Former employee sues PVEC for wrongful termination


Alleges illegal activities by cooperative

By Jan Runions - [email protected]



A wrongful termination lawsuit, filed on Jan. 17 in Claiborne County Chancery Court, alleges illegalities by Powell Valley Electric Cooperative (PVEC). Jo Ann Dillingham, who was employed for the last 25 years as the PVEC director of accounting and finance, was allegedly terminated after disclosing “illegal activities” to the auditing committee.

Dillingham, who was, according to the lawsuit, a cancer patient with ongoing health problems, had her health insurance terminated on Jan. 6 – the same day she was fired.

“…Powell Valley Electric Cooperative, Inc. had no justifiable reason for terminating (Dillingham), other than her failure and/or her refusal to remain silent about or participate in illegal activities by its defendant (PVEC), through its agents, servants and employees, and more specifically its general manager, Randell Meyers,” states the lawsuit, in part.

Dillingham is suing PVEC for a total $4 million in compensatory and punitive damages, plus costs and attorney’s fees. She is also demanding restoration of her position, salary, credits, fringe and other employment benefits.

When asked for comment on the pending lawsuit, the Claiborne Progress was referred to PVEC general counsel David Stanifer.

“We deny all allegations in her complaint and we are looking forward to our day in court,” he said.

Powell Valley Electric Cooperative was formed in 1938 to provide electrical services at the lowest possible costs to eight counties in Tennessee and Virginia. The Cooperative purchases power from the Tennessee Valley Authority (TVA) at wholesale prices and supplies electricity as a product to over 31,000 members. Approximately 78 cents of each dollar acquired through its member-owners and customers goes toward purchasing TVA power. The balance is used for construction, line and tree trimming maintenance, salaries and other operational and maintenance expenses. The Rural Utility Service, a federal agency that loans low-interest, long-term funds to PVEC and other rural companies, provides the Cooperative with the money to build power lines, according to the complaint.

As a public benefit corporation, PVEC exists because of the Tennessee Nonprofit Corporation Act. Tennessee Codes Annotated §65-25-203 requires the Cooperative services to be furnished at the lowest cost consistent with sound business principles.

Beginning in 2015, Dillingham alleges she began noticing several areas of concern in violation of federal, state and local policies, regulations, procedures and requirements of the TVA, the Internal Revenue Code, established practices of the Internal Revenue Service and PVEC.

“The plaintiff (Dillingham) discussed many issues and concerns with an outside auditing firm, Rodefer-Moss & Company, and trusted that these outside auditors were going to make audit recommendations to insure the financial stability of the defendant (PVEC), but none of (Dillingham’s) recommendations were noted in the final audit report issued for fiscal year ending June 30, 2016,” reads the Complaint, in part.

The lawsuit claims that, contrary to the auditor’s advice, Dillingham found instances during the last 25 years of ongoing understatements of taxable benefits for company provided vehicles.

Dillingham also claims that the general manager “had made several decisions that appeared to be for his personal gain and which otherwise would impact the financial standing” of the Cooperative.

In fiscal year 2014, PVEC proposed a policy for a 25 percent buyout of the company sick leave bank. The complaint claims the general manager increased the buyout to 50 percent, which allegedly benefited the general manager for his own personal agenda, resulting in significant costs to the Cooperative and its members, including ongoing annual payouts.

Dillingham claims that PVEC began in August of 2014 to keep surplus cash funds in Citizens Bank – a move that could very well be seen as a conflict of interest. At that time, the same person chaired the boards of both entities.

In August of 2014, the Cooperative had in excess of $7 million in Citizens Bank. By September of last year, PVEC had in its Citizens Bank account approximately $11 million in cash balances.

According to Dillingham, she could not find any instances in the PVEC board minutes to prove the board of directors had ever adopted a resolution allowing excess funds to be kept in Citizens Bank.

“While closing the June 30, 2016 fiscal year, (Dillingham) noted that National Rural Utilities Cooperative Financing Corporation (CFC) was paying a higher rate of interest on invested funds than Citizens Bank for which (Dillingham) thereafter brought to the attention of (PVEC) general manager,” reads the lawsuit, in part.

The Cooperative, according to Dillingham, had previously invested its surplus funds in CFC investments prior to the PVEC board chairman’s request that the funds remain in Citizens Bank.

Dillingham claims she recommended that the Cooperative resume investing its excess funds in CFC commercial paper since anything over $250,000 in any banking institution is not secured.

According to Dillingham, the renovation of the new PVEC offices had never been bid, resulting in a $1.4 million construction cost.

An individual had been hired as a temporary employee to oversee the construction project, at a salary of $156,000 per year. When construction was completed late last year, the general manager “created a new position and added that same individual as a permanent employee to perform maintenance work for (PVEC) at an annual salary of $78,000 with benefits,” reads the complaint, in part.

