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Critics Blast TVA’s ‘Sneakiness’ As It Vies To Save $1B Memphis Contract

Trying to shore up relations here, the federal power supplier created a Memphis-based vice presidency and filled it with a well-connected businessman whose wife operates a popular restaurant with an MLGW commissioner. But is it a conflict?

Sunset near TVA’s Allen Combined Cycle Plant in Memphis.  (Marc Perrusquia)

As debate intensified last year over whether to sever an exclusive electrical power contract with the Tennessee Valley Authority, the federal power supplier created a new Memphis-based vice presidency to help shore up relations here. It filled the high-paying position with a longtime local businessman, Mark Yates.

In addition to his strong local ties, Yates’ hire came with a unique — and some say conflicting — connection: His wife is a business partner with one of the five voting members of the Memphis Light, Gas & Water board of commissioners, which will have a primary voice in deciding who will control Memphis’ lucrative, $1 billion-a-year electricity market.

Yates’ wife, Veronica Yates, is listed as one of two key proprietors at the popular Midtown restaurant, Mahogany Memphis. Her partner is Carlee McCullough, a Memphis attorney who’s served on the MLGW board since 2014.

“I don’t see how it couldn’t disqualify her,’’ said Jim Gilliland, co-founder of 450M for Memphis, a nonprofit advocacy group that’s triggering criticisms of its own as it wages an aggressive public relations campaign contending Memphis ratepayers could save as much as $450 million annually if MLGW stops buying electricity exclusively from TVA.

McCullough, 53, could not be reached despite multiple messages left at her law office and on her email and cell phone. MLGW spokesperson Gale Carson said in a text message to a reporter, “MLGW board members decline any interviews while the Power Supply process is still active.’’

Carlee McCullough

Records show McCullough has listed her ownership in Mahogany Memphis in recent financial disclosure forms, but those forms don’t mention any affiliation with Mark or Veronica Yates. According to promotional materials for an Internet TV program he hosts, Mark Yates, too, holds an ownership interest in Mahogany Memphis.

An independent review by the Institute for Public Service Reporting found no evidence that McCullough was under any explicit requirement to disclose her partnership when she voted last year on two key preliminary votes on the TVA matter — votes Gilliland believes the commissioner should have recused herself from.

However, The Institute did find deficiencies in MLGW’s ethics and disclosure policies. For one, MLGW is failing to post board members’ financial disclosure forms on the Internet as contemplated in its 2007 ethics policy. The news organization obtained recent forms under the Tennessee Public Records Act and placed them on the web  opens in a new windowhere.

Additionally, experts on government ethics questioned the adequacy of MLGW’s financial disclosure requirements; one professor called a key provision in the forms “useless.”

For ethics reform advocate Craig Holman, the greater concern is TVA’s actions in hiring Mark Yates, given the close ties he and his wife have to McCullough.

“It’s not illegal, but it is a masterful influence peddling job on the part of TVA,’’ said Holman, a legislative representative for Public Citizen, a Washington-based watchdog group that advocates for transparency in government. Holman notes that TVA not only “created a position that didn’t exist, but filled it with a person who has a very close relationship with those on the local energy board.”

Mark Yates

TVA did not respond to Holman’s influence-peddling allegation nor to specific questions about Mark Yates’ ties to Mahogany Memphis or the hiring process surrounding the new vice presidency, including how many people applied.

“We won’t have any additional comments about Mark’s business or personal investments, etc.,’’ TVA spokesman Scott Brooks said in one in a series of emailed statements. 

TVA hired Yates for “his extensive experience in business and industry’’ as part of a new regional model that puts vice presidents in four posts across TVA’s vast, seven-state service area, Brooks said.

“This supports our long-term vision to have a more active role in local communities and support TVA’s mission to make life better for the people we serve,’’ he said.

Entwined business interests

Singer Jonte Mayon and guitarist Steve Bethany perform outside Mahogany Memphis earlier this year. (Marc Perrusquia)

Patrons munch on everything from smoked oxtails to deep-fried lobster at Mahogany Memphis, which opened in the fall of 2018 inside Chickasaw Oaks Village mall where the restaurant specializes in “upscale Southern” cooking “with a dash of Creole.’’

It’s operated by McCullough and Veronica ‘Veve’ Yates, longtime friends described on business cards as the restaurant’s “proprietors’’ and in various media reports as “owners” or partners.

“I am Carlee McCullough,’’ McCullough says on a promotional  opens in a new windowvideo published last May on the  opens in a new windowHigh Ground News website as she stands shoulder to shoulder with Yates in the restaurant.

“I am Veve Yates,’’ Yates responds. “And we are the owners of Mahogany Memphis.’’

