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Proposed change to utility cooperative’s bylaws could limit future legal liability

July 29, 2018 GMT

Since his appointment eight months ago as the state municipal electric ratepayer advocate, Bill Kowalski has been working with Connecticut Municipal Electric Energy Cooperative leaders to revise its bylaws in a way that would limit legal liability in the future for potential wrongdoing.

But any proposed changes would not include the nearly 1.02 million for dozens of top staff, board members, invited guests and their families.

From October 2016 through May 2018, the legal bills totaled more than $362,000, but were heavily redacted to conceal specific topics and names of those being represented by the attorneys blacked out.

The legal cost borne by CMEEC, which is owned by the six member municipal utilities, including Norwich Public Utilities, Groton Utilities, Bozrah Light and Power and Jewett City Department of Public Utilities, angered state Sen. Heather Somers, R-Groton.

Somers led the effort in 2017 to strengthen state oversight of CMEEC in reaction to the Derby trips.

“I was shocked to read that the ratepayers are paying for the legal defense of individuals within the organization for criminal activity that may have occurred,” Somers wrote to Kowalski in a July 6 letter, “especially when ratepayers are the potential victims. In light of the latest revelations, I am appealing to you to help me with a plan to protect ratepayers against further legal costs associated with irresponsible behavior by CMEEC officials.”

Kowalski, however, had been working on revisions to CMEEC bylaws for the past several months. Proposed changes to the wording covering indemnification of board members and staff are still being discussed.

Kowalski said the current wording in the cooperative’s bylaws on indemnification of board members and officers is overly broad.

The current bylaws state that member representatives, officers and staff “shall be indemnified and held harmless by CMEEC against all costs and expenses, including reasonable attorney fees and/or defense of suit, actually incurred by them in connection with the defense of any claim, action, suit, or proceeding in which they may be involved or to which they may be made a party by reason of their being or having been such Member Representative or Officer, except in relation to matters as to which they shall be finally adjudged in such action, suit, or proceeding to be liable for willful or wanton negligence or misconduct in the performance of duty.”

Kowalski said he has suggested various word changes, including replacing the word “shall” with “may,” giving the board discretion on what would be covered, and removing “any claim.” Kowalski said CMEEC’s original organizational documents dating back to the 1970s do not include the word “claim.”

Last week, Kowalski proposed to CMEEC officials a simpler change, that CMEEC adopt the language in state law covering state employees and appointees.

That states, “No state officer or employee shall be personally liable for damage or injury, not wanton, reckless or malicious, caused in the discharge of his duties or within the scope of his employment.” 

“It is simpler, less convoluted than the current CMEEC language, eliminates the procedural flaw of requiring a final determination for reimbursement of CMEEC by the employee or director, (which is contained in the current bylaws), and is appropriate for a statutorily created public entity made up of public entities,” Kowalski said in an email to The Day explaining the proposal. “Using this text would resolve the issue which has been in limbo since early this year.”

Kowalski said the state language is broad enough not to discourage potential board members from wanting to serve. He also has proposed that the CMEEC board of directors have the authority to decide when indemnification would be provided and that any legal liability be capped to the amount of any proposed settlement. That way, if a covered board member or CMEEC officer rejects a proposed settlement, the person would have to cover additional costs to fight the allegations, Kowalski said.

CMEEC General Counsel Robin Kipnis said CMEEC is working with Kowalski to review the proposed bylaws revisions and the two parties “have made good progress.” She said CMEEC will discuss the proposed changes with the board’s Governance Committee, which would make recommendations to the full board.

Even if the changes are adopted, Kowalski said, they would not be retroactive to make any individuals involved in the FBI investigation liable for bills over the past three years.

“You can’t go back,” Kowalski said.