The gist: Reaching conclusions already voiced by the Guillory administration and its predecessor, a long-awaited forensic investigative report on suspect transactions between LUS and Fiber accuses former Director Terry Huval of flouting state law to inflate Fiber’s revenue by millions of dollars. Published Thursday — along with years of communications among Huval and other officials, as well as commercially sensitive information — the report singles out Huval but implicates current and former employees of LCG, LUS and Fiber.
Get caught up, quickly. For more than two years, LUS and LUS Fiber have been under fire for a multitude of potential violations of a state law Fiber’s competitors pushed through to prohibit government dollars from propping up the municipal telecom. The disputes date back to 2018 when revelations that LUS paid Fiber more than $1 million over several years for services that weren’t connected prompted a reimbursement and Public Service Commission audit. On his way out of office, Mayor-President Joel Robideaux self-reported to the PSC roughly $10 million in what he said were overcharges or unwarranted payments intended to prop up Fiber. Robideaux suggested Fiber’s business model was broken; while he said he wasn’t accusing anyone of illegal behavior, he nevertheless said he’d found a pattern of financial manipulation he believed was clearly intended to benefit Fiber.
The forensic analysis, conducted by Metairie-based CPA firm Carr, Riggs & Ingram, largely echoes those claims but presents more detailed evidence not previously revealed and goes further to allege Huval falsified accounting records and lied to auditors. The report will be turned over to the district attorney, who is already looking into a complaint filed by the Guillory administration earlier this year.
Affirming some prior accusations, the report details Huval’s efforts to find more revenue streams for Fiber early in its rollout. Previously privileged emails from Huval to his attorneys and emails to LCG CFO Lorrie Toups show the longtime director scrambling to sell services to make up revenue shortfalls in 2010 and 2011, about five years after voters approved a bond issue to launch the telecom. The auditors claim Huval’s rapid escalation of charges for a power outage monitoring system (POMS) — which ultimately cost LUS approximately $8 million over almost a decade — was a knowing violation of the Local Government Fair Competition Act, a state law set up to regulate Fiber that prohibits it from receiving subsidies from other government units. The crux of the POMS dispute is whether Huval was required to use full-cost accounting — i.e., charging based on the cost to actually deliver the service. But Huval, seeking some legal justification and a quick cash on Fiber’s balance sheet, used a cost-savings report conducted by LEDA to vastly inflate the monthly charges for the monitoring system.
“On the evening of July 18, 2011, the director was notified by Lorrie Toups, Chief Financial Officer of LCG, via email that his LUS-Fiber budget for the next year was out of balance and showing a $710,850 shortfall,” the auditors write, proceeding to lay out a series of quick communications. At one point, Huval emailed an LUS lawyer to say that an LCG accountant’s take on how the system should be priced, based on the actual cost of LUS Fiber to provide the service, “may throw water on our aspirations for this to become a significant LUS-Fiber revenue source.” By the end of the next day, Huval had increased the monthly charge of the POMS from $20,000 a month to $84,000 a month, which was reflected in a budget revision. The report points to no evidence that Toups questioned the increase or that anyone tried to stop it at the time. Noting that Huval heading up both LUS and Fiber created a built-in conflict of interest when it came to adherence to the law, the report details similar dynamics for services like dark fiber, charges for regular telecom services to other LCG units and even irregularities with marketing costs it notes aren’t necessarily tied to the former director. The auditors ultimately conclude that Fiber may have illegally benefited to the tune of $10 million to $12 million.
It remains unclear whether the payments violated state law. The auditors leave little uncertainty that they believe the charges for services like the monitoring system violated the Fair Competition Act, and that Huval knew it and did it anyway. Huval has long defended both that system and his motives. Others within LUS and Fiber say his choices reveal messiness in the earlier days of Fiber more so than nefarious intent, even if they disagree with how fast and loose Huval may have played with state law. There are some exceptions within the Fair Competition Act and, it seems, a fair amount of gray area. The Current obtained a 2010 email from Assistant City-Parish Attorney Mike Hebert to Huval, in which the attorney opines that the POMS qualifies under the “internal local government purposes” exception to the FCA. Pursuing that avenue, however, does not appear to have gone any further than the legal opinion, and the Hebert email is not addressed in the CRI report.
The issue has become highly politicized. Huval retired abruptly in July 2018, vocally opposing Robideaux’s attempts to privatize LUS as he vacated his office. When Robideaux delivered his own parting shots to the Lafayette Public Utilities Authority last year, Councilwoman Liz Hebert moved to hire a forensic auditor, aiming to get an unbiased opinion of the transactions. Earlier this year, City-Parish Attorney Greg Logan retained Carr, Riggs & Ingram.
