous, very nervous.

He had just gotten a call from Ford asking him to come to Ford’s office in downtown Memphis.

The call was short. Ford wanted to talk about one of Willis’ clients. Since Willis had only one client — E-Cycle Management — he could imagine what Ford was going to ask him: Are you working for the FBI?

Say what you will about Willis, he kept Operation Tennessee Waltz alive for three more months until the unveiling of the indictments on May 26, 2005. His commentary from the witness stand on the tape in which Ford threatens to shoot him was the signature moment in the trial.

The meeting at Ford’s office was Willis’ finest hour as an undercover informant. He outfoxed the fox in his own office, nervously shifting a miniature hidden recording device from one pocket to another while making up stories to counter each of Ford’s probes and keeping his nerve when Ford threatened to shoot him if he found out he was being betrayed.

At the time, Tennessee Waltz had been running for 15 months. Ford had been under suspicion since at least April 19, 2004, and had taken $40,000 in payments from an undercover FBI agent. Ford’s Memphis office was on the second floor of a small building on Third Street, with no easy access or interior observation points for FBI agents. Willis was on his own.

“I had a funny feeling about the call,” he testified.

So he called FBI agents Brian Burns and Mark Jackson, who told him to go ahead and to take a recorder with him.

After they talked awhile, Ford got down to business. How well did Willis know L.C. McNeil, the E-Cycle executive who had been paying Ford? What kind of contract did Willis have with E-Cycle? Was it for two years or three years? Where else did the company do business besides Tennessee?

“I’m just trying to figure out why they need a bill,” said Ford.

Then the big question: “Are they legit, man?”

Ford said Roscoe Dixon and two other unidentified people had warned him to be careful. Unknown to Ford, Dixon, hired a month earlier by Shelby County mayor A C Wharton as an administrative assistant, had been secretly taped for more than a year and had already been caught taking bribes from Willis. But Willis did not pay any bribes to Ford and testified that he didn’t even know Ford had been bribed when he went to his office that day.

To each question, Willis made up an answer. E-Cycle, he suggested, was a shell company for a get-rich-quick stock scheme. McNeil and his partner Joe Carson “hated each other,” and McNeil might be trying to sabotage the deal. McNeil grew up on the rough side of Chicago and might have been a drug dealer as a kid.

Ford wasn’t satisfied. The FBI has a lot of shell companies too, he countered.

“Let me ask you,” he said to Willis. “You ain’t workin’ for none of them motherfuckers?”

Ford whispered that he had a gun and said he would use it. Willis, as he had done several times before, broke into nervous laughter.

“He said he would shoot me dead and go tell my wife that I ran off with another woman,” he testified.

Ford was on the right trail but was missing enough pieces that Willis was able to talk his way out of the jam. The truth was worse than Ford suspected. McNeil was an FBI agent and instructor in undercover operations.

“The feds ain’t cut no deal with you?” Ford asked Willis, who had worked in his campaign in 2002.

In fact, that is exactly what they had done. Willis nervously shifted the recorder around in his pockets, sending static through the audiotape played for the jury.

As Willis was leaving, Ford threatened him again, telling him that if he was working for the FBI, “you gonna die right now.” He touched Willis on his shirt — Willis described it as a pat down — to see if he was wired, and Willis lifted up his shirt. As Willis walked down the stairs, Ford said, “It will not ever come back what you and I said.”

Little did he know that Willis would make it all come back. For the next three months, he never met with Ford again without an FBI agent in the room.

“We almost shut down the operation because of the threat,” Jackson testified.

Since he began cooperating with the government in 2003, Willis has been paid approximately $215,000. But on that day in February 2005 in Ford’s office, Willis was worth every dollar the government paid him.

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Opinion

Analyzing the Ford Trial

The government “can’t just go trolling for public officials, can they?”

The answer is “absolutely not.” FBI agent Brian Burns said that from the witness stand in John Ford’s trial in response to a question from defense attorney Michael Scholl, just like he said it from the witness stand in Roscoe Dixon’s trial last year in response to a question from assistant U.S. attorney Tim Discenza.

So when the FBI and federal prosecutors set up Operation Tennessee Waltz to root out “systemic corruption” in state government in 2003, they did not target John Ford. And when Captain Quint and Matt Hooper and Chief Brody set out in that fishing boat and started chumming the waters in Jaws, they were not looking for a big shark.

Seven days into the Ford trial, the case for entrapment is as murky as the case for bribery is clear. Jurors have seen and heard tapes of 10 payoffs to Ford, totaling $55,000, in 2004 and 2005. Each one is made in the context of conversations about Ford helping undercover FBI agents posing as business executives get special legislation for E-Cycle Management. Undercover agent L.C. McNeil counts out stacks of $100 bills and passes them across a desk to Ford, who often puts them in his pocket without bothering with an envelope. Some of the videos are shot from multiple angles and are as clear and carefully analyzed as NFL football replays, with McNeil, à la Boomer Esiason, circling the money with a red marker on his computer screen.

“I can walk into a room and get more done than 10 motherfuckers,” Ford says on one tape in a typical example of the former senator’s bravado and ratiocination. Obscenity may be edited out of family newspapers but not federal trials.

The prosecution’s biggest problem is probably also Ford’s best hope: showing that it caught Ford without setting him up. In the current news climate, with the Justice Department and U.S. attorney general Alberto Gonzales under fire for the firing of eight federal prosecutors, possibly for political reasons, establishing that Tennessee Waltz was nonpartisan is especially important.

