Board maneuvers revealed in TCT trial

LANDER – Ninth District Court Judge Norman E. Young heard arguments to dismiss in the case of Campbell versus Tri-County Telephone Association in Lander on Friday, during a three-hour process that played out before a courtroom of just under 50 interested parties.

After the hearing, Young announced he would need a few weeks before rendering a decision.

The lawsuit, filed in December by a former board member of TCT, claims that the original, 2014 sale of the telecommunications company was undervalued and defrauded approximately 825 members of the Tri-County Telephone Cooperative.

According to TCT, “Tri County Telephone Association, Inc. was formed in 1953 to provide local telephone service to rural Big Horn Basin customers in Burlington, Otto, Emblem, Ten Sleep, Hyattville, and Hamilton Dome. Telephone service became a reality in 1956 when the first dial tone was made available to these areas. Tri County is a rural cooperative made up of four exchanges: Ten Sleep , Hyattville, Burlington (Otto, Emblem ), and Hamilton Dome . These local exchanges included approximately 1,000 access lines.” Currently, the company provides telephone and high speed data connectivity to over 25 communities in Wyoming and southern Montana, with over 9,000 access lines.

The suit, filed by attorneys Robert DiLorenzo of Emblem and Drake B. Hill of Cheyenne on behalf of former board member Joe Campbell and his wife Barbara, of Hamilton Dome, alleges fraud and violation of Wyoming statute concerning the sale or disposition of assets of a cooperative utility, and also alleges civil conspiracy to defraud and breach of fiduciary duties.

The suit names TCT CEO Chris Davidson, former board members Dalin Winters, Clifford Alexander, J.O. Sutherland, Daniel Greet and John K. Johnson as defendants. Also included are Neil Schlenker of Meteetse, the accounting firm of Hathaway and Kunz and attorney Michael Rosenthal.

The suit alleges that TCT held hard assets of over $90 million when TCT was sold for $51 million in 2014, less $12 million to retire debt and $10 million held back for “unseen liabilities”, leaving $29 million paid to Tri-County Telephone cooperative members.

According to the complaint, the “total transaction was not $51 million” and therefore the owners were “bilked out of tens of millions of dollars of value that they owned” in TCT.

In testimony presented by attorneys for Campbell, it was stated that TCT board members were required to sign a non-disclosure agreement, effectively freezing-out cooperative members from details of the sale. According to Hill, Davidson violated Wyoming state statute 17-20-1201 by avoiding an independent appraisal of TCT’s holdings, and securing no analysis of utility rates during negotiations to sell the cooperative.

According to Hill, as stated to Judge Young, “We believe the [cooperative] owners still own the company and all interests, because this transaction was illegal.”

Campbell alleges in that Davidson and Schlenker were close friends and held private business dealings, including denying board members access to records, including company expenditures and payroll. In addition, the suit alleges that Davidson attempted to remove Campbell from the board after an unsuccessful takeover bid in 2009, censured the board member, and threatened Campbell with a lawsuit. Campbell claims that Davidson shared financial records with Schlenker before the sale, and sold him $4.1 million in TCT investments for around $2,000.

“This sale was funded by cash from Verizon put options that Mr. Schlenker bought from TCT,” said DiLorenzo, “meaning no actual money was put up for this purchase.

Hill pointed out in his arguments against dismissal that Nearly 200 members of the TCT cooperative were never received payment because they “couldn’t be located” and TCT retained that money, “possibly worth millions”. Hill also noted that Schlenker filed a “transfer of ownership” with the Federal Communications Commission before the owners agreed to sale the company.

Attorneys for the defendants argued that as third parties, Hathaway and Kunz and attorney Michael Rosenthal should be dismissed from the case. Additionally, attorneys for Schlenker, representing BHT Investments, LLC, BHT Holdings, Inc., and BHT Merger Corporation, argued that the entities should be struck from the suit as they had nothing to do with the merger.

Campbell’s legal team argued that since Schlenker was the holder of all BHT entities, they were fairly represented in the lawsuit, as BHT “is” Schlenker.

Further, attorneys for Harper and Davidson argued that withholding information from board members didn’t constitute fraud, and the allegations are not pled with particularity to support the allegations, and that none of those things led to the detriment of Campbell. the attorneys for the defendants argued that Campbell, as a director, was well aware of all matters prior to sale.

When Judge Young questioned how fraud could be prescribed to a third party (indicating TCT’s lawyer and accountants) DiLorenzo argued that aiding and abetting fraud was recognized by law, and all third parties were as guilty as the primary defendants.

The suit does not specify an amount for damages in the case, as noted by DiLorenzo, because the defendants never appraised the assets of TCT as specified by Wyoming statute 12-21-1201. An appraisal of assets will be determined during the case, once set for trial. Judge Young advised that it could take three to six weeks to determine all of the evidence for dismissal before reaching a judgement.