Tucked in Virginia’s far southwestern corner, Bristol Virginia Utilities, aka BVU, had the market cornered on electricity, water, sewer and high-speed Internet, and a breadth of corruption that could stun the most jaded cynic.
In the past year, eight former BVU executives, board members and contractors have pleaded guilty to a wide-ranging collection of federal felonies.
The utility was rife with self-dealing, extortion, tax evasion and fraud. There were kickback and bid-rigging schemes, demands BVU’s major vendors underwrite fancy holiday parties (one cost more than $12,000) and provide executives with choice tickets to pro football and college basketball games, NASCAR races, horse races and other sporting events.
Court records depict one case in which some top BVU executives and board members took a weekend trip to Texas, where they relaxed in hotels, dined in restaurants, rode in limousines and watched the NFL’s Dallas Cowboys from luxury skybox seats at AT&T Stadium, all courtesy of a company awarded a $4.5 million contract from the agency.
Rank-and-file employees picked up at least $48,000 total in untaxed bonuses paid as gift cards and cash. Top executives received country club memberships valued at $70,000 , fully loaded GMC Yukons for personal use, and car allowances. Those extras weren’t taxed either.
Meanwhile, the utility’s customers got hit with water, sewer, electric and cable-TV rate increases in a region where the median household income is $33,600 and the poverty rate is 22 percent.
“It’s unbelievable, unbelievable,” said Bristol attorney Doug Fleenor, who’s served on the BVU board since 2009 and was one of the first people to blow the whistle.
So far, just one official has pleaded not guilty. In February, a federal jury in Abingdon convicted Stacey Pomrenke, the utility’s former chief financial officer, on 14 of 15 counts, including extortion, wire fraud, federal program fraud and conspiracy.
She is scheduled for a criminal contempt hearing in June on charges she contacted witnesses during her two-week trial. The hearing is expected to coincide with her sentencing. Pomrenke faces a total of up to 210 years in prison and $3.5 million in fines, said Assistant U.S. Attorney Zachary Lee.
More charges and convictions could be coming.
“I still think they’re investigating a few more people,” said Bristol Mayor Archie Hubbard, who served on the utility’s board for 17 years, until 2014.
In closing arguments during Pomrenke’s trial, Lee described BVU as an agency with a “culture of corruption, a culture of entitlement and a culture of greed ... that started at the top and infected everything and everyone there.”
U.S. Attorney John Fishwick said that one of the values of such cases is to deter public corruption everywhere.
“We hope it resonates with others, so they’ll understand this type of conduct will not be tolerated,” Fishwick said.
In the wake of the long string of corruption convictions of executives, board members and co…
Credit cards gone wild
The contrasts between BVU and its former image are stark.
Formed in 1945 and made over in 2010 as a nonprofit state authority, the utility was once one of the most sought-after employers in Bristol, a city of 17,000 on the Tennessee border. The Institute for Local Self-Reliance hailed BVU, along with utilities in Chattanooga, Tennessee, and Lafayette, Louisiana, as offering one of “the best broadband networks in America.”
But the agency’s reputation began unraveling in 2013 amid a clash between longtime President and CEO Wes Rosenbalm, and Pomrenke, the chief financial officer. For years they had worked closely together but something had changed.
“It was a semidumb bunch of crap that got things started. But it ended up uncovering a heap,” Hubbard said.
She “came in and told us [Rosenbalm] was leaving work at noon every day so he could go coach his son’s basketball team at a private school,” Hubbard said. “I still didn’t consider that a major crime, and nobody else did.”
Rosenbalm, in turn, pointed a finger at Pomrenke. Soon, Fleenor was inquiring about credit card charges by BVU workers. He learned that 28 different employees held agency credit cards.
Monthly charges sometimes totaled almost $50,000. Billing statements showed 18 months of charges totaling more than $200,000.
Charges billed to Pomrenke’s card included coffee at Starbucks, yogurt at grocery stores, meals at a wide array of restaurants and a Comcast cable bill for her home, Fleenor said.
The board asked more questions, Hubbard said, and then opted to part ways with Rosenbalm.
That decision was discussed in a series of private meetings. One was inadvertently recorded.
That audio file wound up in the hands of the FBI.
In a split vote Sept. 25, 2013, the board authorized a $270,000 severance for Rosenbalm.
His annual salary was $219,000, not counting an $1,800-per-month car allowance or a country club membership covered by BVU money.
Hubbard said he, Fleenor and board member Jim Steele voted against the package.
