Class action lawsuit filed against TCT

WORLAND — Almost a year after the sale of the TCT, a class action suit against TCT has been filed on behalf of a former Tri-County Telephone Association board member claiming the sale of the Big Horn Basin telecommunications company was undervalued.

The class action suit, seeking unspecified amount in damages, was filed in Wyoming Fifth Judicial District Court in Cody Monday. According to the complaint filed by attorneys Robert DiLorenzo of Emblem and Drake D. Hill of Cheyenne on behalf of former board member Joe Campbell and his wife Barbara, of Hamilton Dome, “In this action, Plaintiffs seek, to certify a class of owners of Tri-County Telephone to address the collusion of (Davidson) and certain members of the board of directors (with the aid of counsel for the company) with Neil Schlenker to rob the owners of TCT of the value of their ownership interests in TCT and TCT’s investment companies.”

DiLorenzo said in an interview Tuesday that the class action suit includes all members of the Tri-County Telephone Cooperative, approximately 825 members. He said members can opt out of the suit if they desire. He said the Campbells were among a group of people who approached him in July about filing a suit. “They explained it to me and I didn’t quite believe it. I spent six months digging through documents,” he said, adding that the result was the filing of the class action suit.

The suit alleges fraud and violation of Wyoming statute concerning the sale or disposition of assets of a cooperative utility. It also alleges civil conspiracy to defraud and breach of fiduciary duties.

The suit named TCT CEO Chris Davidson, former board members Dalin Winters, Clifford Alexander, J.O. Sutherland, Daniel Greet and John K. Johnson, as defendants. It also names new owner and president of Big Horn Telecommunications Neil Schlenker of Meeteetse, the accounting firm of Hathaway and Kunz and attorney Michael Rosenthal.

Schlenker said in a prepared statement, “We have received a complaint filed on behalf of Joe and Barbara Campbell. The allegations in the complaint are unfounded and not supported by the facts. The TCT transaction referenced in the complaint was completed in strict compliance with the laws of the State of Wyoming. The members of the Tri County Telephone co-op whose interests were sold in the TCT transaction voted on the transaction only after receiving notification of the specific amount of their individual payouts. The vote was 79 percent in favor of the transaction, 5 percent opposed and 16 percent did not vote.  While it is a shame that we will have to divert our attention and resources to deal with this lawsuit, we are confident that the courts will find no wrong doing by any of the named defendants.”

Dalin Winters, who was chairman of the Tri-County Telephone Board at the time of the sale, said Tuesday that he had just been served a copy of the suit “a couple of hours ago.”

He said, “We’ll seek legal advice, which is what we did throughout the whole process, which is why we did the things we did. I believe the claims are unfounded based on that. I’m not a legal expert, which is why we sought legal advice.”

The sale

According to the complaint, TCT was sold at the end of 2014 for $51 million, less $12 million to retire debt, less $10 million held back for “unforeseen liabilities” leaving $29 million paid to the “owners” or Tri-County Telephone cooperative members.

The suit alleges that TCT held hard assets of over $90 million.

Cooperative members were original Tri-County Telephone customers in Burlington, Otto, Emblem, Ten Sleep, Hyattville and Hamilton Dome.

At the time of the sale at the end of 2014, TCT had about 10,000 total customers. According to its website, “TCT is a broadband company, providing telephone, Internet, television and security services to the Big Horn Basin of Wyoming, including Basin, Burlington, Byron, Cody, Cowley, Deaver, Emblem, Frannie, Greybull, Hamilton Dome, Hyattville, Lovell, Manderson, Meeteetse, Otto, Powell, Ralston, Shell, Ten Sleep and Wapiti.” They also provide services to certain areas of Southeastern Montana and provide some Internet services in Worland.

According to the complaint, the “total transaction was not $51 million … the owners did not receive $51 million. The owners were bilked out of tens of millions of dollars of value that they owned in the company.”

Cooperative members voted by mail-in ballot with a meeting on Dec. 20, 2014, to announce the vote. The sale was completed Dec. 31, 2014. According to Elections Committee Chairman Lynn Allen at the time of the Dec. 20 meeting, they received 694 valid votes of 825 eligible cooperative members. There were 652 in favor of the sale, or 79 percent and 42 opposed.

The proposed sale, which was announced to members via a letter in September, drew criticism early, with some of the same concerns outlined in the class action lawsuit, centering around the value of the company.

The suit does not seek a specified amount for “damages.” DiLorenzo said there is no specified amount in the suit because “none of the defendants did any kind of appraisal of the assets as they were supposed to under Wyoming statute 12-21-1201. They didn’t do any appraisals of any of the assets.”

He said an appraisal of the assets will have to be done as the case proceeds.

“The true value is between $80 million and $90 million. They have hard assets. They have lots of land, buildings, they have a fleet of new trucks. They have underground cables and underground objects. They have all kinds of things that weren’t even considered (in the sale).”

Claims and allegations

The civil action suit filed Monday claims Davidson and Schlenker were “very close friends” and that business dealings were not kept at arms lengths.

Allegations include that the TCT board were “denied access to records of expenditures of the company, including pay scales” as well as other books and records of the company.

Another allegation is that after opposing the first takeover bid by Schlenker in 2009, efforts were made to try and remove Campbell from the board including attempting to combine “the Hamilton Dome and Hyattville areas.”

It alleges that in the first bid, Davidson was offered 5 percent of the ownership of Schlenker’s company.

It also alleges:

—Schlenker’s second bid began on July 24, 2013, and that an application for transfer of control of TCT to Big Horn Telecommunications was filed with the Federal Communications Commission on Sept. 10, 2014, prior to any approval of the sale.

—Davidson and the board, as well as attorney Rosenthal, did not follow company bylaws when conducting the ballot in private.

—According to state statute owners of a cooperative are to be notified 90 days in advance of a meeting to vote on the sale of utility property. The suit alleges 90 days was not provided.

—Davidson and the board “failed to act in protection of the owners’ interests. The Defendants’ tactics resulted in Defendant Schlenker’s takeover of the company using the owners’ own assets. Without the tactics employed by the Defendants, the owners of the company would not have been deprived of the value of the company.”

—Defendants sold a $2.9 million investment of Best of the West for $1,000.

—The “owners” (co-op members) were not notified of an alternative sale proposal.

DiLorenzo said there was one proposal “in which all the members and owners could have received a greater amount of money in equity credits and could probably have even kept the co-op amongst themselves.”

According to the complaint, members were notified that mailing an alternative proposal to the owners of TCT would violate the merger agreement with BHT, subjecting TCT to a penalty of $1.1 million.

DiLorenzo said, “The bottom line is that 850 people out there were shortchanged by millions and millions of dollars. It’s really as simple as that. And there’s some very sharp people who decided to take advantage of these people.”