CULLMAN — Seven local residents, including the chairman of the Cullman County Commission, filed a lawsuit Friday against two associate county commissioners, as well as other players involved in last month’s formation of a controversial water cooperative and its governing board.

The five-count suit alleges associate county commissioners Doug Williams and Wayne Willingham improperly exploited a 1984 statute allowing for the formation of a Governmental Utility Service Corporation (GUSC). The suit also accuses the pair of improperly forming a water cooperative—the South Cumberland Cooperative District (SCCD)—and of breaching the county’s fiduciary duty; of wasting public assets; and of committing civil conspiracy in supposedly scheming to create the entities outside the view of both the public and of commission chairman James Graves.

“Fiduciary duty” describes a legal or ethical relationship of trust between two or more parties.

In a previous interview, Williams denied that Graves had been excluded from an ongoing exchange of information over the past several months concerning the creation of a utilities board. Rather, said Williams, Graves purposely excluded himself every time the matter was mentioned.

Willingham said Saturday he had not seen the suit and was not yet in a position to comment.

“It’s hard to comment on something you don’t yet know anything about,” he said. “I guess we’ll look at it Monday. I talked to Dan (Willingham, the county attorney), and he said he hadn’t seen a lawsuit either.”

Friday, news of the filing came as a surprise to Williams, who remained general in his comments about the suit until he had a chance to review it.

“I hope that he (Graves) didn't spend county funds to do this,” said Williams. “Under the law, our lawyers would be covered if he's suing the commission. He can't spend county funds to hire an attorney in a suit that intends to do detriment to the county—he would have had to have the authorization of at least two commissioners, which he does not have.”

For the moment, that concern appears to be a moot issue, as Graves is being represented as chairman on a pro bono basis by attorney Rusty Turner of Culpepper & Turner, LLC. The group of plaintiffs, including Graves, is represented by local law firm Knight, Griffith, McKenzie, Knight & McLeroy, LLP.

The defendants were unable to provide information about their legal representation by deadline for this article.

Turner said most of the plaintiffs are involved in agriculture-related occupations and live in different parts of Cullman County. They include Graves, Kenneth Neal, Billy Federer, Chad Federer, Jeff Wren, Ronald Graham and Jackie Satterfield.

Satterfield, a Welti resident, said Saturday he had no personal grudge against Williams or Willingham, and that his involvement in the suit is borne of a genuine concern for the welfare of Cullman County and its residents.

“Doug has always been a friend of mine, and I have stopped many times at Wayne’s store. I do not have any animosity toward either of them,” said Satterfield. “I just didn’t feel like they handled this properly. The business of the public does not need to be conducted in secret or under the cloak of darkness. I’ve never sued anyone personally—I’m not a troublemaker. We just feel like the assets of the people should be protected, and there was no other way to do that than to make this effort to get the decision of the commission reversed.”

Through their attorneys, the plaintiffs collectively issued a press release Friday in an effort to succinctly explain the basis for filing the suit:

“Its purpose,” reads the release, “is to stop the high-jacking [sic] of the Cullman County Water System and $30 million of Cullman County owned assets by two County Commissioners and their greedy friends.”

“If this process is allowed to stand, the Commission will no longer own or have an interest in their water system,” the release continues. “Their water system will be owned and controlled by five persons not elected by the people. The creation of this clandestine organization was done with utmost secrecy and no transparency. This is just wrong...We intend to try and get the water system back for the people of Cullman County.”

Also surprised Friday by news of the suit was Ron Stone, a charter member of the three-person GUSC board.

“I didn’t even know they were filing a suit,” Stone said. “It hits me as a total surprise. There were no closed-door meetings on it. As far as I know, I haven’t done anything illegal or fraudulent. As a matter of fact, I volunteered my time without compensation to serve on that water board.”

Graves declined to comment directly on the suit Friday, speaking instead through a press release provided by Turner. In the release, Graves said he was “forced to file the action to take whatever steps necessary to protect the interests of the citizens of Cullman County.”

A closer look at the suit reveals five separate allegations dealing with both the circumstances of the creation of the two water entities, and with financial jeopardy the defendants’ actions are alleged to place upon Cullman County, should the county remain unable to manipulate the revenues it formerly accessed as owner of the water department.



