Fallout continued Wednesday following a contentious vote at Tuesday's Frankfort Plant Board meeting to pay nearly $50,000 in legal bills for two directors who sparred with city commissioners last year and to ask the utility's insurer to cover the cost.
It was the latest development in a series of tumultuous events that go back to 2015.
The Frankfort Plant Board normally approves insurance coverage for the board every January. In January 2018, FPB approved an officers and directors insurance policy that included an exclusion should board members be sued by the city of Frankfort.
At the time a target of an investigation by the Frankfort City Commission, FPB Chair Anna Marie Pavlik Rosen asked if the exclusion could be lifted and the utility's insurance agent Charles Hamilton explained that such clauses are routine for insurance companies that cover municipal utilities. Nevertheless, he determined that the exclusion could be removed and made the change in FPB's officers and directors policy at Rosen's request.
On the surface, this seemed like a positive change to the policy, officials said. Removing the clause would result in more insurance coverage for directors at no extra cost. But board members Dawn Hale and Stephen Mason said Tuesday night that they weren't informed of the change, nor voted to approve it.
A year later, the board voted on a new insurance policy. After a closer look, Mason discovered that the new policy was missing the previous exclusion clause. Mason questioned why the clause had been removed and why the board had not been informed of the change.
Rosen told The State Journal on Wednesday that, in 2015, a group was championing a plan for FPB to leave Kentucky Utilities (KU), the plant board’s energy supplier at the time. As an alternative, they wanted FPB to partner with the fledgling Kentucky Municipal Energy Agency (KyMEA), a collection of municipal utilities that buy power as a block and distribute it to members.
Rosen said she and FPB Vice Chair Walt Baldwin were not necessarily opposed to the idea but believed it needed to be considered more closely. “We wanted to look at all the possible energy solutions,” Rosen said. “We tried to get the whole thing to slow down and have contracts reviewed, without bias.”
The efforts to review FPB's contractual relationships with KyMEA drew staunch opposition in the community, including from then-City Commissioner Robert Roach, who spearheaded an effort to remove Baldwin and Rosen from the board.
"The city of Frankfort hired lawyers to look into the situation,” Rosen said. Concerned they were at imminent risk of being sued by the city, Rosen said she and Baldwin hired the Louisville-based law firm of Strobo Barkley to represent them. An eventual city commission vote to vacate Baldwin's seat was blocked by a circuit judge
“In the end, the legal bills added up, and we finally got around to saying the plant board should pay those bills,” Rosen said.
At Tuesday’s FPB meeting, Rosen arrived at agenda item 8.4, a motion to authorize FPB General Manager Gary Zheng to submit a formal claim to the board’s insurance carrier under its officers and directors insurance policy.
But before approving this motion, Rosen said they needed to vote on another motion first.
“What we actually need to do is first pass a motion with regard to the indemnity clause in the KRS and actually pay this bill from the attorneys before we can submit a claim to the insurance company, because what they’re looking for is ‘Do you have an expense that we need to have covered that you’ve paid?’” Rosen said. “And so I have a motion to make that happen before this other motion to submit this claim to the insurance company.”
Rosen then moved to have the FPB pay the legal costs of $48,985. “I thereby move to direct FPB to pay the invoice received from Strobo Barkley PLLC per stated indemnification and submit a claim to our D and O (directors and officers) insurance provider for reimbursement,” she said at Tuesday’s meeting.
The law firm's bill, dated in May, was to Rosen individually, not the Plant Board.
A call for discussion on the matter sparked a tense exchange, with Mason and Hale questioning Rosen and Baldwin, demanding to know who changed the insurance policy and why.
When the time came to vote, Mason and Hale voted “no,” citing ethical and procedural concerns. The motion passed 3-2, with Rosen, Baldwin, and Jeff Bradshaw approving.
On Wednesday, Mason and Hale reflected on the vote, questioning the assertion during Tuesday's meeting that payment of the invoice was necessary in order to submit a claim to the insurance company. Among their concerns is that Rosen and Baldwin could have violated FPB’s Code of Ethics by shoe-horning in a vote to have their legal bills paid less than a week before their current terms on the utility board expire. They will leave the board Monday unless reappointed by Mayor Bill May and confirmed by the city commission, which meets Monday night.
According to FPB’s Code of Ethics, “No Frankfort Electric & Water Plant Board employee or a Board Member shall act in his official capacity in any matter where he, a member of his immediate family, or a business organization in which he has an interest, has a direct or indirect financial or personal involvement that might reasonably be expected to impair his objectivity or independence of judgment.”
Hale and Mason noted that Rosen and Baldwin hired Strobo Barkley on their own without advance approval by the board.
For her part, Rosen maintained on Wednesday that, even though the FPB approved the measure to cover her and Baldwin’s legal bills, she and Baldwin did not benefit financially from the vote. “We’re not getting paid,” Rosen said.
Mason and Hale see the issue as a bit murkier. While both agreed that changing FPB’s insurance policy to remove the exclusion cause was beneficial to all board members, the way in which it was done raises ethical concerns, they said.
“I’m always for better," Mason said during Tuesday's debate, "but I want to get there the right way. I don’t want to get there in a way that looks questionable.”
Hale said Wednesday she was still considering whether to file a complaint to FPB’s ethics committee.