WALLINGFORD — A federal grand jury has indicted five people associated with the Connecticut Municipal Energy Cooperative, the town’s former energy supplier.
CMEEC executives and associates face federal charges for theft and misuse of federal funds, federal authorities announced Thursday.
The indictments, unsealed Thursday in U.S. District Court in New Haven, are the culmination of a two-year FBI investigation of CMEEC’s finances, which was prompted in 2016 by media reports that CMEEC executives used money from the cooperative’s budget to fund lavish trips to the Kentucky Derby.
CMEEC, a quasi-public electric energy co-op owned by several municipal utilities in Connecticut, had purchased power for Wallingford from 1994 until 2014, when the town entered a five-year contract with Energy New England.
Wallingford entered a legal dispute with CMEEC in 2013, claiming the cooperative is overcharging the town through agreements the two sides have for shared projects. Those agreements run through at least 2021. The arbitration is still pending.
Indicted Tuesday were: CMEEC CEO Drew Rankin, 57, of Columbia; former Chairman and Norwich’s board representative James Sullivan, 52, of Norwich; current Norwich representative John Bilda, 54, of Norwich; board Secretary and Groton representative Edward DeMuzzio, 77, of Groton; and Chief Financial Officer Edward Pryor, 62, of Groton.
Rankin did not return a request for comment Thursday afternoon. Wallingford Town Attorney Gerald Farrell Sr. declined to comment on the indictments.
The five individuals are charged with conspiracy, theft from a program receiving federal funds and aiding and abetting the theft from a program receiving federal funds. Between 2010 and 2015, CMEEC received more than $9 million dollars from the U.S. Department of Energy, the U.S. Attorney’s Office in New Haven said in a statement Thursday.
All five defendants appeared Thursday before U.S. Magistrate Judge Robert M. Spector in New Haven. Each defendant pleaded not guilty and was released on $100,000 bond.
One of two indictments alleges the five defendants “planned, organized and directed lavish trips outside of Connecticut, including trips to the Kentucky Derby in 2015 and 2016, and to a luxury golf resort in West Virginia in 2015.”
The trips, which cost more than $800,000 collectively, “did not relate to CMEEC business or CMEEC member business, but were intended to personally benefit, compensate and reward the co-conspirators, their family members, friends, and associates,” the statement said. The costs included “travel expenses, privately chartered airfare, first-class hotel accommodations, meals, tickets to sporting events, golf fees, souvenirs, and gifts.”
The indictment alleges funds were used to pay for the trips from the cooperative’s “margin account” without “the written consent of the member towns as required by the CMEEC membership agreement.”
“The CMEEC membership agreement provides that excess revenues are designated as ‘CMEEC Margin,’” according to the statement, “and that the excess revenues are to be returned to the member towns to help keep electricity costs stable for ratepayers.”
“CMEEC has received millions of dollars in grants from the U.S. Department of Energy,” said U.S. Attorney John H. Durham. “Instead of protecting these funds and returning excess revenue to member towns and ratepayers, these defendants are alleged to have used the CMEEC Margin Account as a secret slush fund to pay for lavish junkets for themselves and their family and friends, as well as for other inappropriate expenses.”
Special Agent in Charge Kristina O’Connell of the Internal Revenue Service’s Criminal Investigation in New England said the “criminal conduct alleged in the indictment is yet another example of those abusing high-level corporate positions to personally benefit at the expense of others.”
The indictment further alleges that, in response to reporter inquiries about the Kentucky Derby and golf trips, Rankin underreported the costs of the trips, omitted the names of attendees who were not CMEEC employees or board members, and made other false statements related to how the trips were funded.
“After the trips were known to the general public, CMEEC canceled a reservation it had made for the 2017 Kentucky Derby,” authorities said, “and was refunded only approximately $90,000 of the $298,960 it had prepaid for the trip in May 2016.”
A second indictment charges Rankin and Sullivan with engaging in a conspiracy to pay for Sullivan’s personal expenses with CMEEC funds. The indictment alleges Sullivan submitted his personal expenses on a regular basis via “expense reports” that Rankin approved and directed to be paid out of CMEEC funds.
“Sullivan’s personal expenses were charged to the CMEEC’ account for lobbying expenses, even though Sullivan was not a registered lobbyist for CMEEC. Between January 2012 and August 2015, Rankin authorized the payment of numerous personal expenses for Sullivan, including airfare for dozens of flights Sullivan took, trips for Sullivan and his family members to attend the Kentucky Derby in 2013, 2014, and 2015, and airfare for a flight for Sullivan’s wife to travel to Key West, Florida, in December 2014,” according to the statement.
The second indictment charges Rankin and Sullivan with one count of conspiracy and three counts of theft concerning a program receiving federal funds.
Sullivan is the husband of U.S. Rep. Linda Sanchez, the vice chair of the House Democratic Caucus. Sanchez withdrew as a candidate for chair of the caucus Thursday after news of her husband’s indictment broke. Sanchez, who represents the 38th District in the Los Angeles area, wrote in a letter to fellow Democrats, “Unfortunately, an unexpected family matter requiring my attention compels me to withdraw my name as a candidate for Chair of the Democratic Caucus.” She said later Thursday in a statement, “Earlier today I learned that my husband is facing charges in Connecticut. After careful consideration of the time and energy being in leadership demands, I have decided that my focus now needs to be on my son, my family, and my constituents in California.”