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5.3. SR 02-08-2010ITEM 5.3. ~lk~`-~ River MEMORANDUM i ®uncil ®ri Johns®n, ity inisrat®r ° February , Z I ~ '~ iscuss ~r~tnlissi®ner issue At the January 11 City council meeting, Councilmember Gumphrey raised an issue re ardin g g the conduct of EDA Commissioner Ron Touchette. The conduct related to a situation in which Mr• Touchette was acting pe~csonally as the managing brol~e~: of Rock Solid Companies in a dispute over a delinquent electric bill with Ells River Munici al Utilities. The Ci C p ty ouncd directed the issue back to the Utilities Commission for further investigation. At the January 12 Utilities Commission meeting, Cornmissionex Gumphrey re uested that those q involved in the dispute could submit to Troy Adams, Director of ~ erations, their p comments about Mr. Touchette's conduct, Commissioner Gumphrey asl~ed that I et a g copy of the comments submitted and fo:~vard them to the City Council fo~• discussion, Attached are the comments received f~•om ERMU Commissioners, em to ees, and Peter py Beck, City attorney. My comments are not attached as I was asked to m.al~e those comments at the January 11 Council worksession. S:ICouncilll.ori120141~DA Commissioner Issue 02 ~$ I a,doc Dear Mayor Klinzning and Councilman 2/2/ 1 a I sincerely hope that the Elk River Municipals employees have sent comments to all of you on Ron Touchette actions in the last few months. At a number of Elk River 1Vlunicipals Utilities hoard meetings the employees, the city attorney, Ellc River city administrator and the Utilities commissioners all had a number of comments on how Ron Touchette voiced his view on his out standing bill. Not only did the Utilities restore power to the properties before tie Utilities had a account set up for Ron Touche~e in good faith but also to insure the current business's operating on the properties in questioned could keep open. With in a few days of the account being set up Ron Touchette refused to pay the bill, and on a number of occasions the Elk River Utilities informed Ron Touchette that the power would be shut off, if the bill was not paid. During this time Ron would then raise more issues not only with ERIVIU employees, the ERIVIU Commissioners and who ever else would listen. In the summer of 2007, one of Ron Touchette properties on Main St in Ellc River had a water issue late on a Friday evening. He had contacted the Utilities, In fact the water department. The issue wasn't getting resolved fast enough for Ron so he contacted me. After listening to his very passionate responds and how he is going to sue the Utilities and the city, I told him I would look into it and at the time I contacted Aryan Adams. Bryan was already taking care of it along with Dave Berg. In January of 2010 after listening to staff about Ion's action in fact Troy Adams who is Director of Operations at ERMU when he delivered my packet to my home I had enough. I also need to mention another very unpleasant voice mail Ron had left me a few weeks earlier again in regards do his bill and all the legal actions he is going to take. In mid January after this was printed in the paper I received an e-mail from a former employee of the City of Elk River Michele IVlorton Bergh. She stated that as an Elk River employee she was on the receiving end of Ron's actions a number of times while she was an employed with the City. Please don't get me wrong a resident and a business owner has every right to complain for what ever action he feels he is being wronged, but as a Elected Elk River City councilman I hold all the appointed Commissioner at a higher standard. And for Ton to disrespect not only the employees of Elk. River municipal and its commissioners to a point that was to~a~ly wrong for any business owner. I will stand behind the employees I represent with the pity of Elk River as a Councilman and as a Utilities commissioner. Again residents and business owners can complain how ever they want to me but I will not let them treat our employees that way if I can help it, I also really believe if they are going to act this way they should not be representing the City of Elk River as a commissioner. Thank you ferry Gumphrey To; Elk River City Council From ;John Dietz Re: Ron Touchette investigation Date; January 18, 2010 Qn November 28, 2009 (the day after Thanksgiving} I received a message from Ron at my home, I was not home at the time but returned his call that same day. He was calling because the Elk River Municipal Utilities Commission had sent him a letter saying that if he didn't pay the back electric bills for waterfront East by that day that the power would be turned off, Previous to the phone call, Ron had met with City Attorney Peter Beck and Peter informed the Commission that he thought that Ron had agreed to pay the deposits for new accounts for the waterfront East buildings and would put the ~ 13,000 past due amount for those buildings into an escrow account with ERMU