CUC board majority ousts Songao from vice chairmanship

The self-described “majority” of the Commonwealth Utilities Corp. board ousted Diego Songao from the position of vice chairman last week because they said they wanted someone “who worked with them.”

Eric San Nicolas, from Tinian, is now vice chairman. The CUC board also voted to name director Joe Torres, from Saipan, to the position of treasurer. This position had been unfilled.

Directors San Nicolas, Torres, Albert Taitano, Chris Concepcion, and Adelina Roberto voted in favor of removing Songao from the vice-chairmanship and replacing him with San Nicolas. Songao abstained from voting. Director David Sablan voted against.

For the treasurer position, all board members voted for Torres to fill the position, after some questions from Sablan on whether Torres understood the ramifications and responsibilities of the position, and if Torres had actually read the board’s bylaws on the position.

Taitano motioned to include the election of the vice chairman on the agenda at the beginning of their meeting.

When asked by Songao for a reason, Taitano said they want to elect a vice chair that “works with the majority” of the board members.

To this, Songao said if his vote is not what the majority wants, then he has all the privilege to do so.

In an interview yesterday, Torres said that “having board members that can work together and accomplish things is needed,” given CUC’s financial situation.

“With this group, I feel it is a work team. It is transparent,” he said, referring to the group that voted to replace Songao with San Nicolas.

CDA implications?
Songao, who appeared upset by the board majority’s intentions, said at the meeting that he was there to represent the Commonwealth Development Authority, a preferred stockholder of CUC.

Songao pointed to previous “surface discussions” among CDA board members to “protect its interests.”

In 2004, a memorandum of agreement between CDA and CUC turned more than $200 million in debt plus interest into $45 million in preferred stock held by CDA. Since 2009, when the MOA was executed, CUC has not put a penny on its over $1 million in dividend payments per year, deferring all payments.

CUC, at the recent direction of the board, is now requesting a moratorium to debt payments and has expressed a preference to not include debt payment in future tariff rates.

“If this board does not take the responsibility to ensure CUC meets its obligations, and also provide guidance and direction for a good, financial standing for CUC, CDA might come in to take over management of CUC,” Songao said.

To this, Torres said, “That’s not a threat, vice chair?”

Songao said it was not a threat but it was CDA’s position because of its concerns with the way CUC is handling its financial obligations.

Sablan described Songao’s removal from the vice chairmanship because he was not in the majority a “poor reason.” He asked if the real reason was because they did not want Songao and himself on this board.

“We are deliberating [and it is] sometimes heated…but to just remove him from the vice chairmanship, to squelch him, I don’t think is a good enough reason,” he said.

In an interview, Songao said he should be able to speak his mind and to protect the interests of CDA. “I should make decisions according to fiscal responsibility, according to how we should have CUC be responsible for its operations,” he said. “…I’d like to see that we maintain that CUC meets its obligations and put CUC in a good financial standing.”

On Songao’s “threat” to have CDA move to take over CUC, Torres said yesterday that Songao was only one member of the CDA board. The board decides issues, not one member, he said.

“The way Songao made his comment is threatening the people of the Commonwealth…That’s not right,” Torres said, adding that if CDA was a major stockholder, why hadn’t they pumped money into CUC?

Treasurer
Before the vote for treasurer, Sablan said the office of treasurer is a major responsibility, and is responsible for all the financial affairs and is subject to penalties if anything goes wrong. “I think you need to look at the ramifications of that responsibility,” Sablan told Torres.

Songao had also asked if the board had a set of responsibilities in its rules and regulations, and if every disbursement that came out of CUC would have to be signed by the treasurer.

To this, CUC legal counsel James Sirok said the treasurer signs checks as one of the signatories and manages accounts.

Sablan said that from his experience in other organizations, if anything goes wrong financially, the “treasurer goes to jail.”

Sablan asked Torres if he was ready to handle that responsibility, and has read the responsibility in the b-laws and what it entailed.

“I don’t foresee any problems,” Torres said.

“Have you read the bylaws…? I think it is important for you to tell us,” Sablan asked again.

Torres said yes. San Nicolas said they have utmost confidence in Torres.

Next moves
While the term was not used last week, the “minority” in the board are clearly Sablan and Songao. Saipan Tribune learned there have been frustrations from the board majority over CUC management—from their counsel, to executive director, to public relations officer—raising questions about what the board majority’s next moves might be.

In April, the board voted out Sablan from the chairmanship. In May, executive director Alan Fletcher announced he would not be renewing his contract with CUC. The board had made a decision to not continue with Fletcher, Saipan Tribune learned then.

The majority has also raised questions whether the CUC board should have “their own” legal counsel. The counsel for the CUC board and management is James Sirok. The majority has also raised concerns on moves by previous chair Sablan and vice chair Songao to interview individuals for CUC’s top positions without their knowledge. One of these positions was for current chief financial officer Matthew Yaquinto.

However, when asked, Torres said he did not prefer to use the word “majority.” “It separates people,” he said of this term. “It’s a working group,” he said instead. “Songao and Sablan can be part of the working team if they want to.”

When asked to comment on the board’s recent moves, Torres said he would like to put the issue concerning Fletcher “to rest.” “Let’s move forward for what is best to serve the public.”

Torres went on to say this working team’s goal is to keep rates the same, resolve a payment plan with the local hospital, and improve CUC’s distribution systems.

On the other hand, the board’s “minority,” management, and consultants see a need for rate increases to protect the utility from collapse, given millions in unpaid utility bills owed to them, among other reasons. They also aim to take a hard look at hospital’s finances and see what it can pay them as its debt sits at around $16 million and growing.