Here’s an overview of the trial as of Tuesday, April 17th:

Who’s on the stand? Undercover FBI agent L.C. McNeil (not his real name) has been on the stand for most of four days. He was Ford’s running buddy in 2004-2005 and taped hundreds of hours of conversations. He is the government’s key witness because he actually made the payoffs to John Ford in a way that, in hindsight, seems like a dead giveaway to an undercover sting.

“I don’t target anyone,” McNeil said in response to a question from Discenza. “My focus is to go out and conduct a fair and balanced investigation.”

In two days of cross-examination, Scholl has done everything but shout “liar liar pants on fire” in numerous efforts to get McNeil to depict acting as lying.

Who is L.C. McNeil? The short answer is undercover specialist who looks like he could kick anyone in the courtroom’s ass. The long answer is more complicated. In real life, he is 39 years old, African-American, 6’1″, 220 pounds, a former Los Angeles policeman, a graduate of Oral Roberts with a theology degree, and a former full-time minister who was still ministering last year. For some reason, the government got McNeil to divulge most of that information in the Dixon trial but only gave the Ford jury an abbreviated resume and let Scholl flesh out the details.

In his fake identity, McNeil was the single father of a son in Chicago, a music producer and investor in lucrative stock offerings, and a world traveler. On the tapes, he and Ford are partying, talking about women in language that would get a budding Don Imus in trouble, and going to sports events. But McNeil is not nearly as foul-mouthed as Ford. He calls Ford “cat” and “doctor” and almost always ends his phone conversations with “Peace.”

Does he ever slip up? It’s hard to say, but there seems to have been a close call or two. McNeil always refers to his fellow undercover FBI agent Joe Carroll (alias Joe Carson) as simply “Joe.” Inevitably, Ford says something like “who?” And McNeil says, “My partner.” But he never uses his full name, which is perhaps too easy to confuse with his real name. And his fake career in music and movies, by coincidence or design, put him in Los Angeles and New York at the same time that one of Ford’s daughters was trying to break into the business there. He even says he will contact her, but apparently he never did. Nor did Ford check him out, which might have blown the cover.

Was John Ford targeted? At some point, he obviously was, but when and how are key issues in the trial. The FBI and prosecutors had to comply with guidelines for undercover operations and get approvals from higher-ups in Washington. Given the notoriety and history of the Ford family, it seems likely that Gonzales or his predecessor were in the loop, but that has not come out in court.

The jury must decide whether Ford was “predicated” or predisposed to take a bribe or entrapped by overzealous FBI agents. That’s the reason why so much has been made of an April 2004 dinner at Morton’s Steak House in Nashville when Ford and McNeil met for the first time. Kathryn Bowers, who definitely was an early Tennessee Waltz target, arranged the dinner and E-Cycle paid for it.

“I got a brother on City Council and another brother on County Commission and I control the votes in both places,” Ford says. But he was not an eager player. In his cross-examination of McNeil, Scholl played a tape on which Ford said he was too busy to help.

“It takes five months of my time, and I just don’t have time to do it,” he says.

The next day, McNeil and Tim Willis, his undercover informant, visit Ford at his Nashville office in the legislative plaza. Ford wants to talk more about the music business, but McNeil wants to talk about E-Cycle.

“Do you think we’re in good position to do some things?” he asks.

Three months later, Ford travels to Miami to meet Willis and McNeil, supposedly for a black film festival. He gets a tour of E-Cycle’s yacht and an earful of Willis blabbing interminably on his cell phone at lunch one day. Scholl’s tapes, in contrast to the government’s tapes, present Ford as quiet and mainly interested in the music business and women.

The man who came to dinner: The government wants to start the Ford story at the dinner at Morton’s. Ford came to the dinner, apparently without a personal invitation. Other legislators did not. Bowers, like Ford, is a black Democrat from Memphis. The road through Bowers and Dixon, another early target, would logically lead to Ford.

Ford’s self-assessment as political godfather was not shared by everyone. In tapes played at Dixon’s trial, Dixon says to E-Cycle executives that “we’re all leaders in the Senate.” And Bowers says, “The Senate didn’t have no leaders.” Also, Barry Myers, a Dixon understudy who testified against him at trial, says on tape that the powerful Sidney Chism-Willie Herenton Democrats “don’t give a fuck” about the Fords.

What are the risks of the entrapment defense? It’s a chess game, and prosecutors can counter with evidence such as the Rolex watch gift from developer Rusty Hyneman to Ford to bolster their predication argument. It is still early in the trial, and Discenza likely has more witnesses and more evidence that he might not have been able to put before the jury without the entrapment defense. There has already been testimony that Ford was involved in three previous FBI investigations.

Could the bribes be construed as legitimate? The intent is as clear as the video quality. McNeil always brings the conversation around to E-Cycle legislation so there is little, if any, chance of the payment being depicted as a legitimate consulting fee. Ford, of course, drives home the nature of the payments by playing the part of the dutiful legislator in the early tapes and, in the later tapes, threatening anyone who rats him out.

So, it’s a slam-dunk case? Never. That’s for the jury to decide.

Where’s Tim Willis? In the wings. The government will have to put him on the stand to talk about the witness-intimidation charge against Ford. He will take his standard beating from the defense (this will be the third trial in which he has testified) and will be questioned sharply about his moviemaking, which could suggest that he saw the whole thing as a sort of “Tim’s Excellent Adventure” project to advance his career.

