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VOL. 124 | NO. 146 | Tuesday, July 28, 2009

Lee Fees Caught in Legal Loop

By Andy Meek

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ALMOST THROUGH (MAYBE): The Memphis City Council next month is scheduled to vote on a reimbursement of legal fees for former MLGW president Joseph Lee. Shown are City Council members Shea Flinn and Bill Morrison, who have been in the thick of the never-ending saga. -- PHOTO BY LANCE MURPHEY

With the predictability of a boomerang, Joseph Lee’s legal fee situation never seems to go away and keeps coming back to where it started.

At the Memphis City Council meeting Aug. 18, the body is scheduled to approve Memphis Light, Gas and Water Division’s payment of more than $426,000 to the city of Memphis. That amount from the city-owned utility company is to reimburse the city what it recently paid to settle a lawsuit the former MLGW president and CEO filed last year.

Some council members this month were puzzled at the apparent requirement that the council needs to approve MLGW’s reimbursement to the city. The requirement has a tinge of irony, because it was a council vote that set the months-long legal flap in motion.

To recap, the City Council as 2008 drew to a close declined to allow MLGW to pick up a $426,422 legal tab Lee accrued over about 18 months, starting in 2007.

Lee began racking up the legal fees after he became a target of a federal corruption probe that later was abandoned. Once it was dropped, Lee’s attorney got MLGW to approve paying the legal fees. But the City Council has oversight of MLGW expenses above $25,000.

Checks and balances

Once MLGW’s request for approval traveled north on Main Street to City Hall, the council said no. Lee then took the city to court over the council’s action.

He filed suit in Shelby County Chancery Court in December.

A few weeks ago, the city’s legal department sent Lee a settlement offer for the exact six-figure sum he wanted all along, and Lee accepted. At the same time, city attorney Elbert Jefferson filed a lawsuit against MLGW hoping a judge would in turn require MLGW to reimburse the city for its payment to Lee.

The MLGW board wants to make that payment to the city. And the council’s attorney told The Daily News the city has the statutory right to demand reimbursement anytime it pays a lawful expense of MLGW’s.

To the utility company, reimbursing the city involves settling Jefferson’s lawsuit. And because the amount involved is more than $25,000, utility officials sent the matter last week back to where the whole thing started – the City Council.

“This (request) is to pay the city of Memphis $426,000, approximately, as reimbursement for any amount or similar amount the city would pay to Joseph Lee and/or (Lee’s attorney) Robert Spence,” MLGW president Jerry Collins told council members. “From the standpoint of MLGW, this is for the settlement of a lawsuit, which requires council approval. This is for a check to be cut from MLGW to the city of Memphis.”

Still out of reach

Council member Reid Hedgepeth proposed delaying approval of MLGW’s reimbursement to the city until Aug. 18, and the council went along with that delay. Local attorney Ronald Krelstein has filed a lawsuit against the city arguing it is outside the scope of the City Charter for the city to have handled Lee’s matter the way it did.

A hearing is scheduled in the Krelstein suit Aug. 17, and Shelby County Chancellor Arnold Goldin ordered Lee and his lawyers not to spend the $426,422 until the hearing. The City Council is scheduled to meet the day after that.

So Hedgepeth proposed waiting to see what happens Aug. 17. If the judge rules the city’s settlement was proper, that would be the right time for the council to then approve MLGW’s reimbursement to the city, he reasoned.

“The judge in this case has ordered the defendants not to spend this money, because possibly they could have to return this money,” Hedgepeth said. “Therefore, if it’s returned, there would be no need for MLGW to reimburse the city.”

PROPERTY SALES 56 437 16,061
MORTGAGES 76 508 18,556
BUILDING PERMITS 241 876 33,390
BANKRUPTCIES 64 301 10,314