until the dispute over that amount was settled, Ron was very much on the offensive in that 1112$ call. He told me he had not agreed to an agreement with Peter Beck and that Peter basically didn't know what he was talking about. He kept telling me that I needed to take care of this immediately or it would make the City, the Utilities and Peter Beck look bad. He would spread the word around town about our incompetence and make sure that information got to the Star News, A111 promised him that day was that the power wouldn't go off until I had a chance to set up a meeting between Ron and Peter. I said the power still might be turned off but that at Least there would be one more meeting before that happened, we then had a meeting at the ERMU office on Dec.1, 2009 at 3 p,m. Ron was there as was Lori Johnson, Peter Beck, Troy Adams, Theresa Slominski and myself, Peter kept stressing to Ron that it said in his receivership papers that he was responsible for all bills necessary to keep the businesses in waterfront East open, Peter asked Ron to supply some case law or precedent to show why he didn't owe the back bills, Ron got very belligerent with Peter and atone point threatened to sue Peter and the City for slander. Ron gave no proof to back up his case. He said he was just right because that was the way it was. Ron's actions were very unprofessional, He kept threatening to "expose" the Utilities for its mistakes, basically telling us that if we didn't see it his way he would make us pay through negative publicity and a possible lawsuit. Peter told him we were simply following our policies and that if the money was put into escrow Ron would have to sue to get it back otherwise ERMU was keeping it. Ron constantly showed a lack of respect for the City attorney. There were several times I almost broke into the conversation to tell him that but I let Peter do the talking. Ron kept demanding that we set up new accounts for the waterfront East project, something there was no basis to do. There had not been a change in ownership of the properties. we left that Dec. l meeting agreeing that Peter would spell out in a document how the disputed amount would be put into escrow and Ron said he would talk to the bank involved in waterfront East about it. He was given a deadline to have the signed document back into ERMU before the Dec.15t~' meeting}, Eventually an agreement was reached and Ron paid the agreed upon amount. Ron stated to the City Council that we contacted his tenants about the possibility of turning off their power after he had paid the disputed amount. That is not true. At the Dec.15 Commission meeting Tray Adams was directed to talk to the tenants to let them know there was a dispute over a power bill and if it didn't get settled by the end of the week, their power would be going off. That was done as a courtesy in case they had machinery or computers that would be affected. Ron did not pay the disputed amount until well AFTER the tenants were contacted, I received a long voice mail from Ron on Dec. 28, 2009. He also called Jerry Gumphrey with the same message, He went on and on about trying to get new accounts for the waterfront East project since September and that what was wrong with our staff that this hadn't been done, He again tried his bullying tactics, saying that he would spread the word of ERMU's alleged incompetence to others in the city and the press. I did not return his phone call but instead called Theresa that evening and asked her to call Ron the next day and hopefully provide what he was looking for. Theresa did talk to him and told him we were shorthanded because of the Christmas week but that she would get it done by the first week of January, which she did. Ran had no credible facts in this case to back up any of his claims, His basic claim was that he was right because he said so. His intimidating tactics may work with others but I think ERMU was right to stand up to him, In my mind, he owes the City Attorney a sincere apology for the way he belittled and berated him. His actions certainly were not appropriate far anyone, let along someone that is representing the City on the Economic Development Authority. To: Elk River City Council From; Troy Adams Re: Ron Touchette and the water Front East Buildings in Dtsego Date: February 3, 2010 At the January 12tj' Utilities Commission meeting, Commission Jerry Gumphrey requested staff to prepare statements regarding contact with Ron Touchette of Rock Solid Commercial. My most recent contact with Ron Touchette pertains to the water Front East Buildings in Dtsego, which Rock Solid Commerical is the court appointed receiver, The following is a timeline of events to outline staffs and my contact with Ran Touchette regarding the water Front East Buildings; 9/25/2009 Staff met Ron Touchette and a building maintenance person at the water Front East Buildings to gain access to the meters and to determine which of the electrical services needed to be on. At that