Fleenor said he felt unsettled by what transpired. In October 2013, he took his concerns to then-Washington County Commonwealth’s Attorney Nicole Price.
The case landed in the office of Washington County Sheriff Fred Newman. Investigators discovered employees had been paid bonuses and benefits that had not been reported to the IRS.
Chief Deputy Byron Ashbrook said his office quickly contacted federal prosecutors.
A federal investigation is what some board members feared most.
Following Rosenbalm’s departure, BVU went for more than a year without a replacement.
In the meantime, the rumor mill stirred.
When reporters sought open records, the agency’s general counsel, Walt Bressler, had a ready response, Fleenor said: “We’ll comply with this, but it’s going to cost $7,000,” he said.
Reporters went away. “That was their way of keeping the information buried,” Fleenor said of the BVU board.
Virginia’s Freedom of Information Act allows public bodies to impose “reasonable charges” but “not to exceed its actual cost” in processing open records requests.
In fall 2014, the board hired Don Bowman, who had grown up in Bristol, to helm the agency.
Since leaving town years before, he’d obtained a college degree in engineering at Virginia Military Institute, served five years active duty in the U.S. Navy (and more in the Naval Reserve), added a law degree from the University of Virginia and worked as in-house counsel at Mead WestVaco.
His parents in Bristol encouraged him to apply for the BVU job, partly based on the sense that something was badly wrong there, Bowman said.
“Basically, [BVU was] stealing from my high school friends, my mom and dad, my pastor,” Bowman said.
Bowman started work Nov. 3, 2014. By then, the sheriff’s investigation had been going on for a year and federal investigators had issued subpoenas.
“The 89th day I was in here, the IRS and U.S. attorney showed up,” Bowman said.
The date was Feb. 2, 2015.
“From that day on, my life at work was kind of turned upside down,” he added.
He invited investigators into BVU’s headquarters and provided them office space, keys, door badges, and access to utility records and personnel.
A spate of guilty pleas and convictions began.
4 snared in kickback schemes
By spring 2015, the utility was in upheaval.
On March 26, 2015, two successive BVU vice presidents of field operations pleaded guilty to accepting kickbacks from BVU contractors. Robert J. Kelley Jr. pleaded guilty to money laundering, defrauding the IRS and conspiring to commit mail fraud. His successor, David Copeland, pleaded guilty to money laundering and conspiring to commit wire fraud.
From 2006 to 2009, Kelley approved payment of $330,510 for billings he knew were fraudulent from South Carolina-based Edwards Telecommunications, according to the statement of facts filed with his guilty plea.
Edwards Telecommunications was a major contractor for BVU’s broadband subsidiary, Optinet. Edwards in turn paid $160,000 to RJK Consulting, a company Kelley created, for work he never performed.
Copeland followed Kelley at BVU in 2009. He acknowledged approving $143,000 in false invoices for work that ETI never performed and collected $40,000 in cash, according to court records. The source of the money used to pay the contractor was a grant BVU received from the Virginia Tobacco Commission.
Kelley was sentenced to 30 months in prison and ordered to forfeit $165,375. U.S. District Judge James Jones sentenced Copeland to 24 months in prison and ordered him to forfeit $50,000.
On April 6, 2015, guilty pleas from two BVU contractors followed. James Todd Edwards, the owner of Edwards Telecommunications, pleaded guilty to conspiring with both Kelley and Copeland. A second contractor, Michael Albert Clark of Colbert, Georgia, pleaded guilty to conspiring with Kelley in a separate kickback scheme.
Jones sentenced Edwards to 18 months in prison, fined him $5,000 and ordered him to make $460,000 restitution. Clark got eight months, a $2,000 fine and was ordered to forfeit $110,000.
More guilty pleas followed.
Former CEO pleads guilty
Rosenbalm’s turn in Jones’s courtroom came in July 2015. The former CEO pleaded guilty to conspiracy to defraud the IRS and conspiring to commit federal program fraud. Those acts had nothing to do with Kelley or Copeland’s crimes.
Rosenbalm admitted directing subordinates to solicit gifts and payments from BVU vendors, who felt they had to comply in order to continue doing business with the agency.
The gifts and money included:
- Sports tickets to basketball games at Rosenbalm’s alma mater, the University of Kentucky
- $2,850 for a BVU Thanksgiving luncheon
- $15,000 for a BVU Christmas dinner
- $5,500 for the BVU children’s Christmas party during which children of employees were presented with gifts
- $4,125 for a basketball scorer’s table at a private school attended by one of Rosenbalm’s children.