Count One

Improper use of Governmental Utility Service Corporation

Count One accuses the defendants of violating Section 11-97-1 through 11-92-27 of the Code of Alabama.

Specifically, the plaintiffs allege the associate commissioners did not meet any of the qualifications set forth in the Code that would justify the creation of a GUSC.

The portion of the Code in question concerns a 1984 legislative act providing municipal entities with a legal mechanism to create a GUSC. The measure was instituted in order to offer local governments statewide a means of forming utility boards that could avail themselves of some of the decision-making resources available to private businesses. The Code states, in part:

“...in recent years, funds available to cities and counties from the United States of America for payment of costs of construction of utility services facilities has been substantially reduced, and it is anticipated that, in coming years, such funds may be further reduced or eliminated;

“...the result of the elimination of funding from the United States of America will be to place the entire burden of payment of costs of constructing and improving utility service facilities solely upon the cities and counties in the state;

“...among the alternatives available to cities and counties in the construction of new and improved service facilities is the encouragement of private investment in the construction, ownership, and operation of utility service facilities...”

The suit states that Williams and Willingham “created the GUSC as a ‘shell corporation’ in contravention of the statute,” and that the Cullman iteration of the GUSC was created solely “to provide another governmental entity to partner with Cullman County to enable the creation of South Cumberland”—a purpose the suit claims is not allowed or intended by the GUSC statute.

Count One continues:

“GUSC has received no assets from Cullman County and is not [to] be engaged in the provision of utility services to residents of Cullman County. Therefore, its purported creation did not follow the intent of the Legislature in establishing Governmental Utility Service Corporations.”



Count Two

Improper formation of a Capital Improvement Cooperative District

Count Two makes a similar allegation as Count One, except that it refers to the creation of the SCCD instead of the GUSC. It alleges Williams and Willingham to have violated Section 11-99B-1 through 11-99B-18 of the Code—the section dealing with the formation of utility cooperatives such as South Cumberland.

The relevant portion of the Code, Section 11-99B-2, states:

“This chapter is intended to encourage and facilitate cooperative efforts by public entities to provide projects for their own use and for the use and benefit of their citizens and users.”

The suit claims South Cumberland, ostensibly a capital improvement cooperative district, was formed improperly because, as Count Two alleges, “The only cooperative effort put forth by the GUSC is the appointment of Board members to shield South Cumberland from control by future Cullman County Commissions.

“The Cullman County Commission contributed all of the assets to South Cumberland, GUSC contributed nothing...The GUSC purportedly created by the Cullman County Commission herein is not a public entity within the meaning of Section 11-99B-1 (through 11-99B-18) so as to allow for the formation of a cooperative district such as South Cumberland. The GUSC is a legal fiction and merely the alter ego of the currently existing majority of the Cullman County Commission.

“...In addition, a cooperative form of operation would allow the new entity to avoid oversight by the Public Service Commission and to obtain use of rights of way of non-consenting municipalities and other counties in the operation of the water department...South Cumberland would have the power to condemn land and to sell assets of the cooperative without public meetings or the approval of any other body.”

Turner stressed that point, noting that the former water department had assets in portions of Morgan, Walker and Winston counties, in addition to its infrastructural network in Cullman County. That, he said, would further complicate the county’s position in any matter that engages out-of-county property owners in future legal disputes or property acquisition actions associated with expansion, maintenance or improvement of the Cullman water infrastructure.



Count Three

Breach of fiduciary duty, deceit and fraud

On April 12, all three county commissioners agreed to issue $7,255,000 in revenue bonds to upgrade water pipe infrastructure in various portions of Cullman County.

The bond agreement had evolved from its controversial beginnings, having originally been proposed as an $11 million package that would also have backed the county’s assaying of wells in the Cullman-Blount county line area. That proposal drew the threat of legal action from the City of Cullman, which has a long-term contract with the county stipulating the city remain the sole supplier of county water for the life of the contract. Chairman Graves had vigorously opposed the approximately $4 million portion of the bond proposal which would have financed the pursuit of well water as a secondary water source for the county, claiming—as did the city—that the wells would violate that contract.

