New lawsuit filed against Pioneer Electric

Published 12:00 am Saturday, March 19, 2005


more than a year, Pioneer Electric Cooperative remains under the shadow of a suit filed by three of its members, and on Wednesday the same three filed another complaint in Butler County’s Circuit Court.

The new complaint adds National Rural Utilities Cooperative Finance Corporation (CFC) and The National Cooperative Services Corporation (NCSC) both of Herndon, Va., as defendants in the suit.

In Feb. 2004 Wendell Phelps of Butler County, Hoffman Rhyne of Lowndes County and Kenneth Stallworth of Wilcox County, who are the plaintiffs in the case, claimed Pioneer’s management and trustees allegedly mismanaged funds.

Defendants included cooperative manager J. Malloy Chandler, trustees of the cooperative and the Acme Propane Gas Company’s board of directors including Hugh Strickland, Harold Powell, Thelma Mixon, Wood Till Jr., David Lyon Jr., Herbert Blackmon and Melvia Carter; Lynn Powell, an Acme officer and James H. Strickland, an officer of Pioneer Services.

On Aug. 31, 2004, Judge H. Edward McFerrin made a ruling on the complaint and dismissed most of the suit, including claims against Pioneer Electric’s management. At that time, McFerrin placed both parties under a gag order, and advised them not to discuss details of the case in public.

On Friday, Phil Butler, of Bradley, Arant, Rose and White, L.L.P., the law firm representing Pioneer’s board, issued the following statement:

&uot;The court has asked the parties not to try the case in the media, and we respect the court’s wishes,&uot; he said. &uot;We will only comment that it is unfortunate that members of the cooperative continue to make unfounded allegations without knowing any facts.

We are concerned that this action may have the unintended and unfortunate effect of costing the cooperative and its members more money, probably resulting in higher rates for the consumers.&uot;

The new suit seeks the court to hold an immediate hearing and appoint a custodian &uot;pendente lite.&uot;

This person, according to the complaint, would preserve the coop’s assets wherever located and to carry on the business of PEC until trial can be held on this motion and a full trial can be held to resolve the other complaints that have been filed.

The new complaint alleges that CFC enticed Pioneer Electric Cooperative into the propane business and by doing so damaged the cooperative.

That alleged damage occurred when CFC continued to loan Pioneer money after Pioneer Electric was, according to the complaint, already in deep financial debt.

According to the complaint, &uot;CFC makes loans to non-members through its subsidiary, NCSC.

NCSC makes loans to CFC’s members’ 'for profit' subsidiaries and customers and to organizations that substantially benefit CFC’s members.

NCSC obtains its funding through direct loans from CFC, private placement debt issuance with a guarantee from CFC, and by the sale of commercial paper with a guarantee from CFC.&uot;

In the newest complaint, which only gives the plaintiffs side of the argument, asks the court:

n Declare that the defendants have breached their fiduciary duties to the members and have engaged in ultra vires acts and other acts harmful to PEC, the plaintiffs and other members of PEC.

n Appoint a custodian or receiver to take over the management of the cooperative.

N Impose a constructive trust over all assets usurped and misappropriated by the defendants through their mismanagement as Trustees and officers of the PEC.

n Enter a judgment on behalf of PEC for compensatory and punitive damages as a result of the defendants’ wrongful and illegal and malicious breach of their fiduciary duties owed to PEC and its members and other wrongs.

n Exercise the equitable powers of the court by removing forever defendants as trustees and officers of PEC and preventing any further payments of salary or compensation to the defendants.

n Require a reorganization of PEC with a receiver and a new Board of Trustees.

n Award damages against defendants personally, individually and officially for their breaches of fiduciary duties and other wrongs

n Grant plaintiffs’ attorney fees and costs of this action

n Permanently enjoin the commission of any act that is injurious to or not in the best interest of PEC.

n Dissolve PEC and/or any such other and further relief that the court deems just and proper in the premises.

n For a judgment in favor of PEC and its member against defendants Pioneer Services, Acme Propane, CFC and NCSC in the an amount to be determined by the court for the various wrong committed by these defendants as alleged in the complaint.

n Declare that CFC and NCSC are liable for the deepening insolvency of PEC.

N Declare that CFC and NCSC conspired with and aided and abetted PEC and the other defendants in the wrongful acts alleged in the complaint.


CFC and NCSC are engaged in businesses activities in this State but have failed to qualify to do business as required by law

N Declare void all evidence of indebtedness relating to the propane business between CFC, NCSC and PEC.

In the latest complaint, the plaintiffs have asked again for a jury trial, as they have in the previously filed complaints.