A four-year legal struggle on the part of scores of Connecticut municipalities appeared near an end last week when a Waterbury judge ordered the state’s largest waste authority to pay $35.8 million to member towns whose rates were raised to cover a disastrous loan to the bankrupt Enron Corp.
In a June 19 decision, Waterbury Superior Court Judge Dennis G. Eveleigh said the $220 million loan from the Connecticut Resources Recovery Authority (CRRA) was illegal and maintained that the authority benefited from "unjust enrichment" in raising its rates to cover losses from the unsecured loan to the Texas energy trading giant in 2000.
"It looks like we have been vindicated," said Barkhamsted First Selectman Michael Fox, whose town was one of the original CRRA members to sue the authority. "I am pleased."
CRRA President Thomas D. Kirk has vowed to appeal the decision, which could drag the process out for another year or more. But CRRA spokesman Paul Nonnenmacher said in an e-mail Monday that any appeal would have to be approved by the CRRA board of directors, which is meeting this morning, June 28.
"The board will consider all possible grounds for an appeal and will weigh all factors carefully before making a decision which will be made before the court requested date of July 9," Nonnenmacher said.
The CRRA board voted unanimously Jan. 25 to distribute $14.8 million to the towns after reaching a $23.8 million settlement with law firms including Hawkins Delafield & Wood, the Manhattan firm that represented Enron. The decision to distribute those funds was put on hold pending the outcome of the Waterbury trial.Towns joined for suit in 2004
The class action suit against the quasi-public solid waste disposal and recycling organization involves 70 municipalities in the authority’s Mid Connecticut Project, including the Northwest Corner towns of Salisbury, Sharon, North Canaan, Falls Village, Cornwall and Norfolk.
Initiated in January 2004 by the town of New Hartford, the suit sought to get back for the towns at least a portion of the $111 million that CRRA recovered from Enron after the company declared bankruptcy in the wake of one of the worst corporate scandals in U.S. history. The authority used those recovered funds to pay down its debt.
The suit further claimed that the authority unfairly increased its trash-collection or tipping fees by 40 percent to compensate for receiving no payments from Enron, thereby penalizing the plaintiff towns for CRRA’s disastrous deal with the company.
Stamford attorney David Golub, who represented the towns and performed a forensic analysis of CRRA’s accounting, said his clients offered to settle the case shortly after filing the suit in 2004, but the authority would have none of it.
"They’re not willing to accept the judge’s decision," Golub said. "We think they should pay and we’re hoping cooler heads prevail."
Golub credited the town of New Hartford and First Selectman Bill Baxter for paving the way for the other towns "even when it wasn’t politically popular." Baxter did not return phone calls seeking comment.Funds to NW Corner towns
Salisbury First Selectman Curtis Rand said it’s unclear how much money Salisbury and Sharon would recover if the Waterbury court decision holds, but under the January decision by CRRA to distribute $14.8 million to the 70 member towns, almost $86,000 would have been split proportionately between the two towns. So the two towns’ share would presumably be substantially larger with a $35.8 million award.
"I’d like to see it end and the towns get the money we’re owed," Rand said.
State Sen. Andrew Roraback (R-30), whose district includes several of the plaintiff towns, said he supported the suit, in part because "those towns are entitled to share in the bounty CRRA has gotten as a result of the recovery of funds from Enron."
"There are a number of errors of both fact and law which we believe would be overturned on appeal," Nonnenmacher, the CRRA spokesman added. "Our board has always acted with prudence and we can expect the same in this instance."
CRRA believes an appeal could be completed by late 2008 or early 2009.
According to Nonnenmacher, the CRRA board still wants to find a way to distribute the $14.8 million to the towns it had intended to give back in January, even if the authority goes forward with an appeal.
Attorney General Richard Blumenthal said his office has not been involved in the legal dispute between the towns and CRRA, but he will continue to work to recover what remains of the $220 million the authority lost in the deal. He said his office has recovered 75 percent of those funds, including the $23.8 million from Hawkins Delafield & Wood. Blumenthal would not say from whom he is attempting to recover additional funds.
"My hope is this dispute will be resolved with as little expense to the parties as possible," Blumenthal said. "Whatever the outcome, we will continue to fight for as much money as possible for the towns and CRRA."