After some saber-rattling by city attorneys, the county backed off the wells idea, and all three commissioners reached an agreement on the April 12 bond issue.

Now, according to Count Three of the lawsuit, Williams and Willingham have placed the county in financial jeopardy with respect to the issuing of bonds backed by the promise of revenue of what was, at the time, assumed to be continuously generated by a water department under direct county control. With the transferring of the water department to a cooperative that does not answer to the county commission, the suit claims, the confidence of bondholders in the revenue they foresaw when investing in the April 12 bond could potentially be shaken.

Similarly, the suit alleges the county—which still stands as the issuer of the bonds, in the eyes of investors—has no control over the department tasked with generating the revenues promised to bondholders when the county issued its $7,255,000 bond.

“At no time,” Count Three states, “prior to the issuance of these bonds, or on April 12, 2010, did Defendants Williams or Willingham inform the citizens of Cullman County, the general public, bond counsel, potential purchasers of the bonds such as the Retirement Systems of Alabama and other pension funds; of their intentions to act two weeks later on April 27, 2010 to give away the entire assets of the Cullman County Water Department to an independent body, the South Cumberland Cooperative District...

“...The debt owed by Cullman County for the creation and improvement of the Water Department facilities is secured by the full faith and credit of the county. The purported transfer of facilities is a breach of the Defendant’s fiduciary duty because the county continues to be responsible for the debt even though the assets and income of the Water Department have been transferred.”

Count Three also mentions the county’s exclusivity agreement with the city over the purchase of water, citing the loss of the water department assets, along with the control over water department revenues, as a potentially debilitating financial move that—the suit claims—could lead to a recreation of the Jefferson County sewer bond crisis, only on a smaller scale:

“If the transfer of the assets of the Water Department is upheld, the County has no control over the revenue to pay for said water purchased,” reads Count Three. “Such a situation will be akin to the current financial crisis that Jefferson County, Alabama faces regarding the repayment of bonded indebtedness without sufficient resources to repay such debt.”

Count Three goes on to note the possibility that bondholders could call their April 12 bonds ahead of the repayment schedule, if they lose faith in the creditworthiness of the new owners of the water department assets:

“Cullman County has enjoyed an A- bond rating in the issuance of these most recent water revenue bonds,” says the filing. “The entity known as South Cumberland Cooperative District has no rating, thereby further risking the acceleration of repayment of those bonds by the bondholders. Cullman County cannot afford this burden without control of the resources necessary to pay such debt.”

Finally, Count Three suggests Williams’ and Willingham’s actions constituted “a plan of deceit and demonstrated fraud” in an effort to move on a plan that allegedly had been deliberated with intent to defraud the county.

“Defendant Williams stated at the April 27, 2010 County Commission Meeting that he had been working on this plan ‘for a long, long time...over a year,’” Count Three asserts. “This statement, along with Defendant Willingham’s statement that he had reviewed the documents presented seeking to form the GUSC and South Cumberland Cooperative District, clearly show a concerted effort on the part of the Defendants to manifest a plan of deceit, fraud and breach of fiduciary duty.”



Count Four

Waste of public assets and conversion

Count Four essentially alleges Williams and Willingham to have wasted public assets by giving away the water department as a property of real value and as a generator of revenue. It also asserts that the two commissioners incurred legal fees at county expense in the drafting of legal documents providing for the creation of the GUSC, the SCCD, and the transfer of ownership of the water department to the SCCD.

The suit asks that the associated legal fees be made the responsibility of the individual commissioners, and that the transfer of the assets be “set aside as a product of waste and conversion.”

“The Defendants Williams and Willingham have committed waste of public assets by their approval of the transfer of the assets and employees of the Cullman County Water Department to the South Cumberland Cooperative District without just and due compensation to Cullman County,” reads Count Four. “In addition, the transfer of said assets is a conversion of those assets from public ownership and control to the ownership and control of an entity appointed and controlled by the Defendants.”



Count Five Civil Conspiracy

Count Five is the suit’s strongest assertion against Williams and Willingham as alleged willful perpetrators of a conspiracy to defraud the county. It asks the court to find the pair “liable for civil conspiracy.”