time, 3 services were determined to be required with an additional 2 services to be reconnected for heating needs in the future. Ron wanted new accounts for the Buildings in the name of Rock Solid ® Staff insisted on documentation from Ron indicating a change of ownership prior to setting up new accounts. Ron was to provide that documentation, 10/21/2009 Matt Touchette wlRock Solid emailed the documentation specifying Rock Solid as the court appointed receiver, 10/22/2009 This document was forwarded to Utilities' attorney, Peter Beck, for review. ® ~n the Drder for Appointment of Receiver, the court stated under the Receiver's Duties that the receiver was to "Pay prior obligations incurred by Main Street Dtsego, LLC or other responsible for the Mortgaged Property, but only if deemed necessary for the continued operations of the Mortgaged Property and its improvements," Peter concluded that past due electric bill would covered by this court statement. It was recommended not to set up new accounts in Rock Solids name, but rather keep the existing accounts with history and update the name to Rock Solid. Peter Beck took over discussions with Rock Solid regarding the payment of the prior obligations. Ron Touchette and the water Front East Buildings in Otsego Page 2 of 5 February 3, 201.0 11/3/2009 Peter Beck and Ron Touchette discussed by phone the prior obligations for the 3 electrical services in the amount of ~ 11,241.81 and the required deposit of X7,000 pursuant to the ERMU customer deposit policy. Peter sent a follow up email, 11/9/2009 Peter Beck sent another follow up email to Ron, 11/17/2009 Peter Beck provided an update to the Utilities Commission during the scheduled commission meeting regarding the water Front East Buildings and the collection of the prior obligations. The Utilities Commission directed Peter to send Ron a letter informing him he has until 11/27/2009 to pay the prior obligations for the 3 electrical services plus the required deposit or the power would be disconnected, 11/23/2009 Ron Touchette stopped by City Hall to talk to City Administrator Lori Johnson about the water Front East Buildings and Elk River Municipal Utilities, 11/2/2009 Lori Johnson emailed Ron informing him that with regards to this topic, he needed to contact Peter Beck directly. 11/25/2009 ® Ron Touchette emailed a request to schedule a meeting regarding the water Front East Properties. 11/27/2009 Ron called Utilities Commission Chair John Dietz. 11/30/2009 A December 1 S~ meeting was scheduled between Ron Touchette, Peter Beck, Theresa Slominski, John Dietz, Lori Johnson, and me. 12/1/2009 Peter Beck forwarded an email with attached letter from James Hess of Hess Law Office regarding Rock Salid and the water Front East Properties. The letter stated that it was the position of Ran Tauchette supported by Hess Law Office that Rock Solid was not liable for the prior obligations. At 3:OOpm, a meeting was held regarding the water Front East Properties at Utilities' Conference Room. In attendance were Ron Touchette, Peter Beck, Theresa Slominski, John Dietz, Lori Johnson, and me. Discussion revolved around the Order for Appointment of Receiver document from the court and Ron's position that Rock Solid was not liable for the prior obligations and Peter Beck's position Ron Touchette and the water Front East Buildings in Dtsego Page 3 of 5 February 3, 2014 that Rock Solid was liable, The tone of the meeting escalated. At one point, Ron threatened to sue Peter. The outcome of the meeting was that Peter Beck was to draft an agreement to be signed by the Owners as facilitated Ran and Rock Solid. This agreement was to be sign and received by the Utilities no later than 1211512009. This deadline was established so the agreement could be consider by the Utilities Commission at their 12115 scheduled meeting. Assurance was given to Ron that the electric service to the buildings would not be shut off prior to the Utilities Commission meeting, Also, there was concern from Staff that the 3 services under discussion which had been reconnected were not the only services required to provide heat to all the spaces with plumbing, Ron provided a contact number for the building maintenance person, Ron provided a check for the deposit amount. 12/2/2009 Staff met a Rock Solid building maintenance person to reconnect an addition 2 electrical services that were required for heat. 12/10/2049 Peter Beck sent Ron two versions of the Deposit Agreement and Release for the water Front East Buildings, Cne version included only the original 3 electrical services, and the second Included the original 3 plus the additional 2 services reconnected for heating. The Deposit Agreement and Release reflected a reduction in the prior obligation by 113 to resolve the dispute without litigation. 