Deleted scenes: Like the dozen or so reporters in the courtroom each day, the defense and prosecution are each trying to create a storyline for an audience by selectively choosing quotations, characters, and incidents. Scholl has effectively changed the plotline for now, but his points are sometimes hard to decipher. Discenza works faster and always has his witnesses repeat what he considers to be key statements.

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News The Fly-By

Black, White, and Red

Last week, I was surprised to hear Councilwoman Barbara Swearengen Ware say she was embarrassed by the way the City Council was acting. Actually, I was surprised to hear her say that she was a member of an honorable body, too, but that she was embarrassed about it was the real shocker.

Why? Well, it was her reasoning. Ware wasn’t embarrassed about members of the council being indicted on federal bribery charges or a very public investigation into one council member’s $16,000 delinquent utility bill. She was embarrassed that members of the council were still concerning themselves with the employment of beleaguered Memphis Light, Gas and Water president Joseph Lee.

Naturally. It’s not like MLGW is a city division or anything and that the council might have an interest in how it is operating.

In a heated committee meeting last week that split along racial lines, the council once again talked about what it could, and should, do about Lee. At issue were two proposals: a resolution by Carol Chumney accepting Lee’s March 1st letter of resignation and one put forth by Jack Sammons asking Lee to resign.

But in reality, everything seemed to be at issue.

Brent Taylor told Chumney he might agree with her resolution, but he didn’t like the way she presented it. She responded tartly, “If I’m out of order, so be it.”

Ware reminded council chair Tom Marshall that he asked for the independent investigation into MLGW’s special treatment of Edmund Ford, not the full council.

Dedrick Brittenum told Marshall that the proposals were being handled in the wrong committee.

Joe Brown told Chumney, a popular mayoral candidate, that she was using her council position for political gain.

“You can’t use your elected office to promote yourself. You’re in a gray area, and at times, you do violate that gray area,” he said. “You can’t even have the staff send out faxes about ‘Coffee with Carol.'”

And that was all before things got really ugly.

Ford, looking throughout the meeting like the cat who ate the canary, said to Marshall, “I don’t have a prejudice bone in my body, but I know you do” before making a reference to white sheets and saying he was going to draft a resolution to remove Marshall from his position as chair.

“It’s a personal issue. It’s a black and white issue,” said Ford. “I don’t know what you’ve been promised, but I want you to leave me alone. I’m not the one.”

And, in a typically long-winded speech, Brown said that the council discussion was setting race relations in Memphis back 50 years. He referenced the recent sentencing of Dale Mardis, the white car-lot owner who pleaded no contest to second-degree manslaughter for killing black code-enforcement officer Mickey Wright. When Mardis was sentenced to 15 years, family and friends of Wright were outraged.

“There’s something coming,” said Brown. “We wouldn’t want a civil disturbance.”

And people wonder why Memphis has a hard time keeping up with its sister cities. This isn’t a time to see black and white; if anything, it’s a time to see red.

The issue is possible malfeasance and a lack of public trust in the utility’s leadership, not race. But by making it a question of color, the council continues to damage its own credibility.

And for what purpose?

To remove Lee, the council would have to draft charges against him and essentially hold court proceedings to establish cause. Even then, however, there is no certainty that it is within the council’s authority to fire Lee.

The council approves the mayor’s appointees; it doesn’t generally remove them.

But in the monthlong brouhaha that surrounded the scandal, there simply wasn’t enough political will to even try to fire Lee, leaving the council in a surreal tug-of-war last week between asking a man who has already resigned to resign or accepting a resignation that isn’t the council’s to accept.

When it came right down to it, neither resolution passed in full council. Lee is still working at MLGW, the council never resolved anything, and the city stuck debating between what’s black and white and what’s right and wrong.

And to me, that’s just downright embarrassing.

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Cover Feature News

From Rotan Lee to Joseph Lee

By John Branston

January 1997: Willie Herenton appoints Herman Morris, who is then MLGW general counsel, to be interim president of MLGW.

June-August 1997: Rotan Lee, a utility consultant from Philadelphia (and no relation to Joseph Lee), introduces himself to Morris and Herenton. His brief contact with Morris doesn’t lead to anything. Lee goes to Herenton and signs a $150,000 contract as a consultant. Morris gets the president’s job officially.

August 1997: The Flyer, which broke the story about the possible sale of MLGW, reports details of the proposal from interviews with Herenton, Lee, and Allen Morgan Jr. of Morgan Keegan. They suggest a sale could fetch $800 million and make the city debt-free while lowering property taxes.

December 1997: The Flyer reports that MLGW sends out 3,000 cut-off notices per day and that there are about 400 cut-offs each day. Over one-fifth of MLGW customers are more than 30 days past due on their bills. The 1,900-member IBEW union and MLGW management oppose privatization.

Summer 1998: After meetings draw scant interest, Rotan Lee and Herenton drop plans for privatizing MLGW.

October 1999: Herenton is reelected for a third term, defeating several opponents, including city councilman Joe Ford. Ford’s brother Edmund is elected to the City Council, setting the stage for a seven-year saga of cut-off notices and careful treatment of Edmund Ford’s chronically overdue MLGW bills.

January 2001: MLGW’s board adopts, without discussion or publicity, a severance policy for Morris and other executives that collectively could pay them over $1 million if they “voluntarily” retire.