“The defendants have engaged in a pattern and practice of civil conspiracy to defraud the citizens of Cullman County and to deprive the citizens of Cullman County of one of its chief assets, the Cullman County Water Department,” the suit accuses. “These actions occurred in secret and without opportunity for any public input or comment. Their actions have caused the financial strength of Cullman County to be imperiled by the removal of one of its sources of revenue, thereby placing the entire county government in jeopardy of financial ruin.”

The item goes on to describe Williams’ and Willingham’s actions as “a scheme to deprive Cullman County of the Cullman County Water Department without just compensation and to transfer the Water Department to an entity that will answer to no one except a hand-picked board who will have the power to set rates, sell all or part of the Water Department, and to take private property with no oversight by any governmental agency or citizen.”



Terms, damages, reparations

The suit asks that the court find that both created entities—the GUSC and its board, along with the SCCD and its board, be declared void ab initio, or from their beginnings. It similarly seeks to have the deeds, bills of sale and “other documents purporting to transfer the assets of the Cullman County Water Department” declared void.

It also asks, as noted above, that Williams and Willingham bear the financial burden associated with the hiring of attorneys to draft all documents related to the formation of the two entities, and that the county be relieved from the responsibility of paying these fees.

In addition, the suit asks the court to declare “Defendants Williams and Willingham...liable for civil conspiracy.” Finally, the suit seeks “such other further and different relief the court deems proper.”



Turner summarized the plaintiffs’ disposition in filing the suit, and its justification as a civil matter.

“They’re basically just concerned citizens who believe that this has been done for a purpose that was not appropriate to the situation,” he said. “There are more appropriate ways for doing this than the current structure. It’s both the procedure in how it was adopted, and the structure—we don’t think it was legally done. If this was a good thing for Cullman County, why was it done in secret? That’s the essence of this lawsuit.”

Neither Graves nor any of the plaintiffs’ attorneys had yet contacted the state Attorney General for an opinion on the legality of how the GUSC and SCCD were formed. Turner said the civil suit may, through discovery, yield information that could make consulting with the AG a possibility, but declined to speculate on the likelihood of drawing attention to the case as a criminal matter in the future.

“To be honest, until we begin and see how the discovery process goes forward, it’s premature at this point,” said Turner.

The suit will be assigned to either Circuit Judge Frank Brunner or Circuit Judge Don Hardeman. It is too early in the process to forecast whether it will ever see a trial. Having been filed Friday, the suit is now public record. Copies are available in the Cullman County Circuit Clerk’s office on the top floor of the Cullman County Courthouse.

The five-member SCCD board will meet for the first time at 1 p.m. Monday at the South Cumberland Cooperative District office—formerly the Cullman County Water Department—on Beech Avenue. The meeting is open to the public.



*  Benjamin Bullard can be reached by e-mail at bbullard@cullmantimes.com or by telephone at 734-2131 ext. 270.

The Details

The South Cumberland Cooperative District (SCCD) will hold its first meeting tomorrow. The details:

What: SCCD board meeting

When: Monday, May 10 at 1 p.m.

Where: The SCCD offices (formerly the Cullman County Water Department) on Beech Avenue

The meeting is open to the public.

The Lawsuit In Brief

The Plaintiffs: Kenneth Neal, Billy Federer, Chad Federer, Jeff Wren, Jackie Satterfield, Ronald Graham, James Graves

The Defendants: J. Doug Williams, Wayne Willingham, The Governmental Utility Service Corporation of Cullman County, The South Cumberland Cooperative District, The Cullman County Commission



Count One: Improper use of Governmental Utility Service Corporation

Count Two: Improper formation of a Capital Improvement Cooperative District

Count Three: Breach of fiduciary duty, deceit and fraud

Count Four: Waste of public assets and conversion

Count Five: Civil Conspiracy

For more info:

See the portions of the Code of Alabama cited in the lawsuit by logging onto http://www.legislature.state.al.us/codeofalabama/1975/coatoc.htm and navigating to the relevant section by first selecting “Title 11 COUNTIES AND MUNICIPAL CORPORATIONS” in the lefthand frame panel. From there, just follow the links to the corresponding sections of the Code mentioned in this story.