12/15/2009 Because a signed Deposit Agreement and Release was not received by the Utilities prior to the Utilities Commission meeting, the Commission gave another time extension to Ron giving him until 12/18/2009 to provide the signed Deposit Agreement and Release and make payment of the agreed amount. The Commission directed me to call the 3 tenants in the water Front East Buildings to give them courtesy notification of the impending disconnection. 12/16/2009 I contacted the 3 tenants in the water Front East Buildings, James Hess contacted Peter Beck regarding the Deposit Agreement and Release, Peter emailed it to James. 12/17/2009 Ron called me, furious that I' d contacted the tenants, Ron threatened to sue the Utilities, the Commissioners, and to sue me personally. He stated that he was being personally attacked and that if I was "looking for a fight, you picked the wrong guy," Multiple times Ron yelled "YaU wILL NaT CONTACT MY TENANTS, D4 YCU UNDERSTAND? ! DC YDU UNDERSTAND? !" Ron Touchette and the water Front East Buildings in Otsego Page4of5 February 3, 2010 Because of the threat of litigation, I was limited in my response, I would only reply that I "understood what he was saying", which only upset Ron further. James Pless stopped into the Utilities Dff~ce to submit payment in agreement with the terms of the Deposit Agreement and Release version that included a115 electrical services, James brought with a signed Deposit Agreement and Release, but it was the version that only included the original 3 electrical services. James was to make arrangements to provide the correct signed agreement. Assurance was given that the electrical services would not be disconnected. 12/18/2009 The tenants were contacted to inform then the dispute had been resolved. 12/21/2009 Peter forwarded an email from Ron requesting a change to the accounts stating "the accounts MUST be in the Receiver's name and have the proper state date and a beginning balance of zero." 12/28/2009 --11112410 Ron called John Dietz and Jerry Gumphrey, John Dietz contacted Theresa Slominski. Theresa contacted Ron, ® Ron had also talked with Utilities Staff in an effort to contact me, I was on vacation for the holidays from December 24t~' through January 4t~'. Ron didn't want to leave a message and made it clear to Staff that he was not happy that I was unable to return his calls and that he was going to sue the Utilities, Theresa spoke with Ron. 1/4/2010 ® Theresa sent Ron an email and letter with information he'd requested pertaining to the new accounts. 111 X12010 Ron contacted Theresa requesting documentation with a breakout of the billing statements for November and December so he could provide them to the court if requested, 1/19/2010 Theresa sent Ron a letter regarding the new accounts and having the history indicated on the accounts per Ron's request. 1/20/2010 Ron stopped into the office to review the letter and information sent on January 19~~'. At this time, I believed that all the issues related to the accounts had been resolved. . ` Ron Touchette and the water From East buildings in Otsego Page 5 of 5 February 3, 2010 The Utilities have been faced with erosion in revenue that has been brought on by the current state of the economy. 1t is in the best interest of the rate payers, the Utilities, and the City that the Utilities pursue payments due, In the case of the water Front East Euildings, the Utilities acting on the recommendations of their legal council did pursue collection of the prior obligations. These actions were in accordance with Utilities po icy. ~vr ~~ Troy Adams, P.E. Director of operations MEMGRANDUM TG; Councilmember Jerry Gumphrey FRGIVI: Peter Beck RE: Contacts with Ron Touchette Regarding LandCor Buildings in Otsego DATE; February 3, 2010 The following summary of my contacts with Ron Touchette was prepared from a review of my file. I'm sure the information is accurate, but it may be incomplete in that I may not have written notes of all of my contacts with Ron. I first spoke with Ron on November 3, 2009, Prior to this conversation ERMU staff had given me the background, including the amounts due on the LandCor Otsego accounts and a copy of the Court Grder appointing Rock Solid the receiver of the Main Street Gtsego Buildings, I called Ron at the staff s request to explain our analysis of responsibility for the delinquent accounts, During my conversation with Ron, I explained that I had reviewed the Receivership Grder, ERMU policies and Minnesota Statutes, and had discussed the situation with attorneys in the bankruptcy and creditors' rights department here at the law firm. I explained our analysis was that since there had been no change in ownership of the buildings, and the Receivership Grder directed the Receiver to pay prior obligations incurred at Mainstreet Otsego if deemed necessary for the continued operations of the property and its improvements, we believed that the Receiver had the obligation, on behalf of the owner, to pay the amounts due, Ron did not agree, and the conversation became fairly heated. At one point, he said he would take it to the District Court in Wright County and "make you look stupid," I told him several times that this was my analysis, but that I would be willing to review the issue with his lawyer, or the lawyers for the lenders, or anyone else who could provide me with any law or other authority which would lead to a different conclusion, By the end of the conversation, I thought Ron and I had agreed that he would put the amounts past due on deposit with ERMU while we continued to discuss whether the Receiver was required to pay these amounts. I stated again that if the lawyer for the Receiver or the lenders could show me that the Receiver should not have to pay these amounts, or if a Court ordered that we had no right to receive those amounts, we would return the deposit. 