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Front Page » September 23, 2004 » Local News » Emery Telcom remains under investigation, company board r...
Published 4,033 days ago

Emery Telcom remains under investigation, company board responds to affidavit allegations

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Emery Telcom's business practices remain under investigation by the Utah Attorney General's Office, but no formal criminal complaints have been filed in connection with the matter.

An affidavit submitted to the court to establish probable cause for the issuance of a warrant to search the Orangeville-headquartered company's offices has been released. Executing the warrant on Feb. 5, investigators reportedly seized accounting documents related to Emery Telcom's business and accounting activities. Law enforcement authorities also conducted a search at a second apparent business office site in Colorado.

Filed by Capt. Ross Larsen, the probable cause affidavit contained allegations of misbookings and miscodings of business expenses by Emery Telcom. The attorney general's office investigator based the allegations of questionable or unlawful business practices on information provided by current and former employees of the company. After coming forward voluntarily, the four witnesses wished to remain anonymous during the investigative process.

"As part of the search warrant process, individuals provided information in secret which was relied on by the attorney general's office to prepare an affidavit supporting the search warrant," noted Emery Telcom's board of directors in a recently released written statement. "The affidavit was filed under seal and was not available to public or the board until a few weeks ago. To this point, we have refrained from public comment in consideration of the attorney general's investigation and to protect all of the parties involved, including those few people who made the allegations as well as the people under investigation."

Prior to the execution of the search warrant, "the board had no knowledge of the investigation, had not been made aware of any perceived problem by any employee, had not been asked for any information and had not been asked to take any action. In addition, the employees had not raised these perceived problems with the independent auditor of the company," pointed out the recently released statement.

The document supporting the issuance of the warrant indicated that the alleged business expense misbookings and miscodings involved Emery Telcom's non-regulated subsidiary companies. The subsidiaries include Emery Telcom's long distance, Internet and communications companies. Emery Telcom manages and assumes the accounting responsibilities for all of the company's subsidiaries and regulated businesses.

As a regulated cooperative utility, the court document pointed out that Emery Telcom operates under rates set by the Utah Public Service Commission. The rate is fixed at 10 percent profit plus reimbursement for capital improvements. The court document challenged the utility's alleged misbooking of subsidiary company expenses to Emery Telcom. The purported actions allowed Emery Telcom to be reimbursed for the subsidiary companies' expenses through utility rate increases, contended the affidavit supporting the issuance of the search warrant.

In addition, the court document questioned the accuracy of information provided by the company in a Carbon-Emery rate case and the legality of Emery Telcom's accounting practices when contracting with outside companies for equipment upgrades. Emery Telcom allegedly accepts contract payments from the companies, then reflects the upgrade costs as capital outlay expenditures. The practice allows the utility to fraudulently recoup money for the upgrades from the Utah Public Service Commission, contended the affidavit.

Following the execution of the search warrant Feb. 5, Emery Telcom's board of directors promptly launched an independent investigation into the matter and the allegations aimed at the company's management team in the affidavit. After six months, the independent attorneys and telecommunications regulatory consultants identified several instances of incorrect accounting, which are not unusual in the complex industry, explained the board of directors. However, the independent investigation uncovered no substantial evidence of criminal misconduct by the company's management team.

"To the contrary, over and over again, the investigation has revealed that the criminal allegations provided to the attorney general were incorrect, mistaken or totally false," pointed out Emery Telcom's board of directors.

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