April 15, 2009
Don DePriest, the Tennessee Valley Authority board member from Columbus who resigned abruptly last week, owes more than $1.1 million in back taxes and faces lawsuits in a Lowndes County court for allegedly reneging on the repayment of millions of dollars in loans and misleading investors in his telecommunications companies.
DePriest''s resignation letter to President Barack Obama was dated Thursday, April 9, the same day a News Sentinel reporter called his lawyer and his private business office in Columbus, regarding his tax and legal issues.
According to a lien notice filed Feb. 23 in Lowndes County Chancery Court, DePriest owes the Internal Revenue Service $1.123 million in unpaid employment taxes between Jan. 1, 2005, and June 30, 2007. The IRS assessed the penalty on May 26, 2008, and filed the lien when the penalty was still unpaid nine months later.
The IRS determined that DePriest, who served on the TVA board''s committee that develops rate schedules and fiscal policy, did not pay withholding taxes on employees. According to the IRS, the penalty is levied against people who willfully fail to collect or pay the taxes.
The lien does not identify which of DePriest''s companies didn''t pay or how many employees were involved. IRS spokesman Dan Boone said all of the company''s other tax documents are confidential.
U.S. Sen. Lamar Alexander, a Tennessee Republican who serves on the Environment and Public Works Committee and is co-chair of the TVA Congressional Caucus, said in a statement Friday that DePriest''s departure was appropriate.
"Though he has served well and his term expires next month, his resignation is the right thing to do in order to maintain confidence in TVA," Alexander said.
DePriest''s term on the board was set to expire May 18, though TVA Chairman Bill Sansom said Friday that DePriest previously intended to stay on until his replacement was confirmed.
DePriest didn''t respond to a message left at his office on Friday. On Thursday, when a reporter called his office to ask about the lien and loan issues, DePriest''s secretary said he was "too busy" to discuss the matter. (Editor''s note: Attempts to contact DePriest at his home and office were unsuccessful today.)
In addition to the lien, DePriest faces other possibly costly court battles. Oliver L. Phillips Jr., a Columbus business associate, alleges in multiple court documents filed in Lowndes County Circuit Court that DePriest owes him more than $12 million, plus interest, stock and unpaid profits. DePriest also is being sued by a Franklin, Tenn., investor whose complaint is similar to Phillips'' lawsuits.
The common thread running through these and several past lawsuits is the allegation that DePriest has refused to pay back loans to creditors or profits to investors.
DePriest owns or has owned a number of businesses, many of them mobile phone companies and some that operated overseas. A former chairman of the Columbus Utilities Commission, he also is chairman of the venture capital firm MCT Investors and American Nonwovens Corp.
DePriest''s financial disclosure form filed with TVA is confidential, according to TVA spokesman John Moulton. Ten years ago, according to court documents, DePriest owned more than $98 million in assets and investments. He lives in a stately antebellum mansion in Columbus with his wife, an Episcopal priest.
President George W. Bush appointed DePriest, a major Republican donor, to the TVA board when it expanded from three to nine members, and he was confirmed by the Senate in 2006. DePriest touted his business acumen and stressed the importance of ethics when testifying Feb. 8, 2006, before the Environment and Public Works Committee prior to his confirmation.
"The highest standards of corporate governance should consistently be maintained, and the professional standards of the organization, from top to bottom, must set the mark for confidence for public or private companies," DePriest said, according to the committee''s official transcript.
Phillips and other investors allege that DePriest isn''t living up to the standards he espoused at the hearing.
The business relationship between Phillips and DePriest goes back at least to March 1982, when they and an investor named Chuck Cooper formed Charisma Communications Inc. Over the years, Phillips, either alone or in groups, loaned DePriest millions and invested in other businesses.
Phillips alleges that promises to repay the loans, in cash or stock, have gone unfulfilled, and that DePriest hasn''t paid dividends or transferred ownership of promised partnership units.
DePriest''s lawyer, Ernest Taylor, said Thursday that his client doesn''t believe he owes Phillips anything, but is willing to abide by the court''s decision. The trial date is May 4.
"Mr. DePriest has asked the court to do a complete accounting to determine who owes whom what, if anything. If he owes Phillips he will pay him," said Taylor, who is not representing DePriest in the IRS matter.
Phillips isn''t the only unhappy investor in DePriest''s companies. Fred Goad of Franklin, Tenn., filed a lawsuit on May 15, 2008, in Lowndes County against DePriest and his Maritime Communications/Land Mobile LLC. In his complaint, Goad alleges that he loaned $400,000 to Maritime on Nov. 2, 2005, a loan DePriest personally guaranteed. DePriest also gave him the right to purchase 22 partnership units at $1 apiece, Goad contends.
According to Goad, DePriest has not repaid the loan as promised, though he did pay Goad a $25,000 fee for the inconvenience, and Maritime hasn''t issued him certificates of ownership. He wants a Lowndes County judge to award him both, plus interest, attorney''s fees and costs.
Citing the pending lawsuit, Goad declined to comment on DePriest.
Peter Harmer, an international marketing consultant from Nashville, is another investor who believes DePriest misled him. In November 2000, he said, he invested in DePriest''s MCT Corp. at $12.85 a share. According to Harmer, MCT would join ventures to bring mobile phone service to regions of the former Soviet Union. The plan, Harmer said, was to sell MCT in 12-18 months to a large operator, with a forecast profit of 400 percent to 500 percent.
Harmer said DePriest would tell him the company was doing well but did not provide documentation. Harmer said DePriest promised $45-$60 a share when it came time to sell the company, so he took out loans based on that value.
When the company was sold in 2007, however, the stock fetched just $15.85 a share, and the bank came after him, Harmer said. The results, he said, were devastating.
"I''ve lost well over half a million dollars," Harmer said.
Harmer, who promoted economic development in the Tennessee Valley overseas for TVA during the 1980s, said he has not filed a lawsuit.
DePriest has a history of being sued for allegedly not repaying loans. A review of recent federal court cases shows he was forced to repay $247,707 last year to Mitchell Hauser of New York and $143,169.16 to MSB Financial Services Corp. in 2005.
Cases involving loans of $300,000 with Fifth Third Bank and $100,000 with Lawrence E. Goulb, of New York, were settled out of court. A dispute over a $100,000 promissory note between three DePriest companies and Media Services Group Inc. was dismissed with the agreement of all parties, but the court didn''t indicate whether a settlement had been reached.
The chemical giant DuPont has a pending lawsuit in U.S. District Court in Nashville over a $500,000 advance to DePriest''s American Nonwovens Corp., plus a little more than $77,000 of an $86,657.50 bill for engineering services.
Harmer said TVA''s employees and customers deserve better.
"The TVA board should not be a repository of political paybacks," he said, "but should consist of the best qualified individuals with the highest integrity to oversee the running of the mammoth agency that impacts the life of the region in so many ways."