AMERICAN-STATESMAN STAFF

Published: 8:32 p.m. Friday, Dec. 10, 2010

http://www.statesman.com/news/local/former-pec-general-manager-fuelberg-convicted-on-all-1112892.html?page=2

As punishment phase begins, defense will ask for probation, but prosectors will detail spending practices.

FREDERICKSBURG — Bennie Fuelberg, the former general manager of the Pedernales Electric Cooperative, was found guilty on charges of theft, money laundering and fiduciary misapplication of property by a Gillespie County jury Friday afternoon.

Fuelberg, 66, who ran the nation's largest member-owned electric utility for more than three decades, could be sentenced to two to 10 years in prison and fined up to $10,000 for the third-degree felony charges.

"Obviously, as you might expect, we're disappointed in the verdict," defense attorney Charles Grigson told the jury as the punishment phase began. "Bennie's disappointed. But he's going to live with it; he's going to respect it."

Defense attorneys are asking the jury to sentence Fuelberg to probation.

"The consequences Bennie Fuelberg has suffered largely have already occurred," Grigson said. "His reputation has been damaged. His family has been hurt by the publicity."

Prosecutor Eric Nichols told the jury that the state will present evidence of Fuelberg's "fundamental lack of respect for the laws of our state," including ways he profited from a venture known as the Texland Electric Cooperative, a failed 1980s plan to generate power for Pedernales.

Fuelberg and Walter Demond, the co-op's former outside attorney with Clark, Thomas & Winters, one of Austin's oldest law firms, were originally indicted on identical first-degree felony charges. At the prosecution's request, jurors were given the option to reduce the charges to third-degree felonies, which carry a lesser punishment. Demond will go on trial early next year.

There was little reaction in the courtroom, mostly filled with Fuelberg's relatives and reporters, when state District Judge Dan Mills read the jury's guilty verdict about 2 p.m. Friday. Fuelberg hugged his wife and other family members as the court went into recess before beginning the punishment phase of the trial, which is expected to continue next week.

The verdict was a shocking denouement for Fuelberg, whose position at Pedernales, one of the Hill Country's largest employers, had made him a powerful figure. It also made him wealthy: A critical audit by Navigant Consulting found that Fuelberg was paid $6.3 million between 1998 and 2007, including deferred compensation of $1.5 million the last two years.

Throughout the trial prosecutors sought to prove that Fuelberg broke the law by funneling hundreds of thousands of dollars in co-op members' money between 1996 and 2007 to his lobbyist brother, Curtis Fuelberg, through the Clark Thomas firm. They said Fuelberg removed oversight of the law firm's bills from other managers to hide the payments.

Bennie Fuelberg testified he kept the arrangement secret from the Pedernales board of directors and employees. But the defense argued he did so in order to hire his brother as a legislative consultant without offending the president of the board, who was technically responsible for government relations. They also said Fuelberg had no knowledge of a similar arrangement that paid $2,000 a month to Lampasas attorney Bill Price, the son of former co-op board member E.B. Price .

Had Fuelberg been acquitted, the co-op's insurance policy may have ended up paying his defense costs, Pedernales spokesman Michael Racis said.

During the punishment phase Friday evening, E.B. Price testified that Fuelberg would pay his board members for special meetings with co-op money, then collect checks from them in the same amount and donate money to political candidates Fuelberg deemed "friendly to PEC," he said.

Some of the candidates who received checks from Fuelberg ranging from several hundred dollars to $1,000 included state Comptroller Susan Combs and U.S. Rep. Lamar Smith, R-San Antonio. Price testified he did not think anything was wrong with this practice.

Fuelberg's — and Pedernales' — troubles began in May 2007 with the filing of a member-led lawsuit that led to disclosures of large salaries, excessive expenditures and money-losing ventures at the co-op, which Fuelberg ran with little oversight by the well-compensated board of directors.

The lawsuit led to the Navigant audit, a criminal investigation by the attorney general's office, a reform movement that eventually displaced the entire board and steady news media coverage. During the past three years, the American-Statesman has published close to 150 news articles dealing with developments at Pedernales.

After 30 years at the co-op, Fuelberg stepped down in early 2008, along with several other top officials, and was indicted a year later.

Today, the co-op has levels of openness unheard of during Fuelberg's tenure, including democratic board elections and more open records. Current board President Larry Landaker said the co-op will continue to move on regardless of Fuelberg's sentence.

"The era of Mr. Fuelberg has passed now," Landaker said.

Andy Wilson, an analyst at consumer watchdog group Public Citizen Texas and a co-op member, called the conviction an important victory for everyone who stood up to corruption at the co-op.

"This should send a chill down the spine of other corrupt co-op boards and managers across the country," Wilson said. "We can take back our co-ops, as we've done in Pedernales, and so can others across the country."

Added Wilson: "Whatever sentence he receives, it is far less than he deserves and does not restore money back to the owners of the co-op who he was bilking for all those years."