Government & Politics
 

Entergy investigators: Company knew or should have known about paid actors at council meetings

At an October 2017 public hearing, Charles Rice Jr., then-CEO of Entergy New Orleans, sat next to people wearing orange shirts supporting the power plant. Some of the people who wore shirts to the meeting and spoke in support the plant were paid to do so.

Executives at Entergy New Orleans “knew or should have known” that actors were hired to appear at City Council meetings and voice support for the company’s proposed eastern New Orleans power plant, a City Council-commissioned investigation concluded.

The results of the investigation were released Monday night, and the council will hold a special meeting on Wednesday at 1 p.m. to formally receive it and hear a presentation from the investigators. The council, which regulates  Entergy New Orleans, is considering levying a fine of up to $5 million against the company.

The council called for the investigation of the so-called “astroturfing” campaign after The Lens reported that dozens of people, including professional actors, were paid between $60 and $200 to come to City Council meetings in October 2017 and February 2018 in support of a proposed power plant in eastern New Orleans.

The council hired a team of lawyers from the firm of Sher, Garner, Cahill, Richter, Klein & Hilbert, led by former federal prosecutor Matt Coman. Retired Judge Calvin Johnson was also part of the team.

In May, Entergy released the results of an internal investigation, denying that its employees knew anything about the scheme and blaming its public relations contractor, The Hawthorn Group, for hiring a third company, Crowds on Demand, which ultimately recruited the actors.

“Even after the revelation that came as a result of the investigative report by The Lens and there was no question that people were paid by Hawthorn or Crowds on Demand, ENO continued to deny it had any knowledge of the payments and maintained it did nothing wrong,” investigators wrote.

But the evidence indicates otherwise, the report says.

One particularly revealing exchange shows former CEO Charles Rice ordering specific numbers of attendees for the October meeting.

In October 2017, two weeks before a key utility committee meeting, Rice sent a text message to  Yolanda Pollard, a communications manager for Entergy, asking how many people Hawthorn could recruit for the meeting. Pollard said Hawthorn had secured “50 people and 10 speakers.”

“If Hawthorn can get more people I will pay,” Rice responded. He followed up a few minutes later, saying he didn’t care about the cost. “This is war and we need all the foot shoulders [soldiers] we can muster.”

Hours later, Pollard said that Hawthorn would send 75 people and 10 public speakers, all wearing pro-plant t-shirts. The cost would increase from $23,000 to $29,000.

“Deal,” Rice responded.

Rice stepped down from his post as CEO last August and took a position in Entergy’s legal department.

The City Council voted 6-1 to approve the $210 million power plant in March. Some critics are calling for the Council to reverse that decision.

“Undermining citizen voices also undermines the Council’s decision making process,” said Logan Burke, the executive director of the Alliance for Affordable Energy, one of the central organizations opposing the plant. “We simply want to see Entergy held accountable by its regulator so that a ‘war’ against the community isn’t allowed to continue.  This investigation was an important first step, but is by no means the end.”

Entergy still withholding documents

In May, the City Council passed a motion calling for the investigation and demanding that Entergy hand over “all documents that relate in any way” to its campaign for the plant as well as the company’s internal investigation. In response, Entergy turned over hundreds of documents that revealed that high-level executives at Entergy, including Rice, knew more about the astroturfing than they initially let on.

They also showed that the paid actors were only one part of a larger, million-dollar-plus influence campaign to gain public approval for the new power plant.

But according to the report released Monday, Entergy withheld a large portion of the evidence.

“It is important to note, however, that Entergy failed to fully comply with New Orleans City Council,” the report says.

The investigators pursued the missing documents, and Entergy eventually surrendered about 1,200 new documents, containing thousands of pages of additional evidence.

The original deadline for the investigation’s results was the first week in September. But Entergy didn’t cough up the last of these documents until October 5th, according to the report. The City Council was forced to extend the investigation deadline twice, delaying the results by nearly two months.

Even now, investigators say Entergy is still withholding evidence. The report claims that Energy refuses to hand over relevant text messages, only allowing investigators to review some text messages at the company’s lawyer’s office. Though Rice was included in text exchanges with Pollard cited in the report, they were apparently not retrieved from his phone. The company only provided one text message retrieved from Rice’s phone, according to the report.

In response to other requests, Entergy produced an extensive “privilege log,” claiming a number of records were exempt from disclosure.

“To the contrary, these items were inappropriately designated as privileged and, thus, should have been produced, the report says.”

And, the report notes, Entergy executives had surprising lapses in memory about the scandal during their interviews. One executive “claimed to have almost no memory of events that occured just months ago,” while another “had scant recall of significant events.”

“Entergy considered this investigation an adversarial process, pitting them against the investigators with the Council being the arbiter or judge,” the report says. “It never recognized nor accepted the fact that this was simply a search for the truth and that it should have been as hell bent on finding the truth as the investigators were.”

In a statement released Tuesday, Entergy spokesman Neal Kirby said, “Upon initial review, we take exception to certain characterizations and omission of key facts from the report.”

A failing PR campaign

The report also illuminates the impetus for Entergy’s involvement with Hawthorn.

Gary Huntley, Entergy New Orleans’ Vice President of Regulatory Affairs, told investigators that “generating public support was an integral component to Entergy’s success in winning approval for the [power plant].”