Mark Yates is described as “an owner of the restaurant Mahogany in Memphis’’ in  opens in a new windowadvertising materials that recently had been posted on the website of the Tri-State Defender promoting a variety of features including “ opens in a new windowThe Profit Margin,” an Internet TV program Yates hosts in conjunction with the news organization.

He did not respond to text and voicemail messages left on his phone nor to a request to TVA for an interview.

Public records offer a range of slightly differing insights into who controls the restaurant.

Veronica Yates filed articles of organization for the restaurant in April 2018 under the corporate name Mahogany Memphis LLC, listing herself as a member of the firm. Under Tennessee law, each member of a member-managed limited liability company “has equal rights in the management and conduct of’’ its business.

However, subsequent filings with the Tennessee Secretary of State’s Office in 2019 and 2020 list McCullough as the firm’s sole member. Tennessee Alcoholic Beverage Commission records include 2018 application forms listing McCullough as the restaurant’s “individual’’ owner holding 100 percent interest.

Available records don’t provide an accounting of any possible investors in the restaurant.

Push to leave TVA

An MLGW commissioner since 2014, McCullough and her colleagues have been faced in recent months with a looming question: Should the utility sever its decades-long relationship with TVA?

Pushing that question are 450M co-founders Gilliland, a principal at the Diversified Trust fiduciary investment firm, and Karl Schledwitz, chairman and CEO of Monogram Foods.

Congressman Steve Cohen is one of several high-profile people who’ve endorsed 450M for Memphis. (Mark Weber/Daily Memphian file)

Gilliland said the 450M team has raised just $18,400; of that, $10,000 has come from the pair’s own pockets. More significantly, they’ve tapped endorsements from a host of local leaders including former mayor Dick Hackett, Congressman Steve Cohen, investment fund manager John Dobbs, banker Bob Byrd, and Pat Halloran, former CEO of The Orpheum performing arts theater, where Gilliland and Schledwitz are on the board of directors.

“They’ve put together an interesting coalition,’’ said supporter Herman Morris, an attorney and former CEO of MLGW who now advises the environmental group Friends of the Earth as it advocates for MLGW to find green power sources.

“We can do better than TVA,’’ said Morris, who said studies dating to 1999 identified huge savings for Memphis if it bought electricity on the open market.

But questions, too, surround Gilliland and Schledwitz as they fight for the heart and soul of Memphis ratepayers, taking out advertisements and rallying support from their considerable business and political networks.

“One or two people say (my motive is) to get rich,’’ Gilliland said. That’s a reference to talk now pulsing through the political grapevine about Gilliland’s long history in the public finance field. Some suggest he’s positioning himself to capitalize from bond sales if Memphis hires a new power supplier and must build new infrastructure — allegations he calls “absurd.’’

“Karl and I aren’t taking a penny from anybody,’’ said Gilliland, who said public attention should focus on TVA’s “sneakiness” in creating a new vice presidency and filling it with it with someone as well-connected as Mark Yates.

Critical votes

In turn, Gilliland contends McCullough should have recused herself last year in two, key preliminary votes on the TVA matter — one he applauded, the other he opposed — and should be barred from further participation because of a conflict.

Those votes in March 2021 followed a long push to leave TVA by advocates who contend the federal power supplier is overcharging Memphis millions of dollars for electricity.

Those efforts led to a breakthrough the previous September when McCullough and her board colleagues voted 5-0 to  opens in a new windowaward a $520,000 contract to GDS Associates of Marietta, Georgia, to oversee bidding from wholesale power suppliers who might replace TVA. But City Council declined to ratify the contract days later after a competitor disputed the GDS award, a rare decision that came amid intense behind-the-scenes lobbying.

But by March as officials resurrected a modified version of the GDS contract, McCullough’s support for exploring an alternative to TVA appeared to soften.

She voted on March 17 in favor of a proposal by MLGW President J.T. Young to indefinitely suspend the search for a new power suppliers and to begin negotiations with TVA for improved rates. 

MLGW president J.T. Young delivers his State of MLGW address in February 2020. (Patrick Lantrip/Daily Memphian file)

Young’s recommendation followed massive power blackouts in Texas and parts of the West triggered by winter storms and questionable decisions by power officials there. The blackouts triggered great suffering — a reminder, Young suggested, that reliability is just as important as rates.

The MLGW board rejected Young’s recommendation on a 3-2 vote, allowing the resurrected GDS contract to move forward. Commissioners Leon Dickson and McCullough cast dissenting votes.

Nonetheless, McCullough joined her colleagues two weeks later in a  opens in a new window5-0 vote to approve the modified GDS contract as part of a deal brokered by Mayor Jim Strickland that allowed bidding to move forward.