March 2002: A letter to Morris from CA editor Angus McEachran triggers the creation of a VIP list of influential Memphians and Morris relatives “who require my personal awareness, attention, or staff intervention when they have problems.” In an e-mail, Morris says the McEachran matter “could set editorial policy toward MLGW for years and must be handled with touch.” Apparently unknown to them, four CA editors and executives make the VIP list, which does not become public for five more years.

May 2002: Herenton, who makes $140,000, recommends a $231,000 salary for Morris after MLGW officials say that is what chief executives at 16 comparable utilities make. Morris gets a raise to $184,000 instead. His five-year term expires, but he continues to serve.

July 2003: A powerful windstorm roars through Memphis and does more than $100 million in damage. Herenton goes to Little Rock for a fund-raiser two days later. Morris and MLGW are criticized for their storm response and unwillingness to accept help from certain utilities.

August 2003: In a memo, Herenton suggests Morris give more business to local and minority firms on a $1.5 billion TVA bond deal.

October 2003: Herenton easily defeats Shelby County commissioner John Willingham and wins a fourth consecutive term as mayor.

November 2003: The Flyer reports that after the City Council balked at its rate-increase request, MLGW and Morris ignored Herenton and took their case directly to the public in full-page ads and opinion columns in the CA.

December 2003: Herenton calls MLGW “an island unto itself” and says it is wasteful and inaccessible. The utility’s souvenir bobblehead doll of Morris, the mayor says, is “self-aggrandizing advertising.” Board member James Netters, who is Herenton’s pastor, tells the Flyer that Herenton does not communicate what he wants to the board. Herenton proposes that city finance director Joseph Lee replace Morris, whose term has expired, but the council asks for a national search instead.

January 2004: Morris is succeeded by Netters, who serves as interim president for six months, earning approximately $95,000.

January 2004: The City Council and the CA call for an investigation of Herenton and the TVA bond deal. Eleven months later, although the council has done nothing, the CA publishes an editorial headlined “Council Probe Has Potential.”

January 2004: The Flyer reports details of Morris’ proposed severance package which, by Herenton’s calculations, totals $1,171,286 in severance, accumulated pension contributions, vacation, sick leave, and “storm restoration pay.” Herenton balks at the “vulgar” proposal. The CA ignores the Morris proposal and reports that “Morris bows out with $205,000.” By the Flyer‘s calculations, the actual final figure is closer to $500,000.

June 2004: Lee is renominated by Herenton and approved this time by the City Council. A new five-member board is also installed, chaired by Herenton’s former CAO Rick Masson.

2006-07: Lee orders subordinates not to cut off power to Edmund Ford. In February 2007, a federal grand jury orders Lee to appear to answer questions about the matter.

February 2007: A day after other media report the VIP memo, the CA publishes a story in which McEachran says he did nothing improper in contacting Morris, worked out a seven-year repayment plan for $10,000 owed to MLGW because of the utility’s meter and billing errors, and got no special treatment.

Categories
Cover Feature News

Thirty Days Late, Thousands of Dollars Short

Every year around this time, a dreaded white-and-blue envelope arrives in the mail. Some people, scared to view its contents, throw it on a desk or in a drawer unopened, hoping it will disappear. Others, anxious to see the damage, rip it open immediately.

It’s the end-of-winter Memphis Light, Gas and Water bill, the one that reflects all the energy used to heat homes in February, generally the coldest month of the year. Some people hold off on payment, risking cut-off. Others try to work out a payment plan, backing up their debt for months. And a few will try to argue their way out of paying a portion.

But residential customers are not alone. Hundreds of local businesses are in similar positions. Last week, the Flyer requested a list of all commercial MLGW customers that were at least $5,000 behind on their bills and 30 days or more late in making payments.

Topping that list was the Memphis Cook Convention Center, with a total debt of $801,205. When contacted, general manager Pierre Landaiche said the facility made a $288,078 payment last week, bringing the new debt total to $513,127.

“The Cook Convention Center was underfunded by the city and county,” says Landaiche. “Rate increases and additional consumption over the last couple of years were unanticipated, causing a deficit beyond our budget.”

Though he says they’ve been trying to make partial payments, the bill has been backing up since 2005. An average monthly bill for the convention center ranges from $85,000 to $95,000.

Landaiche says money is now being appropriated from the city and county, which jointly fund the facility, to cover the convention center’s obligation to MLGW. Some of the $513,127 is being disputed. Landaiche claims they were billed too much for heating during winter months, when the center was not being used.

At a city council committee meeting Tuesday afternoon, council member Deadrick Brittenum asked the city attorney’s office to look into whether or not the Cook Convention Center should be billed for water usage, since some government buildings get free water. Currently, the center is billed for water.

Landaiche says he hopes to have the entire bill resolved in about two weeks. “Obviously, we want the convention center to be current,” says Glen Thomas, a spokesperson for MLGW. “There are probably additional logistics involved with them as far as cut-off. That would have to be a pretty serious issue. Are they significantly over? Yes. Are we in danger of not getting the money? No. I think the convention center will pay up. We’d just like to see it happen sooner.”

Thomas says the utility’s cut-off policy is the same for both residential and commercial customers. MLGW sends out approximately 5,000 cut-off notices per day. Those are sent three days after the bill’s due date. If some payment isn’t received 21 days later, all service is cut off. The key, says Thomas, is working out a payment plan.