'ale further agreed, I thought, that he would deposit the amounts due under the ERMU customer deposit policy for service to be provided on a going forward basis. GRAY, PLANT, MDDTY, MDOTY & B~NN~TT, P.A. A FULL-S~RViC~ f.AW FIRM MINNPAPDLIS, MN ~ ST. CLDUD, MN ~ WA5HINGTON, DC WWW,GPMLAW.CDM Mr, Jerry Gumphrey Page 2 February 3, 2010 Following that conversation, I spoke with ERMU staff to get the exact amounts due on the various accounts and sent an email late on that evening November 3, 2009} confirming the agreement I thought we had reached during our conversation. By November 9, ERMU had not seen a deposit yet and I sent a fallow~up email to Ron requesting an update. By November 17, 2009, I still had not heard from Ron and gave the ERMU Board Members an update at their meeting on that date. The Board directed that I send a certified letter to Ron stating that power to the prope~~ties would be shut off if the deposits were not received by ERMU on or before November 2?, 2009. Dn November 24, 2009, I received an email from Lori Johnson indicating that Ron had stopped by her office to discuss the Issue. Lori followed up with an email to Ron requesting that he contact me, On Wednesday, November 25, 2009, at 7.28 p.m., after I had left town far the Thanksgiving holiday, I received an email from Ron requesting a meeting. I received an email from John Dietz over the weekend requesting that I call Ron. I called Ron and subsequently spoke with John and a meeting was setup for December 1 at the ERMU offices. Just prior to the meeting on December 1, 2009, I received a letter from local attorney Jim Hess in his capacity as counsel to Rock Solid Realty Minnesota stating that it was the position of Rock Solid, supported by his law firm, that Rock Solid cannot be held liable for payment of the pastydue amounts. However, this letter included no legal authority or other basis for that statement, a point I made to Ron during our meeting on December 1, I am sure you have heard that the meeting on December 1 also became somewhat heated at times. Ron made a number of threats to sue the City andlar me, and to make us look bad. At the conclusion of the meeting, I agreed to prepare a proposed agreement between Rock Solid and ERMU, which would go to the ERMU Board on December 15, and which would provide for the amounts in arrearage to be put on deposit until a decision could be made whether the Receiver was required to pay them or not. I had a subsequent phone conversation with Ron on December 4, 2009 pursuant to which we discussed the possibility of settling the issue between the Receiver and ERMU for something less than the total amounts past due, Following a conversation with Commissioner Dietz, I had a follow-up conversation with Ron on December 7, 2009 pursuant to which I proposed to settle the Mr. Jerry Gumphrey Page 3 February 3, 2010 matter for payment of twodthirds of the amounts past due. an December 10, 2009, I sent an email to Ron with two versions of a Deposit Agreement and Release regarding the delinquent accounts. I subsequently spoke with Ron on December 14, 2009 regarding the proposed agreements. I do not recall, and my notes do not reflect, that there was anything heated abaut the conversatians on December 4, 7 or 14, Unfortunately, I was not able to attend the Board Meeting on December 15, 2009. It is my understanding that ERMU staff was directed at that meeting to contact the tenants to let them knout about the possibility of power being turned off because a signed agreement still had not been received from Rock Solid, I am aware that Ron made a number of ca11s to ERMU staff and Commissioners, and to City Council members and staff, regarding the calls from ERMU staff to tenants at the building, but my file does not shoal that I talked to him during this time, A signed agreement was subsequently received and the matter resolved, My notes do not reflect any further conversations with Ron until January 11, 2010 when I called Ron to respond to an email he had sent me the day before regarding the January EDA meeting, Gnce again, there was nothing unusual or heated about that conversation. My final contact With Ron on this matter was following the ERMU Board Meeting on January 12, 2009. Ron and I had a brief