NASHVILLE, Tenn. (WJHL) — After Bruce Giles said the South Fork Utility District (SFUD) board’s oversight of its operations “appears to be the worst case of abuse” in his nine years on Tennessee’s Utility Management Review Board (UMRB), the UMRB voted Thursday to pursue removal of the embattled Sullivan County water utility’s board.

The removal effort was among multiple actions the UMRB approved after their recommendation by its Tennessee Comptroller’s Office (TCO) staff member, Ross Colona. Colona also recommended that SFUD voluntarily merge with another area utility — either Bristol Bluff City, Blountville or Bristol’s main utility.

The action came two days after Colona drove to Blountville for a called meeting of the SFUD board. The board had earlier said it would vote at the meeting to merge with Bristol Bluff City and to potentially accept the resignation of Garry Smith, its district manager. Smith was at the center of a TCO investigation released April 7 that found SFUD made “questionable payments” of more than $1.5 million to businesses Smith owned.

None of SFUD’s commissioners showed up to their own called meeting, leaving Colona to meet with a group of about 30 SFUD ratepayers who’d shown up.

“The customers relayed a lot of their concerns and complaints regarding this whole ordeal to both me and the other individuals that were there,” Colona told UMRB board members.

He said the unofficial meeting with customers and the board’s failure to show up caused him to alter his previous recommendations somewhat.

“The commissioners declined to take action on an item that we needed to see to see some sort of good faith that they were seeking a long-term resolution for the South Fork Utility District,” Colona said in explaining his updated recommendation.

The main next steps could include a late June or early July removal hearing for the five current commissioners, but that will only be required if they don’t resign voluntarily.

Following that outcome, the newly appointed board can elect to merge with “one of the surrounding utilities,” Colona said. If it doesn’t, that will trigger the requirement of a feasibility study with a “qualified expert” with a number of sub-requirements, including merger feasibility studies for Bristol Bluff City, Blountville and the City of Bristol, as well as a rate study showing future rate increases needed to perform current operations.

SFUD will also be receiving a “financial distress questionnaire” and will have to return it within 90 days.

UMRB members ask: How bad was it?

Thursday’s meeting was the first chance for UMRB board members to ask Colona and TCO investigators about the investigation’s findings, and there were plenty of questions.

“Did you all see any measure of control whatsoever that this board had over what was going on?” Giles asked. “I think the word ‘questionable’ was used multiple times, but when I read through pages and pages of this stuff, in my nine years on this board, this is what appears to be the worst case of abuse or whatever word, adjective I want to use. It appears there was almost no oversight with this board whatsoever into what was going on.”

Chief investigator Joseph Ensminger took that question.

“It’s hard to say exactly what they knew,” he said. “Of course, they had board meetings, they approved certain things and amendments and that type of thing, but it seems that they were at least aware of a lot of these issues.”

Mike Dunavant, the chief investigative counsel for the TCO, spoke up next. He said the investigative report was broken into two sections — the first more linked to payments made by SFUD and the second to general board oversight.

“I think that second section may ultimately be the answer to your questions, as we made findings regarding the South Fork Utility board of commissioners and certain internal control and compliance deficiencies that were lacking,” Donovan said. “Those speak directly to board oversight and board awareness and approval of what was going on.”

Dunavant also noted that he had communicated with Second Judicial District Attorney Barry Staubus about the possibility of legal action against the board or Smith.

For his part, Giles didn’t seem to have any question the board was culpable.

“It all came back to that board, on a monthly basis, should be reviewing what’s going on, understand what’s going on — there’s over a million six in known dollars that were at least in my opinion misappropriated or misused, or again whatever adjective you want to use.”

Giles said members’ refusal to attend their own meeting Tuesday made matters worse.

“Just for the record, I’ll make this statement,” he said. “I find it a little bit incredulous that they let him (Colona) drive up there on Tuesday night, and it appears arrogant that they don’t even show up. They should have drove down here this morning to explain themselves in my opinion.”

Tom Moss, another board member, made the motion to accept the staff’s recommendations. “I think it’s egregious what went on,” he said.

Giles also asked whether criminal charges were “completely off the table” in the case.

“We did in this case share all of our findings and investigative work with the district attorney general in Sullivan County,” Dunavant said. He said Staubus is reviewing that information.

“He has the absolute discretion to make those charging decisions if necessary or if it’s appropriate in his mind,” Dunavant added.

Colona said he didn’t know whether Smith had resigned as the SFUD district manager since the board didn’t meet Tuesday. He also said he has heard the SFUD board had opted to get rid of its legal counsel, something that prompted questions about how they could have made such a decision without an open meeting occurring.

Keith Lunsford lives in the area served by SFUD and has been vocal about the board and the situation. He said the UMRB’s actions Thursday were a good sign.

 “We need to have the opportunity to put a new board in place that represents us, represents the customers, and start from scratch,” Lunsford said.

“It is an ongoing saga,” he added. “There’s going to be a lot more come out over the next couple weeks.”