Well before the use of paid, Crowds on Demand supporters, the company had already spent hundreds of thousands of dollars on contractors working on its public support campaign. In part, the contractors were hired to write scripted remarks for public meetings. An email exchange from July 2016, a few days in advance of a utility committee meeting, shows that those scripts were intended to be matched to specific types, including a “local resident who was displaced after Hurricane Katrina” and a “customer from an environmental position.”

In her Oct. 10 testimony, Pollard confirmed that, in some cases, the company and its contractors had not identified speakers who fit those profiles by the time their scripts were written. And Antoinette Green-Brown, a public affairs manager for Entergy New Orleans, “explained that Entergy drafted the script first and then would look for someone to use to provide the message to decision makers,” according to the report.

One script purported to be from “a single mother of three” who supported the plant “for the safety of my kids… I’m not worried about my bill going up or any harmful environmental impacts.”

Entergy also sought to mobilize the network of nonprofit groups they donate to. In October 2017 emails, Entergy representatives made plans to send a letter to some of these “partner organizations,” including the Zulu Social Aid and Pleasure Club, Delgado Community College, and the New Orleans Council on Aging.

“As a company that’s been here for the community for many years and contributed millions of dollars to hundreds of nonprofits to support their programs, we find ourselves in need of your assistance,” the letter said.

In sum, Green-Brown told investigators that they “talked to everyone they could” to garner support. But, she told investigators, “most people didn’t want to come.”

At the same time, “Entergy faced growing opposition from various organizations and individuals,” the report says. “Entergy became concerned.”

Opponents of the new power plant, namely the Alliance for Affordable Energy, were raising questions about Entergy’s shifting justifications for building the plant. When it first applied in 2016, Entergy said the plant was necessary to meet growing energy demand. When revised demand projections debunked that reasoning, Entergy pulled its application, only to reapply using a different justification: the plant was now needed to avoid a transmission failure that could cause “cascading outages” in New Orleans.

Former councilwoman Susan Guidry told The Lens in February that she didn’t remember the transmission issues coming up at all during the first application process.

Opponents also took aim at the incentives Entergy received from the city to build the power plant. Through an agreement with the city, Entergy receives a roughly 11% return on investment for their capital expenditures.

The new power plant in eastern New Orleans will cost $211 million, meaning that Entergy will gain an automatic $23 million profit. Both the cost and the guaranteed profit will be passed onto Entergy New Orleans customers through their monthly bills.

“Ramp things up”

In mid-2017, with its strategy failing to produce the levels of public support the company had expected, Green-Brown told investigators that Entergy “needed to ramp things up.”

“Green-brown stated that the campaign was fairly typical in 2016 but ‘became a war in 2017,’” the report says.
That was when Entergy turned to Hawthorn.

“All Entergy wanted was to find people to show up,” Hawthorn President and COO Suzanne Hammelman told investigators. She went on to explain that finding genuine supporters would have been “time consuming.”

By August 2017, the two companies were discussing the use of “cut-outs.”

Hawthorn’s chairman and CEO, John Ashford, explained to investigators that cut-outs “act as ‘front groups’ for Entergy so as to conceal Entergy’s involvement” in what would otherwise appear to be a legitimate grassroots campaign.

When asked about Crowds on Demand, Ashford said the company’s name “pretty well sums up” their role in the campaign.

Company repeatedly made aware of allegations

The report shows that Entergy executives were repeatedly made aware of allegations of paid support as early as Oct. 23, 2017.

Entergy maintains that it did nothing wrong and that they were unaware that people were being paid to show up at meetings. But the report points to a litany of cases in which Entergy employees were aware of credibly suspicious comments or accusations and took no action to uncover the truth.

“Even when the reality of people being paid to attend and speak at the October 16, 2017 meeting was clearly presented to ENO, it took no corrective action,” the report says. “ENO did not investigate nor research the company it chose. It accepted the company’s denial as fact.”

In one example, senior communications specialist Charlotte Cavell told investigators that since learning about the accusations, she has never asked anyone at Entergy whether they are true. Still, she “helped craft a response to these allegations that Energy did not know” that anyone had been paid.

“ENO did not act with integrity,” the report concludes. “Simply stated ENO lost its way. It found itself so far in it could not recognize its mistake and take the corrective measures.”

Council considering action

A coalition of environmental and community groups is currently suing the City Council, claiming that citizens weren’t allowed in to the October 2017 and February 2018 utility hearings in violation of the state Open Meetings Law. They are demanding that the council rescind its decision and reconsider Entergy’s application.

In July, Civil District Court Judge Piper Griffin put the case on hold until the results of the investigation were released.

“The independent investigation demonstrates the truth of what the New Orleans residents involved have been saying for months – the public’s right to a fair and open public meeting process has been repeatedly, intentionally and seriously violated by Entergy,” said Bill Quigley, an attorney for the plaintiffs.

Council President Jason Williams has also called a special session on Wednesday to specifically deal with the report.

After hearing a presentation from two of the investigators — Coman and Johnson — the City Council will consider a resolution that could result in a $5 million penalty on Entergy. The resolution would also ensure that all costs of the investigation, as well as all additional costs incurred by City Council and the council’s utility advisers as a result of the investigation, are covered by Entergy, not ratepayers.

The council will also consider a resolution to initiate a new investigation into whether mismanagement at Entergy is responsible for New Orleans’ frequent power outages.

“The Council has become exasperated by ENO’s ‘tone deaf’ actions,” one of the resolutions says. “A sea-change in the corporate culture must occur at ENO.”

This story was updated after publication with additional information and context.

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