conversation in the parking lot following that meeting which, again, was not unusual or heated I continue to believe, based on my research and the fact that no one ever provided any legal authority Which would indicate otherwise, that ERMU was justified in seeking payment from the Receiver of the delinquent amounts on these accounts. Although there are many circumstances where a public utility cannot recover on delinquent accounts which is Why ERMU is implementing a policy requiring deposits to secure payment}, in this instance there was not yet any change in ownership of the property and I believe the property manager therefore had an obligation to pay the amounts due, PI~B~WW Attachments GP:2723$00 vZ Phones 7b3.44~.ZOZ4 Fax; 7b3.441.8099 Dealing 1 had with Ron Touchette Sometime during the last week of December 2009, I answered an incoming phone call to the utilities office from Ron Touchette. He was asking to speak with Troy Adams. f told him Troy was not in the office and would be back on Jan 4t"and offered Troy's voicemail to Ron. He declined my offer and then became very agitated and stern stating he had already left messages and hasn't received any return phone calls from him then went on to say "how can we run a place when the Director of operations can't even return his phone calls." He then said he was going to contact his lawyer and sue us. At that point !suggested he speakwith Theresa Slominski to see if she could help him and transferred the phone call to her to assist him, ERMU office employee June 2409 I received a phone call regarding accounts in BER CINEMA c/o ROCI~ SOLID MGMT from Ron Tauchette, During this phone call Ron was very upset that he did not get a call back from another employee. The other employee had not called him back due to being out of the office. I tried to explain this to Ron but he was very upset and verbal on the phone, He had said some things that were not respectful regarding that other employee and then proceeded to tell me he was going to the Mayor regarding haw the Utilities handle business. He also asked me "Don't you know who I am"? This canversatian was becoming hard to manage so I did pass the phone call to a supervisor. On 9/25/D9, Michelle Martindale, Milce Price, and I met Ron Touchette and Gary Cana at 1~62~190~h Street in Otsego. The point of our meeting was fio inspect the buildings and meters onsite to determine which ones needed to be on and ensure the others were off, take readings off all meters, have details of the receivership arrangementexplained inperson, and ensurethat both Ron and we, representing the Utilities, had a mutual understanding of all of the above, The following were the points we determined during our visit and both parties seemed to have an understanding: ® Building B ~~6~o190t~' Std has 9 electric meters -- 2 are house meters done for each floor, which services were to be left on. The remaining 7 were for lower level unfinished suites, which all were to be left off. Of the 7 lower level meters, 2 of those were identified as running 2 furnaces in the lower level, so it was discussed that these were to be turned on in December to avail freezing. ~ The identification labels onthe meterwallwere differentthan whatwe had in ourbillingsystem, so the id numbers were noted and transferred to the corresponding accounts in our billing system so each meter is accurately identified in oursystem, ~ Outside the building, Mike and Ron discussed that there was a much larger service installed to this complex than was necessary upon construction, There was discussion that in Building ~ ~90~o Quantrelle Aver, some suites have the service installed directly and are paying for it themselves ~Coldstone Creamery, but one is run from the house meter so since the house account has gone unpaid, they are essentially not paying for their electric service Safe Harbor 1=inancial~. Ron explained to all of us how the receivership came about, some general details regarding, and that he would have the court paperworkfaxed to us the next day ~9/26/09~, We also said we'd need keys to access the meter room. After several days passed, Ron and I exchanged phone calls because we had not received the court documents that Ron saidwould befaxed on9/~6/09. Afterafewweeks, Ron came intothe utilities office, which I explained again we did not receive the court documents. After some days passed, I called Rock Solid, which I was referred to Ron's son, Matt Touchette, as the new contact for this complex, After speaking with him over a period of several days, we received keys and a fax of the court documents, After reviewing the court documents it was noted that Rock Solids responsibility appeared to include past unpaid charges left on the old l.andcor accounts for this complex. Since then, my involvement has been through communications with Troy and Theresa regarding the status of the utility billing accounts relating to both buildings, doing general account maintenance, Greg Scherber