In second place for the highest unpaid bill was the city of Memphis, with $741,036 due to MLGW. But, according to city engineer Wain Gaskin, that number doesn’t reflect an outstanding debt.

“The amount our MLGW bill shows as overdue is actually the amount we’ve saved taxpayers since May 2004,” says Gaskin.

He says the city began replacing red and green incandescent traffic light bulbs in about 760 intersections with more energy-efficient LED bulbs at that time. The change-out was completed about three months ago, but Gaskin says MLGW’s billing system hasn’t caught up with the energy savings from the new bulbs.

“They’ve had difficulty with their automated system because traffic signals don’t have meters,” says Gaskin.

Gaskin says LED bulbs use 15 to 20 percent less energy than the old bulbs. While the city is still billed for the old bulbs, they only pay a portion of that total each month. For example, last month the city was billed $45,000 from MLGW for traffic lights, but Gaskin says they only paid $8,600. The remainder each month backs up in MLGW’s billing system, appearing as unpaid debt.

Thomas says he does not know enough about the city’s account to comment, but Gaskin claims the city and the utility have an agreement on the traffic bulb issue. The city pays MLGW a total of about $28 million a year for all city accounts.

The Memphis Housing Authority (MHA) shows an MLGW debt of $360,773, totaled from multiple accounts. But Yvette Camel-Smith, general counsel deputy executive director for MHA, says most of that debt is being disputed due to what she calls “mislabeling” by the utility. They’ve scheduled a meeting with MLGW to discuss the bills.

According to Camel-Smith, at least four of the five overdue accounts belong to other agencies. One property on Firestone actually belongs to the city’s division of Housing and Community Development, she says. Another two properties with outstanding bills, listed on Exchange and Fairview, were transferred to Uptown Square, but Camel-Smith says MHA is still getting the utility bills.

MHA isn’t the only commercial customer disputing its bill. Shelby County Government is past due with a $5,757 payment to MLGW. County spokesperson Gwendolyn McClain says the county audits its MLGW bills to make sure they agree with the totals, which usually run about $500,000 to $600,000 a month.

Though they paid most of bill, the $5,757 is being disputed. McClain was not sure what that amount was for, but she says it’s not uncommon for the county to find inconsistencies with part of their bill.

Blues City Baseball, the management company for the Memphis Redbirds, is in the red (no pun intended) with their MLGW bill. They’re listed as owing $70,816, but President Dave Chase believes some of that has been paid off since the Flyer requested its list, leaving them about $30,000 in debt.

“Since the bulk of our revenue comes in the summer, we tend to fall behind in the winter,” says Chase. “In-season, the ticket sales drive revenues up, and we get more caught up.”

Chase says the average monthly bill for the Redbirds and AutoZone Park runs about $30,000 a month from April to September during in-season and about $15,000 a month in the off-season.

Memphis Publishing Company, the parent company of The Commercial Appeal, owes $79,763 to MLGW, according to information generated by MLGW last week. Requests to interview someone at the daily newspaper were forwarded to their lawyer, who had not contacted the Flyer by press time.

And another Ford is late on his utility bills. Joe Ford, unsuccessful in a recent run for Congress, owes $8,115 for the utilities used in his campaign office. Other notable customers on MLGW’s overdue list: Church of God in Christ ($7,449), International Paper ($9,524), Muvico Theaters ($18,331), and Target House/ALSAC St. Jude ($19,999).

Thomas says it’s likely many of the hundreds of overdue customers on the list are working off their balances through payment plans. Others may have paid the day after the list was put out.

“We actively try to recover the money. We’ve begun an initiative to clean up some of these accounts very recently,” says Thomas. “There will be phone calls and letters.”

MLGW furnished the Flyer with a list of nearly 300 customers who had an outstanding unpaid balance of more than $5,000. Some of the more notable names and their bills included:

Blues City Baseball: $70,816

Town of Collierville: $75,784.75

Memphis Publishing Company (The Commercial Appeal): $79,763

Waverly Gardens LLC: $88,661.96

Veterans Administration Hospital: $167,011.47

Memphis Dept. of Public Works: $736,849.60

City of Memphis: $741,036.64

Memphis Cook Convention Center: $801,205.04

Categories
Cover Feature News

Power Play

CREDIT: (AP Photo/Wade Payne)

In publicly rejecting MLGW president Joseph Lee’s resignation last Thursday, Mayor Willie Herenton declared, “I will not, cannot in good conscience participate in a media, political witch hunt that is currently operating in the city of Memphis around the leadership of this utility company. Let me also say that I cannot approve any initiative that has the support of The Commercial Appeal, Carol Chumney, and Myron Lowery.”

He referred to the troika as “an array of evil.”

After refusing to accept his resignation, Herenton encouraged Lee to focus on “regular folk” and their mistrust of the utility’s meter-reading and billing.

“This is one disturbing issue, that I have been overwhelmed by criticism and concerns in the community. I’m asking Mr. Lee, help me and the citizens understand the spiraling increase … that leads many to believe that the billings are excessive and arbitrary,” Herenton said.

(AP Photo/Wade Payne)

Herman Morris

Herenton then announced his solution: “Next week, I will be requesting from the Memphis City Council an allocation of funds to provide assistance to needy citizens, many of whom are on fixed incomes. I will be asking the City Council to support my request for $5 million … to assist us in helping us to help the people who need it most.”