According to the lawsuit, the Cooperative wound up paying the maintenance man more than $126,000.

The complaint further alleges that relatives of the general manager had been hired to assist this individual during the construction phase.

The maintenance man had been provided a golf cart to traverse the building. And, repair costs for his private vehicle had been paid by PVEC funds, Dillingham alleges in her lawsuit.

Dillingham claims this man is a convicted felon.

The suit claims the general manager has provided “special privileges and special billings” to select customers. The complaint alleges the general manager “adjusted” more than $300,000 on jobs for one selective customer, resulting in increases to other customers who were forced to absorb the loss. Dillingham claims some entities, who are members of the Cooperative, have been charged almost double for the same type of services.

Dillingham says in her suit that the general manager has donated approximately $65,000 to an agency for which he was the executive director.

The general manager, the lawsuit claims, has spent more than $250,000 of member’s earnings for legal and consulting fees in an attempt to purchase Sunset Digital’s cable and internet system despite being aware that, by state law, the Cooperative cannot legally participate in that type of business.

The lawsuit cites eight projects that were never bid, which resulted in significant costs for PVEC and its members. Further, the suit alleges that the Cooperative contracted “with a select number of entities” without consideration of other contractors, creating a “monopolization of trade and monopolization of services” resulting in a restriction of trade in violation of Tennessee’s established policies.

The lawsuit claims PVEC is allowing “price fixing” to occur by failing to consider competitors.

“…by allowing a monopolization of its services in the eight counties that it serves, (PVEC) has allowed inefficiency in the marketplace to exist and has otherwise encouraged unnecessary high prices to its consumers for the goods, products, or services being supplied,” reads the lawsuit, in part.

These practices, the suit alleges, is in violation of the Tennessee Consumer Protection Act as found in T.C.A. §47-18-101.

In March of last year, Dillingham began noticing millions of dollars expended on the Cooperative’s right-of-way tree trimming program. She claims in her lawsuit that the Cooperative spent $1,442,986 in the space of five months’ time, despite apparent yearly monetary caps placed on the program by the PVEC board of directors.

On March 28, Meyers allegedly recommended to the board that $1.25 million be spent on the right-of-way tree trimming program with $704,000 of that amount to be spent on the ‘hack and spray method.’

As of Nov. 25, the Cooperative had already paid the hack and spray contractor $1,140,899, according to the lawsuit.

Dillingham claims the contractor had overbilled PVEC to the tune of at least $240,596 for two invoices billed in September.

The contractor had been paid $1,608,856 in total, since 2005, according to Dillingham.

She claims she also discovered that the same vendor had had the “right to audit” and “hold harmless” clauses removed from his recent contracts.

Dillingham insists that field checks of right-of-way services were not being done, prior to invoice approval. A field audit conducted in 2015 allegedly revealed overbilling by a tree trimming contractor who had been paid in excess of $13,000,000 since 2004.

Dillingham claims in her lawsuit that a line contractor, one of the Cooperative’s largest vendors, had been paid a total $11,486,731 during its services dating from 1996.

The lawsuit also claims that labor and equipment belonging to the Cooperative was being used on behalf of a PVEC board member.

On Nov. 28, Dillingham met with the PVEC Audit Committee to address her concerns. According to her lawsuit, she was suspended not long after that meeting and subsequently fired less than 60 days later.

“She filed a lawsuit in Circuit Court after she was suspended with pay and with benefits while we were doing our due diligence and checking out her allegations,” said Stanifer, representing PVEC.

Dillingham was “later discharged for cause as the result of her conduct,” he continued, adding that she then filed a second lawsuit in Chancery Court.

Attached to the original Complaint in the lawsuit are plaintiff’s interrogatories to the Cooperative. An interrogatory is a legal way for one side to ask the other side in a lawsuit for additional information not specifically ‘spelled out’ in related documents or not yet clear from the case.

Interrogatory number five apparently addresses remarks in the letter of termination, dated Jan. 6. The interrogatory requests the name of the fellow employee that was allegedly “pressured” to sneak copies of the Cooperative’s confidential business records for Dillingham’s personal use. It also asks what type of records and when this event allegedly occurred.

Number five also asks for the name of the person who allegedly heard Dillingham say that she wanted to “take down” the Cooperative. It also requests the name of the person who allegedly heard Dillingham say she had “considered shooting the General Manager, Board Chairman and other PVEC employees.”

Lafollette attorney David H. Dunaway is representing Dillingham.

The Claiborne Progress is watching this case closely, and will have more information as it becomes available.

Reach Jan Runions at 423-254-5588 or on Twitter @scribeCP.

Alleges illegal activities by cooperative

By Jan Runions

[email protected]

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