Rosenbalm also admitted he’d failed to report as income such benefits as the country club membership and BVU vehicle allowance. He also acknowledged circumventing federal tax withholding regulations to pay unreported bonuses to BVU employees.
Jones sentenced Rosenbalm to 33 months in prison and ordered him to forfeit $150,000.
Former mayor sold race tickets
By fall, the scandal had snagged Bristol’s former mayor, who also chaired the city’s Economic Development Committee.
On Oct. 26, Paul Hurley, a former BVU board chairman, pleaded guilty to mail fraud and perjury. Those charges stemmed from thousands of dollars in Bristol Motor Speedway race tickets BVU purchased from 2009 to 2014 as economic development incentives.
Hurley was supposed to give them away to businessmen who were considering locating in Bristol. Instead, he sold the tickets to friends, acquaintances and scalpers. Hurley also lied about that to a federal grand jury.
“This had been going on for a number of years,” said Lee, the federal prosecutor. But “there was no record of exactly how many tickets [Hurley] had gotten.”
As part of his plea deal, Hurley acknowledged the value was more than $5,000. Jones sentenced him to six months in prison and ordered him to pay a $2,500 fine.
Chief financial officer convicted
On the same day Hurley pleaded guilty, a federal grand jury indicted Pomrenke, the agency’s CFO and the wife of a Virginia juvenile court judge.
In court, her lawyers contended she was a whistle-blower who helped spark the investigation.
But the evidence painted another picture. Prosecutors produced emails Pomrenke sent contractors requesting tickets to pro football and baseball games and other sporting events. In one, she expressed disappointment she couldn’t get luxury skybox tickets to Keeneland, a thoroughbred horse-racing track in Lexington, Kentucky. The contractor could get only grandstand tickets.
The case also revealed a hole in Pomrenke’s resume.
For years, she had claimed she held a master’s degree in finance from Virginia Tech. She did not. Prosecutors unearthed a March 16, 1998, letter Virginia Tech sent her explaining why. It began:
“The Judicial Panel of the Graduate Honor System met on March 6, 1998 to hear the charge against you of cheating in the course ISE5015, Management of Change, Innovation and Performance in Organizational Systems. The Judicial Panel found you guilty of the charge of cheating.”
Pomrenke didn’t take the stand. The jury deliberated for slightly more than five hours before convicting her. The agency immediately fired her. She faces sentencing June 20.
‘We all going to jail’
On April 6, two more joined the line of BVU officials who acknowledged they had committed corruption.
Bruce J. Clifton Jr., a board member since 2010, and Bressler, the general counsel, each pleaded guilty to conspiracy to commit program fraud and misprision of a felony, which means knowing of a crime but taking steps to conceal it.
Clifton, the sales manager at a Bristol car dealership, became board chairman in July 2015, as the scandal was gaining steam.
He admitted that for years, he’d been rigging bids on BVU fleet purchases so he could undercut his employer’s competitors. Two BVU staffers helped him, according to court documents.
Bressler’s case dropped perhaps the biggest bombshell.
The statement of facts in his guilty plea included transcribed conversations from the board’s private Sept. 16, 2013, meeting. That’s when members discussed the fate of Rosenbalm and the fact that he’d solicited Cincinnati Bengals tickets from a BVU contractor.
Bressler told the board that Rosenbalm’s actions violated procurement law. Rather than report that, the board decided to pay Rosenbalm a $270,000 severance to resign.
The transcript shows some board members had gone on the luxury weekend to see the Dallas Cowboys play in 2011.
One unidentified board member says, “We all going to jail.”
Another unidentified member describes the necessity of concealing the information from federal prosecutors.
“You know the problem is, if, and what worries me about our liability is, if you give this to Randy Ramseyer at the U.S. Attorney’s Office … he’s going, he’s going all over it … so we have to be careful about what we say coming out of this board, ’ cause if you give it to the U.S. attorneys, political corruption … that’s their thing.”
Still another board member interjects, “He’s going to light it up.”
The transcript identifies Bressler saying: “Well, I’ll be perfectly honest, we got a misdemeanor violation, Randy Ramseyer gets hold of it, he’ll do [UNINTELLIGIBLE] wire fraud, mail fraud.”
Ramseyer, an assistant U.S. attorney, did not handle the case. But those charges — and others — came anyway.
On April 26, the Virginia State Bar revoked Bressler’s law license.
Asked if more charges were in the offing, Lee, the federal prosecutor, said simply: “I can’t comment on that. We’re still investigating.”