Every Thursday, the MLGW board of commissioners meets downtown at the utility company’s headquarters. Before the afternoon session, the floor opens to citizens wishing to address the board. Last week, Georgia King took the floor and asked a key question, not only for the future of MLGW but also for election-year city politics.

“When was the customer ‘VIP list’ started, and by whom?” she asked.

King was referring to the list of high-profile MLGW customers whose utility accounts were under the supervision of MLGW executives. The list, which was apparently generated as the result of an e-mail by then MLGW head Herman Morris, was released to the public by Lee’s attorney Robert Spence just after Lee’s grand-jury appearance last week.

MLGW board chairman Rick Masson assured King that an internal investigation would soon be under way to address the question.

Though Herenton had rejected Lee’s resignation earlier in the meeting, he left the door open to revisit the issue, after first decrying the array of evil, which he perceived as trying to force his hand to remove Lee following the revelation of Lee’s “preferential treatment” of VIP-list member and city councilman Edmund Ford.

(AP Photo/John L. Focht)

Willie Herenton

“I find it unacceptable at this point in time to consider accepting his resignation, when, apparently, the wave of public sentiment and the blitz of bias exerted by The Commercial Appeal and other members of the media, I believe, has had undue influence, perhaps, on many key decision-makers,” Herenton said.

The mayor then acknowledged that City Council chairman Tom Marshall had initiated an independent investigation of MLGW, and he contrasted the two approaches to solving the crisis of public confidence in the utility company — the “media, political witch hunt” of the evil array and the objective investigation.

Marshall told the Flyer that “the mayor indicated that he is deferring until the results of the investigation are complete. Ultimately, he will revisit the issue of the termination of Mr. Lee. If you listen carefully, as I perceive it, the mayor is still open to that possibility, depending on the outcome of this investigation.”

Joseph Lee

The mayor focused on the differences between having an agenda for Lee’s removal and the facts to support such a move. “Hopefully, the investigation will be thorough, unbiased, not tainted by any predispositions or judgments based on a biased media that is really focused on discrediting Joseph Lee and this institution,” Herenton said, adding, “I applaud the councilman [Marshall] for his leadership and hope that the individuals who have accepted that engagement will conduct it with the highest of integrity and professionalism.”

Marshall appointed attorneys Oscar Carr and Saul Belz to lead the investigation. The attorneys were slated to outline the investigation plan at the Tuesday, March 6th, City Council meeting. Marshall says that Belz will present the results of the investigation to the council March 20th.

“Part of my reason in not accepting this resignation is that that investigation has not been complete,” Herenton said. “I have no facts surrounding any recommendations that Mr. Lee should be removed from his position.”

Justin Fox Burks

Carol Chumney

While Herenton exercised his prerogative to reject Lee’s resignation, Marshall says that Lee’s future as MLGW president rests as much with the council as it does the mayor.

“The City Council has authority, as prescribed in the charter, with 11 [out of 13] votes, to remove the president of MLGW without the consent of the mayor. In addition to that, the council also appears to have the authority to remove all of the [MLGW board] commissioners without the authority of the mayor,” Marshall said.

The MLGW “crisis of confidence” issues encompass more than the creation and maintenance of the so-called VIP list. The independent investigation will also address the meter-reading and billing practices of MLGW, which Herenton said give the appearance of “excessive and arbitrary” billing. Herenton has attributed the questionable billing practices to a “a conspiracy to sabotage [Lee] from within.”

Marshall offers a simpler explanation. “I’m having trouble believing [the sabotage allegation]. I don’t think that such sabotage exists,” Marshall said. “There is the potential for incompetent billing practices going on, but not as the result of any kind of direct effort. If there is malfeasance, it’s the result of inability,” added Marshall.

MLGW board member Nick Clark expressed a concern for the utility’s business practices that may not go away with leadership change. “The core problem, in terms of the future of MLGW, is the politicalization of business issues, because that interferes with the operation of a public utility.

“Why does MLGW have a problem with the culture of mistrust with certain members of the City Council?” Clark added.

It hardly needs to be said that that mistrust goes both ways. At this point, neither the public nor anyone else has a clear grasp on just what the problems are at MLGW. Are bills really out of line? Is Lee a capable administrator or just a Herenton crony in over his head? Was Herman Morris’ VIP list anything more than a way to maintain good PR? Were favors granted to others besides Edmund Ford?

With any luck, the coming weeks will bring some answers. Meanwhile, the power struggle continues.

Attorney Saul Belz, who will lead the independent investigation of MLGW, is scheduled to appear before the City Council, in order to provide the council with the scope and timeline of the investigation. Visit www.memphisflyer.com for updates throughout the coming week.

Categories
Politics Politics Feature

Shocking!

CREDIT: Jackson Baker

Although petitions for city office won’t be available at the Election Commission until next month, this year’s Memphis municipal election — or at least the mayoral component of it — is already fully under way.

To judge by the charges and countercharges and the quantity of mud that has so far been slung, this contest promises to be as entertaining and down-and-dirty as any in the past (see also Viewpoint).

And the fact is, for all the complaints levied by abstract theorists at “horse-race” journalism, we are electing people, not position papers, and all of it — the battle of personalities, the spin machines, the fund-raising competition, and certainly the size and effectiveness of the contenders’ cadres — counts toward a bona fide measure of the candidates and what they might do in office.

