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VOL. 125 | NO. 230 | Friday, November 26, 2010

Judge Denies Lee’s Motion to Dismiss

By Andy Meek

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Former Memphis Light, Gas and Water Division president and CEO Joseph Lee is still at the center of legal wrangling over a six-figure settlement the city of Memphis paid him last year.

Shelby County Chancellor Arnold Goldin this week blocked an effort by Lee’s attorneys to dismiss a complaint the city filed against Lee to recover the more than $426,000 settlement.

That means Lee is still fighting the city in court to keep the money paid to him by, well, the city.

It’s an unusual case, something even Goldin has acknowledged. And it’s convoluted enough that during a previous hearing Goldin at times shook his head and exhaled.

“This is certainly an unusual set of facts, there’s no question about it,” Goldin said this week.

He then added simply that “sufficient allegations have been made” by the city, and Lee’s motion to dismiss was denied.

The forces that brought the two sides to this point were set in motion a few years ago. What set off the current battle was federal prosecutors announcing they were dropping corruption charges against Lee in 2008. Lee asked his then-employer, MLGW’s board, if they would pay him to recoup his legal expenses.

The MLGW board said yes. After contentious discussions and multiple votes, the Memphis City Council – which has oversight of MLGW – said no.

Lee then filed a lawsuit in Chancery Court against the city. He asked for more than $7 million in damages.

Here’s where his current trouble is focused:

With approval from former Memphis Mayor Willie Herenton, a longtime and passionate defender of Lee, former City Attorney Elbert Jefferson proposed settling Lee’s $7 million lawsuit for a smaller amount – $426,422, which also is the amount Lee sought from MLGW to pay his attorney fees.

Goldin signed an order accepting the settlement. Lee took the money, and paid his attorneys. One of his attorneys is Robert Spence, a former city attorney who represented Lee while Lee was a subject of the federal corruption probe.

Spence has repeatedly pointed out during court hearings the settlement paid to Lee was a proper exercise of the power to settle lawsuits afforded by the city charter to the city attorney and city mayor.

Once they did that in Lee’s case, Spence said Lee’s payment to him made Spence no different than other creditors Lee may have paid – a credit card, the utility company or his mortgage lender, for example.

Settlement or attorney fees? That is the question.

The city has changed mayors twice since the payment. After Herenton’s departure, the city hired an attorney to go after the money.

Ronald Krelstein, the attorney currently representing the city, contends the settlement was a backdoor way of paying criminal defense fees for Lee, which Krelstein said is illegal in Tennessee.

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