The CRI analysis claims others joined, missed or turned a blind eye to Huval’s efforts. “In our review of Huval’s emails in the initial two years of POMS, we noted the justifications and pricing underwent several revisions prior to being promulgated to LCG and those outside of his inner circle,” the accountants write. The footnotes indicate that Huval’s “inner circle” consisted of “former Engineering, Power, and Communications Manager Frank Ledoux, Mona Simon, Consultant Doug Dawson, and less frequently, [Mike] Boustany, Teles Fremin, and Financial Operations Supervisor Antonio Conner.” Fremin and Conner were two of the four LUS/Fiber lieutenants put on leave by the Guillory administration in February, in connection with allegations of a criminal cover up. Fremin returned to work in early March; Conner resigned.
The CRI report — in apparent agreement with the LCG accountant and two consultants who questioned the pricing model years ago — accuses Lafayette accounting firm Kolder Slaven of accepting at face value Huval’s and Conner’s assertions about pricing, even saying the firm’s workpaper “merely parroted the information provided by Huval and Conner.” CRI further asserts that Kolder Slaven and the PSC failed to challenge a July 2011 memo authored by Electric Operations Manager Mike Boustany that justified the pricing.
CPA Burton Kolder, who was interviewed for the report, takes issue with those assertions. “All of our workpapers were accessible to the Public Service Commission, and they did request them and they did look at them,” he says. Kolder, who says the POMS pricing was vetted, points to PSC audit reports dating back to 2011 in which auditors consistently write that they “did not identify any instances of non-compliance with the Commission’s rules” or, in a more recent one, “with the exception of the unused sewer services billed, Staff finds that LUS has complied with the [Public Service Commission’s] rules.”
The audit of the unused sewer services, long since settled, is the only PSC docket open at this time; the CRI report incorrectly stated that two audits remain open at the PSC. “The staff issued the audit report [in June 2019], and there has been no reply from LUS,” says PSC Executive Secretary Brandon Frey. “So the commission has taken no final action on it.” Frey says the PSC remains in the discovery phase on Robideaux’s self-report from late last year, which means it has not yet made a recommendation to the commission about whether a new docket should be opened.
Kolder says what stands out to him most in the CRI report is that he was unable to determine whether Huval or the PSC auditors were interviewed.
They were not. Huval, who declined to comment for this story, did confirm to The Current that he was not interviewed for the report. Making a rare public appearance since his departure, the former director held a press conference in November to defend the outage monitoring system’s pricing and value to LUS and its customers. (View his presentation here.)
“We weren’t interviewed, and we didn’t get a copy,” the PSC’s Frey said Thursday afternoon.
The report caps off a severe escalation of the controversy by the Guillory administration. Robideaux was careful not to accuse anyone of illegal activity, though he did repeatedly suggest the FCA may have been violated. In contrast, the Guillory administration accused Huval and four unnamed employees of illegally deleting emails in an attempt to cover up the power outage monitoring system (Logan acknowledged recently that the emails were never deleted), publicly issuing a letter outlining the allegations and asking state police to investigate. After state police declined to look into the matter, District Attorney Keith Stutes stepped in. Stutes is still reviewing information LCG turned over to him. The 32-page CRI report is peppered with claims that Huval may have criminal exposure because he falsified records and intentionally tried to circumvent state law. And it names names as it paints a picture of complicity among others in Huval’s “inner circle,” claiming, without clear evidence, that the overcharging led to increased costs for LUS customers.
What happens next is a big question. Last week, ahead of the release of the report, Councilwoman Hebert told Guillory she wanted to hear “live and in person” from the forensic CPA who led the report; the council clerk tells The Current a firm representative confirmed someone will present the report Tuesday. Whether the payments indeed violated the FCA is a question for the PSC. But Guillory doesn’t need the PSC’s ruling to order reimbursements or mete out other punishments for those involved.
Neither Logan nor Guillory’s spokesman, Jamie Angelle, responded to a Thursday email on the administration’s next steps.
In the meantime, Frey confirms that the PSC staff has been awaiting the CRI report as part of its discovery into Robideaux’s December self-report on the POMS and other questionable transactions. “We’re doing our research, but we’re also going to look at what they submit, too, before we dig into it any deeper,” he says. “That’s consistent with the way we’ve handled it before, that once that audit report got submitted to us, then we’d use that as a jumping off point for where we go next.”