But in this election year, more than in many previous, issues will play a huge role in voters’ minds and none more so than the issue of Memphis Light, Gas and Water, which — both for those ordinary citizens whose service is constantly under threat and for those privileged ones who (we now know) have been allowed to run up huge bills — has alarm bells ringing throughout the city.

Rarely has the distinction between haves and have-nots been so starkly drawn as by the disclosures of the last few weeks concerning the now infamous “third-party notification” lists kept by current MLGW president, Joseph Lee, a protégé and appointee of incumbent mayor Willie Herenton.

But at least one major opponent of Herenton’s, former MLGW president Herman Morris, is also tainted by the scandal — particularly by a 2002 e-mail, dating from his own tenure as head of the giant city utility, that arguably might have established the precedent.

Morris’ memo, written in response to a customer complaint from then Commercial Appeal editor Angus McEachran, urged staff to “make sure we handle this matter with sensitivity.” Another key point of the e-mail was that MLGW should develop a list of customers “that require my special awareness, attention or staff intervention when they have problems.” He spelled that out to mean a longish list of elected officials (city, county, and state) and news media members.

The memo, conveniently leaked to the media by Herenton allies, was clearly meant to blunt Morris’ almost simultaneous announcement of his candidacy and to share out an albatross that was already a burden on the mayor himself. Meanwhile, candidate Carol Chumney, a frequent critic of Herenton on MLGW’s future and other issues, could enjoy the serendipity of having become chair of the City Council’s MLGW committee as of January 31st.

As such, she is entitled to conduct investigations and to shepherd solutions regarding MLGW and all the controversies attending it, old and new. In her campaign opening last month, she made a point of standing in opposition to the sale of MLGW, something which Herenton proposed a few years back and a project which many of his detractors believe he still holds in reserve.

The new scandal gives Chumney ample opportunity to burnish her reformer credentials (it also presumably gives a boost to the anti-establishment candidate John Willingham), while at the same time it inevitably tarnishes those of Morris.

When he was asked about the memo at his opening announcement last week, Morris floundered for some time, managing in a remarkably unhoned and stammering answer to acknowledge that he had given access to “family and friends” and to influential members of the community at large but not making clear distinctions between such a procedure and the possibility of granting special privileges.

In a curious way, the awkwardness of Morris’ response was exculpatory. It was as if, instead of indulging in some ready-made spin, he was trying to reason it all out as he spoke.

In a brief Flyer interview this week, the newly announced candidate had thought it through more carefully. (See sidebar.)

Special Election(s) Jackson Baker

Chair candidates Bailey (left) and Norman

Report: Yard signs indicate that the two Republican candidates in next Tuesday’s special elections for state Senate District 30 and state House District 92 — Larry Parrish and Richard Morton, respectively — are putting forth an effort, but the two Democratic nominees — state representative Beverly Marrero for the Senate position and G.A. Hardaway for the House seat — are heavily favored.

Two-Man Race for Chair of Shelby Dems? So it would seem, after Saturday’s preliminary caucus, in which a record crowd showed up at Airways Junior High to elect delegates for the party convention on March 31st. Current chairman Matt Kuhn is not seeking reelection, and things are shaping up for a two-man race between lawyer Jay Bailey and minister Keith Norman.

Bailey is supported by David Upton and some, but not all, members of the party’s old Ford faction, as well as by the activist Grant brothers (Greg and Alonzo), Del Gill, and blogger Thaddeus Matthews. Norman has emerged as the candidate of the Sidney Chism faction and is likely also to be supported by Desi Franklin of the MidSouth Democrats in Action reform group. It should be noted that other Democrats — including longtime activist Jody Patterson, who says she will run — may also launch candidacies before March 31st.

For more reports on the mayor’s race and other political news, go to “Political Beat” at www.memphisflyer.com.

A Q&A With Herman Morris

Flyer: Do you think it was strange that the text of your memo about access to certain customers became public just as you got ready to announce for mayor?

Morris: It was a very curious timing. Someone must have scoured the records of the utilities.

What’s the difference between how you handled “special” customers and how Joseph Lee has handled them?

On my watch, if you didn’t pay or didn’t make an arrangement to pay, you got a cut-off notice and services were terminated. It didn’t matter who you were. I wanted elected officials to be able to get through. They, after all, were representatives of a constituency. Big industrial users were a somewhat different case with major issues. But even they, if they got months in arrears, could get cut off.

What about the well-publicized case of former Commercial Appeal editor Angus McEachran? It was in reaction to a query from him, about wildly fluctuating monthly charges, that you wrote the memo that got leaked.

Angus was a tough issue. We ultimately concluded that he paid his bill every month and that our meter malfunctioned. He ended up owing more than he thought he did, so we worked out a payment plan to collect it from him.

The case that’s aroused most attention has been Councilman Edmund Ford’s. Did you have the same problem as Joseph Lee, and did you, too, let him go indefinitely without paying?

I’m not aware of any time that we had anyone go delinquent for the period of time that he did later on, except maybe in cases of bankruptcy, when we couldn’t by law cut them off. My recollection is that Edmund Ford did get cut off, though he would also come in and make payments to avoid cut-offs.

Can you shed any light on your departure from MLGW in 2003?

My departure remains a mystery to me, too. It could have been that I was opposed to the sale of MLGW. It could have been a more open attitude toward providing services to outside communities awaiting annexation. It could have been disagreements about staffing or the way the mayor wanted to handle the “prepaid” issue [an advance purchase of TVA power via preferred brokers designated by the mayor]. I was never given a specific statement or reason.

