Auditor picked at contentious meeting
A new audit — of some kind — will be conducted on Socorro Electric Cooperative accounting over an undetermined period of time. The action comes in the wake of an investigation into financial irregularities, the firing of two co-op managers and a recent audit that revealed material weaknesses with multiple accounts.
At a special meeting of the co-op’s board of trustees on Tuesday, BKD CPAs and Advisors of Springfield, Mo., was selected as the firm to conduct the audit. BKD’s proposal was picked over another submitted by Kiesling Associates of Colorado Springs, Colo.
Representatives from BKD will hold a conference call with a committee appointed by the board on Monday.
Though the decision to hire BKD was unanimous, the board bickered over several matters, starting with what kind of audit should be conducted.
At the outset of the discussion, trustee Donald Wolberg objected to labeling it a “forensic” or “fraud” audit, citing the negative connotations of the terms.
Though he said he’d prefer to call it a “detailed” audit, “You could call it ‘Christmas’ if you’d like.”
Trustee Charlie Wagner, who had been advocating the hiring of BKD for several weeks and a leader in the movement to reform the co-op, insisted that it be a forensic audit, because that’s what the bid committee recommended.
The debate was interrupted when trustee Leo Cordova made a motion to table the matter because co-op President Paul Bustamante and trustee Leroy Anaya were absent.
Dave Wade, who chaired the meeting in Bustamante’s absence, agreed.
“The full board should be here when it’s something this important,” he said.
But others felt it was too important to delay.
“We need to act on this now,” trustee Prescilla Mauldin protested. “We can’t be putting this off.”
Cordova’s motion died for lack of a second.
Trustee Milton Ulibarri then introduced the motion to hire BKD and it passed unanimously — but not before the discussion turned heated.
Wagner outlined what BKD would do, saying the firm would send an urgent response team that would probably have the bulk of the work done in three days.
“They’ll look for things that will tell us whether a crime was committed,” he said.
That set off Wolberg, who repeatedly pointed out that Wagner is the representative of the class in a potential class action lawsuit filed against his fellow trustees and five former co-op officials.
The counterclaim and request for class action certification filed last month was in response to the board’s decision to file a lawsuit against “all unnamed member-owners” of the co-op — or about 13,000 individuals, businesses and public and private entities — to block three newly adopted bylaws that call for the co-op to conduct business with increased transparency.
At one point in the meeting, Wolberg referred to Wagner as an “idiot” who needed to “shut up.”
That didn’t deter Wagner, who had a lot to say about Wolberg’s next motion to appoint an ad hoc committee made up of Bustamante, General Manager Richard Lopez and Attorney Dennis Francish, to meet with BKD representatives.
“There’s no reason to try to peddle this off on a committee,” said Wagner, who also objected to Bustamante being on the committee.
Wagner accused Bustamante of covering up the financial irregularities and said the president could even be an accessory to crimes that might have been committed. Wagner said Bustamante was informed of the accounting problems by the auditing firm of Bolinger, Segars, Gilbert and Moss back in May and didn’t bother to inform the board or the attorney until two months later.
It wasn’t until an anonymous letter apparently sent by a co-op employee sparked an internal investigation did the accounting issues come to light, Wagner said.
The investigation led to the firing of Polo Pineda Jr. as co-op general manager and Kathy Torres as the company’s accountant-office manager.
With renewed vigor, Wolberg lashed out against Wagner. Again, Wolberg brought up Wagner’s association with the counterclaim that alleges fraud and breach of fiduciary duties and names all the trustees except Wagner as defendants.
Wolberg especially took exception to trustees Luis Aguilar and Prescilla Mauldin, voted in last year as reform candidates and two trustees who do not accept compensation for their service, being named in the lawsuit.
“Are you still accusing them of fraud and misbehavior?” Wolberg said at the end of a long comment.
Wade also chimed in about Wagner.
“He should be happy,” he said, referring to Wagner getting his way with the hiring of BKD, “but he’s still griping.”
The board ultimately voted for Bustamante, Francish and Lopez to serve on the committee to meet with BKD. Trustees Jack Bruton, Aguilar, Cordova, Ulibarri and Wolberg voted in favor. Wagner voted no and Mauldin abstained.
The debate didn’t stop there. Trustees also argued over whether there should be a cap placed on the amount of money the co-op will pay BKD for its services.
Attorney Francish suggested that there be a limit set of some kind.
“To have this audit is a good idea, and it should go back as far as we can afford,” he said.
Francish noted that BKD’s proposal would charge between $18,000 and $20,000 for the base audit and another $7,000 to $9,000 for data mining of the co-op’s records.
After more discussion about how much should be spent, Wagner made the motion to put a $50,000 limit. If the auditors found something worthy of further investigation, he said, the board could authorize more to be spent.
Wolberg again emerged as an adversary to Wagner. He said the board would be “jumping the gun” by setting a limit before talking to the auditors and the decision should rest with the committee.
“I’m not opposed to spending $50,000; I’m not opposed to $70,000. But let them figure it out,” he said.
When Wade called for a vote, the motion was defeated with only Wagner and Mauldin voting in favor.
“Sorry Dennis,” Wagner said to the attorney, “your recommendation to have a cap failed.”
The matter was put to rest with Mauldin making an appeal to the committee that data mining be included as part of the audit.
Contact T.S. Last