Appeals in CMEEC Kentucky Derby case to be heard in New York
May 4—The U.S. Court of Appeals for the Second Circuit in New York will hold a hearing May 13 on the appeals by three former utility cooperative executives seeking to overturn their theft convictions, sentencings and court-ordered restitution for their leadership roles in lavish trips to the Kentucky Derby and a West Virginia golf resort.
Former Connecticut Municipal Electric Energy Cooperative CEO Drew Rankin, former Norwich Public Utilities General Manager John Bilda and former CMEEC and Norwich utilities commission chairman James Sullivan all appealed their December 2021 jury convictions on one count each of theft stemming from trips to the Kentucky Derby and The Greenbrier resort in 2015.
The appeals hearing before a three-judge panel at 10 a.m. Monday, May 13 in the New York City courthouse will be held one year to the week after they were sentenced by U.S. District Court Judge Jeffrey A. Meyer in New Haven.
Their appeals were consolidated into one case, and the court also bundled their three appeals of restitution ordered by Meyer last November to reimburse CMEEC for costs Meyer assigned to each of them for the trips.
Collectively, trips by CMEEC to the Kentucky Derby from 2013 through 2016 and two trips to The Greenbrier in 2015 cost $1.2 million, including $502,242 for the 2015 trips involved in the convictions.
Rankin was sentenced May 16, 2023 to 12 months in prison, three years of probation and ordered to pay restitution of $374,400 by Meyer as chief orchestrator of the trips. Sullivan on May 17 and Bilda on May 18 each were sentenced to six months in prison, three years probation and ordered to pay $187,400 each in restitution to CMEEC.
The cooperative is owned by six municipally owned public utilities: Norwich Public Utilities, Groton Utilities, Bozrah Light & Power, which is owned by Groton Utilities, Jewett City Department of Public Utilities, South Norwalk Electric and Water and Third Taxing District in Norwalk. The money used for the trips came out of a CMEEC revenues fund intended to be distributed to the member utilities to help stabilize electric rates.
The sentencings and restitution orders were put on hold by Meyer pending their appeals to the U.S. Court of Appeals for the Second Circuit. A criminal trial on a second indictment of Rankin and Sullivan also is on hold pending the appeal.
In that case, Sullivan and Rankin were charged with theft in connection with alleged reimbursement authorized by Rankin and paid to Sullivan using CMEEC funds for nearly $100,000 in personal expenses.
However, a related civil case in New Haven federal court, also before Judge Meyer, is ongoing.
Throughout the criminal investigation, trial and sentencing proceedings, CMEEC was footing the legal bills for Rankin, Sullivan and Bilda and two other defendants who were acquitted on all charges, former Groton Utilities commissioner Edward DeMuzzio and former CMEEC chief financial officer Edward Pryor.
Immediately following the sentencings last May, CMEEC informed Bilda, Sullivan and Rankin it no longer would pay legal costs for their appeals and for the pending second criminal case for Rankin and Sullivan.
CMEEC cited bylaws that stated the cooperative was not obligated to pay if the covered parties were found to have engaged in misconduct. CMEEC also demanded reimbursement from the convicted former officials for the legal costs that had been paid, citing an agreement all five defendants signed that they would pay back the costs if they were convicted.
Rankin filed a civil suit in the New Haven federal court challenging CMEEC's refusal to pay the legal costs and the demand for restitution. According to court documents, CMEEC had sought restitution of $9.5 million in legal costs following the sentencings, but Judge Meyer rejected that claim.
In Rankin's civil case, CMEEC claimed that Rankin "has been unjustly enriched by CMEEC's payment of his legal fees, expenses and cost for the defense," amounting to more than $2.5 million over the five years from the indictment in November 2018 through the sentencing hearings in May 2023.
Rankin countered that the Affirmation and Undertaking agreement he signed was not legally enforceable. Rankin claims CMEEC is obligated to cover legal costs through his appeal of the conviction, because the case is not finally adjudicated. His conviction could be overturned, negating the need to reimburse CMEEC for the legal costs, Rankin argued. And he argued the second criminal case has not yet begun, and CMEEC is required to cover those legal costs.
Rankin claims CMEEC has breached its contract with him to cover the legal costs. On April 5, Rankin filed a motion seeking an injunction, forcing CMEEC to resume covering his legal costs "until he has exhausted all appellate rights, and, if he is successful on appeal, thereafter, unless and until, if ever, he is "finally adjudged" to have engaged in negligence or misconduct in performance of his duties as CEO.
CMEEC also brought into the civil case a complaint against its liability insurance company, National Union Fire Insurance Co. of Pittsburgh for failing to advance the legal costs to the defendants.
CMEEC had filed a separate civil lawsuit against the insurance company and prevailed, but the two parties continue to argue over what amounts to "reasonable" legal costs. CMEEC objects that it had to advance the legal costs and wait for reimbursement from the insurance company for partial payments.
CMEEC filed motions to dismiss Rankin's civil case, and National Union filed a motion to dismiss CMEEC's third-party claim against the company.
On March 30, Judge Meyer granted part of CMEEC's motion to dismiss Rankin's case, but denied the motion in some claims. Meyer also denied National Union's motion to dismiss its involvement.
Rankin's civil case against CMEEC will not be resolved anytime soon. The current docket schedule calls for motions to be filed by next January, responses by February and trial memorandums filed by May 1, 2025. In an April 26 jointly filed case summary report, the parties estimated the case would be ready for trial by June 3, 2025.
