Allegations that Lafayette Utilities System paid the fledgling LUS Fiber system for services either not used or not needed are in the hands of attorneys and the Louisiana Public Service Commission, Mayor-President Joel Robideaux says.
Colby Cook, the PSC press secretary, said administrative law judge Steve Kabel will review a case that was self-reported April 14, 2018. It involves LUS wastewater and electric divisions paying the fiber/communications division more than $1 million over several years for service that wasn't used.
The communications division has paid LUS back more than $1.7 million, which included interest. The communications division is now separate from LUS and not overseen by the same director.
Terry Huval was LUS director at the time. He retired in July 2018, in part because Robideaux decided to split LUS from its communications operations, and Huval's $250,000-plus annual salary as well. Huval had earlier announced he would retire at the end of the fiscal year, Oct. 31, 2018. A salary reduction would have impacted his retirement benefits.
Robideaux said Friday he believed the communications division needed by be removed from LUS to avoid unjustified payments to the fiber operations.
"If Cox had provided that service," he said, "LUS would not have paid it. That's Accounting 101: Separation of duties."
Huval declined to comment.
A June 4 PSC audit report called the transactions a violation of its code of conduct, with the appearance of self-dealing that benefited an affiliate, in this case the communications division. Such transactions are not allowed because they give government-owned operations unfair advantage over corporate-owned operations that offer the same service.
Kabel will review the report, Cook said, then send it to the full commission for consideration. In a meeting open to the public, the PSC will decide whether to accept or reject the audit, require additional information or determine that the LUS communications division did something wrong. The process usually takes 2-3 months.
Robideaux, in a meeting July 8 with PSC representatives, said he self-reported another instance where LUS paid the fiber division about $8 million since 2011 for a power outage monitoring service that wasn't necessary or financially justified, to the benefit of the communications division. The mayor-president alleges the payments were a violation of PSC rules and the Local Government Fair Competition Act.
The act, Robideaux said, requires that payments be based on what it cost the communication system to provide the service. That wasn't done, he said.
Huval and his staff used an economic analysis "done for other purposes" to justify the amounts charged, he said.
In an Oct. 31, 2012, note, auditors wrote, "Per review of the supporting documents, it appears that the sales of services between affiliated divisions are being charged at a reasonable market price and is consistent with the requirements of the Fair Competition Act."
"I think it was an unnecessary strategy put in place to make it look like fiber was doing better than it was," he said.
The fiber operations didn't need the extra money, Robideaux said.
"It would have taken a little longer to get to positive cash flows," he said. "I think the people would have been OK with that."
The matter, he said, "is in legal hands now" and the PSC is deciding whether to add the latest findings to the 2018 issue or open another audit over the power outage monitoring system payments by LUS to the communications division.