The winter storm blackouts weren’t the only developments separating McCullough’s split March votes and her vote the previous fall in favor of seeking bidders, however.

On Jan. 7, 2021,  opens in a new windowTVA announced it had hired Mark Yates as vice president of its West Region, a newly created position designed to improve relations with “our customers, state and local leaders, community groups, and the public.” The West Region includes 51 local power companies stretching from western Kentucky to West Tennessee and central Mississippi. TVA said the new post was the “pilot’’ in a larger bid to improve relations across its seven-state service area by creating four new regional vice presidencies. TVA later filled the other three vice presidencies with veteran TVA employees.

“This position requires trust and relationships so with my background it seemed a natural fit,’’ Yates said in a press release shortly after his hiring.

That background includes stints as chief of staff to former Rep. Harold Ford Jr., chairman of the Shelby County Democratic Party, chief financial officer at LeMoyne-Owen College, senior vice president at First Horizon National Corporation, vice president at the Morgan Keegan investment firm and, most recently, CEO of the Black Business Association of Memphis.

TVA declined to say how much Yates is paid as regional vice president. The Institute subsequently filed a request for Yates’ salary details under the federal Freedom of Information Act. According to TVA’s 2021 annual report filed with the Securities and Exchange Commission, the total compensation for a median employee was $139,953. Compensation for senior-level executive vice presidents ranged as high as $3.9 million.

Disclosure concerns

In a statement released to The Institute, MLGW said “no disclosures of conflicts with TVA or any other party’’ were made by any commissioners at either of the March meetings. Yet such a disclosure wouldn’t have been required, the utility indicated.

The statement released through spokeswoman Angelika Woods said such a disclosure would only be required if “a Commissioner or his or her immediate family has a personal interest in’’ a contract up for vote. The statement also noted that TVA’s contract was not up for vote: “At this time the Board has not taken any votes on whether to sever ties with TVA.”

McCullough did list her ownership, but not her partnership, in Mahogany Memphis in her latest financial disclosure or “Disclosure of Conflicts of Interest” form  opens in a new windowfiled last April.

However, one ethics expert said the form isn’t asking the right questions.

Financial disclosure “forms are a mess in this country, mainly because officials, civic groups, media, etc. simply do not understand their purpose,’’ said Mark L. Davies, adjunct professor at Fordham University School of Law and the former executive director of the New York City Conflicts of Interest Board.

A key prompt in McCullough’s latest form on file is this: “I have Personal Interests that might affect — or would lead a reasonable person to infer that it could affect — the performance or non-performance of my duties and decisions at MLGW for the year 2020.’’ The filer is required to answer yes or no.

McCullough answered no in her form. On the date of her filing, April 23, Mark Yates had been at TVA for three months. But the question was framed retroactively to cover 2020. TVA announced Yates’ hiring in January 2021.

Ethics expert Davies had larger problems with the form’s question.

“Questions that make the filer guess as to whether he or she has a potential violation and whether something should be disclosed are useless and a trap for officials and should never be used,’’ Davies said in an email.

Questions in financial disclosures should be “tied directly’’ to state ethics laws.

“So, for example, if the ethics law allows an official to take an official action that might benefit a company in which he or she has an ownership interest of less than $10,000, then the (financial disclosure) form should require disclosure of ownership interests only of $10,000 or more because an ownership interest under $10,000 cannot produce a violation,’’ Davies said.

MLGW’s ethics policy originally contemplated that the utility’s financial disclosures would “be the same as the Statement of Disclosure of Interests that candidates must file with the Tennessee Ethics Commission.’’

But they’re not the same.

Both the state and MLGW require filers to list sources of income greater than $1,000, though neither requires a specific amount. Both also require filers to list loans greater than $1,000.

But the state also requires details about business investments greater than $10,000 or 5% of the total capital, as well as details about any retainer fees received for lobbying, professional services performed and any bankruptcies filed in the past five years.

How the forms came to differ is unclear.

This story first appeared at dailymemphian.com under an exclusive use agreement with The Institute.

The Institute for Public Service Reporting is a nonprofit news organization on the campus of the University of Memphis that accepts financial donations from individuals and organizations with the explicit understanding in its  opens in a new windowTransparency & Editorial Independence policy stated on its website that its news judgments “are made independently’’ and that it “does not give supporters the rights to assign, review or edit content.” A material subject of this story, 450M co-founder Karl Schledwitz, donated $250 to The Institute in April.

Written By

Marc Perrusquia is the director of the Institute for Public Service Reporting at the University of Memphis, where graduate students learn investigative and explanatory journalism skills working alongside professionals. He has won numerous state and national awards for government watchdog, social justice and political reporting.

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