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VOL. 123 | NO. 171 | Tuesday, September 2, 2008

MLGW Lets Lee off Legal Fee Hook

By Andy Meek

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IN SUPPORT OF LEE: Memphis Mayor Willie Herenton earlier this summer said he believed former Memphis Light, Gas and Water Division president and CEO Joseph Lee was targeted by federal prosecutors as a stepping stone toward bringing down Herenton. -- PHOTO BY BILL DRIES

Memphis Light, Gas and Water Division is poised to pay several hundred thousand dollars in legal fees incurred by its former president and CEO Joseph Lee over the past year.

Yet that decision to pick up the tab for Lee’s attorneys has evolved considerably over the course of a year, ever since Lee became the subject of a federal indictment in the early summer of 2007. Its evolution saw MLGW change, re-think or clarify its position on Lee’s legal fees at least four times.

The most recent statement of MLGW’s official position came toward the end of last month. Outside the MLGW boardroom, Lee’s attorney Robert Spence was visibly pleased with the board’s vote just minutes before. The MLGW board approved paying almost half a million dollars in fees incurred by Spence’s client in the wake of the indictment last year against Lee.

With basically no explanation, prosecutors dropped the federal bribery and corruption charges against Lee earlier this year. Spence provided Lee with roughly 18 months of legal representation.

The Memphis City Council, which has oversight of MLGW, must give final approval to the payment of the legal bills.

“It’ll now go to the City Council for a similar discussion and vote, and hopefully that’ll be the end of it,” Spence told reporters after the MLGW board vote.

In writing?

Spence’s sentiment, however, may prove to be a little too optimistic. Spence has maintained for more than a year that the utility company has a contractual obligation to pay the attorneys’ tab, which grew to more than $425,000, which Lee now owes to the two lawyers who represented him. The lawyers are Spence and Miami lawyer David Howard.

The federal probe that focused on Lee stemmed from revelations that former Memphis City Council member Edmund Ford Sr. had been allowed to rack up some $16,000 in unpaid bills to the company without an interruption in utility services.

Spence’s position regarding the legal fees has not changed. He has remained clear in what his intentions would be if Lee is denied repayment of those bills.

Joseph Lee

MLGW’s position regarding Lee’s legal bills, however, has followed a complicated and, at times, an unclear path toward the approval finally recommended by utility president Jerry Collins at the Aug. 21 MLGW board meeting.

It began with a deal Lee reached in March 2007 with MLGW’s then-vice president and general counsel Odell Horton Jr. Horton prepared for Lee an attorney engagement letter, the first sentence of which reads: “As an employee of Memphis Light, Gas and Water (MLGW), MLGW agrees to pay your legal fees related to the Edmund Ford federal investigation.”

Once that arrangement surfaced in media reports, the utility company released a statement of clarification, which was not signed by any utility executive or official.

The new position, according to that statement, was that MLGW would review invoices from Lee’s attorneys and pay the fees MLGW considers to be appropriate.

In communication with Horton at that time, then-city attorney Sara Hall reportedly suggested that the reimbursement of legal fees ought to be contingent on a determination that Lee was found to be acting in his official capacity. She also noted that the city’s tradition is to pay the legal expenses of employees who are called to give grand jury testimony.

Lee was charged a little more than $346,000 by Spence, a tab that covered legal work from February 2007 through this summer. Howard’s portion of Lee’s total bill came to $75,000.

Discrepancies

Lee filed a breach of contract lawsuit in Shelby County Chancery Court in July 2007 when he was given notice from MLGW that his legal bills would not be paid, along with other executive benefits he wanted covered.

Lee dropped that lawsuit early last month after both sides had wrangled in court over the issue for more than a year. Lee paid his own legal expenses for that suit and will not be reimbursed by MLGW for that cost, the total amount of which Spence declined to make public because he said it was a matter of attorney-client privilege.

The MLGW board took up the matter of whether to pay Lee’s legal bills at the board’s Aug. 21 meeting. Collins said Lee was seeking a little more than $489,000.

At the time, Collins did not have all of the documentation he wanted in support of his presentation to the board. He told The Daily News after the meeting he nevertheless felt comfortable that if the total amount changed, it wouldn’t be by much.

The day after that meeting, a clerical error was discovered that inadvertently had added almost $62,000 to the amount of Lee’s legal expenses MLGW would agree to pay. The final amount will be closer to $425,000.

“That is an internal staff error and not the error of Robert Spence or Joseph Lee,” Collins said.

Lee’s payment will come out of a special account MLGW maintains for unexpected emergencies.

“That account has approximately $1 million in it, and that’s what will fund this payment,” Collins said.

A final amount for Lee’s legal tab will be presented to the MLGW board Thursday. It’s expected to head to the City Council for final approval Sept. 9.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 85 305 21,577
MORTGAGES 62 223 16,417
FORECLOSURE NOTICES 0 17 1,504
BUILDING PERMITS 0 571 42,491
BANKRUPTCIES 34 138 6,717
BUSINESS LICENSES 40 72 3,169
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0