Another issue that has aroused the public is that of too easy and too lucrative pension arrangements for public employees. Was that an issue with your own golden parachute?

At the time, the parachute didn’t seem very golden. I negotiated fairly in terms of my departure. I wasn’t eligible for a pension, so I had to negotiate. At 52, I wasn’t quite old enough, and I hadn’t been there 15 years. I was just under the limit both ways for a pension. In all honesty, the final settlement probably fell short of being the equivalent of what I would have received through retirement eligibility.

Categories
Editorial Opinion

MLGW: The Fallout

Maybe he should have sold it.

When Mayor Herenton suggested several years ago that serious consideration be given to the possible sale of Memphis Light, Gas & Water to an investor-owned utility company, he found few supporters, aside from the banks and brokerage firms that would have done the underwriting. The more typical response was that the idea was kooky and unthinkable and

just what you’d expect from “King Willie.”

So now MLGW head Joseph Lee is appearing before a federal grand jury, there are indications that politics have corrupted the utility, and the ordinary Memphians who are the shareholders of MLGW get bad news, high bills, Memphis Networx, and diversion of money from the water division to a professional basketball team.

It might seem to add up to a great platform for former MLGW CEO Herman Morris to run for mayor against Herenton this year, but it’s not that simple. There’s enough credit and blame to go around for both of them. Morris, by the way, has made no official announcement but has told several people he is interested. The filing deadline is not until July, and qualifying petitions can’t be pulled until April.

Herenton, remember, promoted Morris to CEO from legal counsel and gave him a free rein. When Morris’ term expired, Herenton let him continue and even approved giving him a raise to a salary higher than the mayor’s own. Morris left with a generous pension and severance package, although not as lucrative as the one he originally sought because Herenton thought it was too much and blew the whistle.

Right after the big windstorm in 2003, Herenton famously made a campaign visit to Little Rock while Memphians coped without power. In a press conference after the storm, he passed questions about MLGW’s slow response to Morris. Neither man can claim stellar marks for that one.

Herenton replaced Morris with Lee in 2004 and replaced several board members as well. That was overdue. The board had been dominated by cronies, consultants, and preachers for too long.

Late last year, Herenton chose his communications assistant (and Democratic Party activist) Gale Jones Carson to be MLGW’s head of public relations. She says the political favors that have been recently uncovered at MLGW predated Lee’s tenure. But the argument makes no sense. Herenton appointed both Morris and Lee, as well as the board members. And if he wanted to cut down on the politics and the impression of political skullduggery, he should have gone outside his inner circle and hired someone other than Carson for the PR job. There is no way she can be seen as a neutral spokesperson, given her history, especially if Morris jumps into the mayor’s race.

Candidate Morris would be questioned about his performance at MLGW. What does he know about “the list”? It seems there was such a thing when he was CEO. (See our story on page 15.) Why did he allow MLGW surpluses and PILOT payments to be used for Memphis Networx and the financing of FedExForum? Can the city afford the pensions, union pay scales, and health-care packages that were approved on his watch?

In short, both Herenton and Morris are likely to be careful about throwing stones. MLGW’s office headquarters is crawling with loyalists and grudge-holders for both of them. And now federal investigators are on the case. This looks like a story with staying power until the October election and beyond.

Categories
News

Politics, Favors at MLGW Preceded Lee

Politics and special attention at MLGW preceded current CEO Joseph Lee and were extended to, among others, the former editor of The Commercial Appeal, according to e-mails obtained by the Flyer.

On March 29, 2002, then-MLGW CEO Herman Morris wrote an e-mail to communications manager Mark Heuberger and vice president Curtis Dillihunt about the “CA Editor Problem.”

Morris wrote that he received a handwritten note “from the editor of the CA with a letter of complaint from his wife” requesting Morris’ help in a billing matter.

“This could set editorial policy toward MLGW for years and must be handled with touch,” Morris’ e-mail says. “I tried to call him Thursday but he was not in. I will be out of town 4/1/02 but will call him when I return on Tuesday. I would like you to get involved and make sure that we handle this matter with sensitivity.”

The e-mail has not previously been reported by The Commercial Appeal in its coverage of politics and special treatment at MLGW. The CA editor at the time of the e-mail was Angus McEachran.

The e-mail was obtained by the Flyer from MLGW communications manager Gale Jones Carson on Tuesday, shortly before our deadlines. It continues:

“Finally, I need to develop a list of customers that require my personal awareness, attention, or staff intervention when they have problems. Generally, customers who can call me or the mayor at home should be on the list. The mayor(s); city councilmen; county commissioners; state legislators; congressmen; any city director; editor of the CA; news or station director of TV stations; hospitals; jails; airports; FedEx; other big plants or customers; Fred Smith, Jack Belz, Mike Rose, Ira Lipman, Maxine Smith, Carol Miller (my sister), Lori Miller (my niece), Haymond Turner (my inlaws), Tom Garrott, Ron Terry, Marc Jordan, Pat Tigrett, Dean Jernigan, Herman Ewing, Pitt Hyde, Ben Hooks, Jesse Turner, Russell Sugarmon, Bill Crawford, and Pete Aviotti.”

For more on this breaking story and Morris’ list, go to www.memphisflyer.com.