Dems slam Fox’s role in SME bankruptcy

The Montana Democratic Party is criticizing Republican Attorney General Candidate Tim Fox's role in the ongoing Southern Montana Electrical Cooperative bankruptcy proceeding. 

Earlier this month the Democrats accused Fox of "playing a central role in a legal scheme that could put millions (of dollars) in the pockets of out-of-state predatory lenders."

At issue is Fox's role in representing lenders who gave money to embattled SME to build the Highwood Generating Station.

First some background: Critics of the beleaguered power venture say the giant finance companies knew, or should have known, that loaning SME the capital to build Highwood Generating Station was a risky venture.

Public Service Commission chairman Travis Kavulla, a Republican, said in an interview with the Tribune last month that the loan Prudential Capital Group of Dallas gave to SME was "totally well-above the market rates" given to similar power plants.

Prudential, the largest lender to loan SME money, loaned the company $75 million at 8 percent interest which the company used along with along with a $10 million loan from another lender at 7.25 percent interest, “to pay for a plant that should have cost more like half that," Kavulla said, adding that the the loans were "risky and predatory."

The Democrats jumped on an recent Associated Press story, in which Kavulla said he he is "concerned the individual members of the electricity cooperative may end up paying the price for the bad decisions by Southern managers and lenders."

The cost to run the plant currently exceeds the open-market price of electricity, Kavulla said.

So where does Tim Fox come into play in all this?

Fox is representing Prudential Capital Group, the largest lender, in the ongoing bankruptcy saga. According to federal court records, lawyer and trustee fees related to the bankruptcy proceedings have already eclipsed $1 million.

"If Fox and his clients have their way in court, SME customers — both ratepayers and taxpayers — could be on the hook to pay back millions, including over a million in attorney fees. This will amount to tens of thousands of dollars each for a loan that Fox's clients likely knew was 'risky and predatory," the Democratic Party said in its Oct. 1 release.

Fox's attorney fees account for a just a tiny fraction of the overall fees paid in the case. According to court records Fox, who is charging an hourly rate of $250, filed reimbursement requests totaling $12,500 since getting involved in November, 2011.

That's chump change compared to many other lawyers involved in the case, some of whom charge up to $845 per hour for their time.

For his part Fox declined to comment on his role in representing Prudential in the SME bankruptcy.

"I don't talk about my clients' business in pending cases," Fox said in an interview. "I can't do that, ethically. It's public record that I have appeared on behalf of a creditor in a bankruptcy case, but that's all I can say about that."

Fox's opponent in the attorney general race, Helena Democrat Pam Bucy, said in a statement that she believes everyone deserves legal representation, but she is troubled that Fox took Prudential on as a client in a case that opposes Montana ratepayers and taxpayers.

"The attorney general is Montana's chief consumer protection advocate," Bucy, a former assistant attorney general under Democrat Mike McGrath. "We established the Office of Consumer Protection at the Department of Justice so that Montanans would have legal recourse in cases like this, where out-of-state lenders have made risky and predatory loans to Montana consumers. Since we are both running to be Montana's chief legal representative, it is alarming to see my opponent put the profits of risky, predatory out-of-state lenders before the well-being of Montanans."

Since electric coops are not regulated by the PSC, the SME case would fall to the next attorney general and the Office of Consumer Protection if consumers file a complaint of unfair debt collection practices, the Democrats claim.

According to the latest Public Policy Polling survey, Fox has 45-35 lead over Bucy with a whopping 20 percent still undecided.

The perennial “robo-call”

Today as I was standing in line at my favorite lunch joint when my cell phone rang. The number that popped up was that of GOP gubernatorial candidate Ken Miller.

If you read today’s profile of Miller you might recognize the number because it is the same number Miller asked all Montanans to use to reach him on the campaign trail.

I answered the phone expecting Miller might want to chat about the recent article, but he didn’t even give me a chance to say hello. Actually, it wasn’t really Ken on the other line. It was a recorded version of Ken:

“Hi. This is Ken Miller. If you haven't heard I'm a grassroots tea party-endorsed conservative running for governor of Montana. The Miller momentum is growing like wildfire across this state and with my running mate Bill Gallagher, we are winning straw polls everywhere. You may have seen our green and blue signs in your area. I hope we can count on your vote for Miller-Gallagher by June 5th. I'd love to hear from you today. I'm Ken Miller. Feel free to call me on my personal cell 670-8318. This call is paid for by Miller for Governor box 325 Lower Montana.”

Commissioner of Political Practices Jim Murry, who on Thursday denied Miller’s request to dismiss an ethics case filed by Miller’s former chief fundraiser, said he also received Miller’s robo-call. Murry said his office has already received several complaints, which he turned over to Lewis & Clark County Attorney Leo Gallagher.

In addition to Miller, people have recently reported receiving robo-calls from Montana Conservation Voters urging recipients to vote for Democratic Attorney General candidate Pam Bucy and Democratic gubernatorial candidate and current Attorney General Steve Bullock.

It seems like I write at least one story each election cycle about candidate or campaign using robo-calls. Candidates from both parties like to complain about how their opponent’s use of robo-calls is “illegal” and “unethical.” That might be true.

But what’s also true is candidates from both major parties use them every year.

In 2008 Republicans griped that the Montana Democratic Party was using robo-calls to support Democratic Superintendent of Public Instruction candidate Denise Juneau. (sorry, the article is archived so no link).

Then-MDP spokesman Kevin O’Brien (now Bullock’s campaign spokesperson), made no apologies for the Juneau call in 2008.

"We believe that free speech is protected by the U.S. Constitution, and we are going to do everything that we can to make sure that every voter has the opportunity and ability to vote," O'Brien said Wednesday in 2008.

Last year Bullock sided with attorneys general from across the country in opposing a federal law that would have made it more difficult for states to enforce bans against robo-calls to cell phones, but he’s apparently benefitting from MCV’s during this election season.

Gallagher said his office received several robo-call complaints Thursday. Gallagher has long been sick of the calls, which he says are illegal.

“What I've done in the past is I’ve written a letter to each party and advised them that robo-calls violate 45-8-216 and I asked them to please advise anybody who asks them that they are a violation of state law and if they do it they'll be charged,” Gallagher said.

However so far no county attorney has ever brought charges against a political candidate or third-party group for making robo-calls in Montana.

So why doesn’t anyone enforce the law against robo-calls? Here’s how one long-time campaign organizer explained it to me:

“I'm told the legislative language directly contradicts 1st Amendment precedents. Nobody will bring suit or levy fines because there is too much precedent to overturn, and losing in court would effectively tell everyone it's ok to do autodials, which would remove any hesitation the legislative language might give candidates.”

For his part, Miller said he and his campaign advisors believe the calls going out this week are legal.

“We've done a lot of research on it, and it is our opinion and it is the opinion of many others” that robo-calls are legal, Miller said.

“We felt that we could be at a disadvantage to our competition if we did not use them, and we wanted to be a step above so we made sure that the caller ID has my personal cell phone number on it,” Miller said.

If you ask me, until a county attorney brings charges and the matter is settled in court once and for all, robo-calls during election season will be as perennial as daffodils, green grass, and apple blossoms blowing on a warm spring breeze…just not as pleasant.