A group of Sam Houston Electric Cooperative, Inc. (SHEC) members have filed a class action lawsuit against SHEC, a non profit member owned electric coop, and its directors, advisory directors, advisory directors-at-large, and officers for failure to return profits to members of the electric membership corporation. The members are represented by attorney Frederick L. McGuire in Liberty, Texas and Husain and Associates.
According to the suit, SHEC’s primary obligation is to provide electricity at cost and operate as a non-profit. Any returns realized by SHEC are supposed to be returned to the members. Instead, SHEC has consistently refused to return its member any funds.
Under Texas law, according to the suit, electric cooperatives must operate on a non-profit basis. The lawsuit alleges SHEC charges its members more on their electric bills than it needs to operate. Additionally, the lawsuit claims SHEC receives ‘capital credits’ which are supposed to be passed on to SHEC members. These extra profits are supposed to be allocated periodically to each member based on their electrical usage. These individual shares are called ‘capital credits.’
According to the suit, in 2012, SHEC reported $144,394,062 in Patronage Capital, $153,607,349 in 2013, and $161,909,370 in 2014.
The suit says, “On information and belief, SHEC has returned margins to the members only twice. Those returns represented 2.00% or less of the actual margins.” The suit goes on to state that SHEC retained $156 million in 2011 and $176 million in 2014 in margins, which in fact was money that belonged to the members.
Additionally, the lawsuit alleges on November 27, 2015, “SHEC shut off the power to Lester B. Berry’s home in Dayton, Texas, without proper notice, causing horrendous suffering to and ultimately the awful death of Lester Berry. SHEC took this drastic action over a bill for $129.62 that was one month past due.” Berry had been a long time member of SHEC.
Directors and officers named in the suit are Don Boyett, Lynn Hendrix, Milton Purvis, Casey Evans Davis, Robert Leisner, Gary Jenke, Robert Boyd, Katherine Hardin, Charles Turner, W.E. Ernie Miles, Thomas Lucher, Kyle J. Kuntz, David Babcock, and Joe Conner.
The suit asks the court to enter judgment against the Defendants jointly and severally for actual damages, including excessive compensation and benefits and all improper expenditures paid by SHEC and the patronage capital which should have been distributed or retired to Plaintiffs. The Plaintiffs are also claiming exemplary damages based on malice and/or malfeasance in an amount ‘sufficient to punish Defendants for their intentional malicious acts and breaches of fiduciary duty.’ The suit is also asking for damages for the wrongful death of SHEC member Leste B. Berry.
The attorneys can be contacted through the Liberty, Texas office of Frederick L. McGuire, 714 Main St., Liberty, Texas 77575. 936-336-9809.