The board president of a Brainerd electricity cooperative, Crow Wing Power, acknowledged Wednesday that several directors took undisclosed compensation in connection with the 2006 sale of an affiliated company.
While the $70,000 payments are more than a decade old, they surfaced only recently, first at a Crow Wing Power board meeting and then in two critical letters to the editor published in Brainerd-area newspapers. The letters specifically brought up the notion of undisclosed payments.
Responding to those missives, Bob Kangas, Crow Wing Power’s board president, wrote in a letter published Wednesday in the Brainerd Dispatch that the board members were offered $70,000 each for “extra work” related to the sale of Hunt Technologies, a maker of electricity metering equipment.
“The immensity of this endeavor warranted compensation for those who accepted it,” Kangas wrote, adding that two of the board’s members — Gordon Martin and Dwight Thiesse — at the time turned down the payment. Kangas is one of two members still on the Crow Wing board who accepted the payment.
Martin and Thiesse both confirmed to the Star Tribune that they were the members who did not accept the payments.
In 2000, Crow Wing Power financially rescued the troubled-but-promising Hunt, a Pequot Lakes company that had around 200 employees at the time. By 2006, Hunt was a turnaround story, and it was sold to an Australian-led group.
Kangas wrote that the Hunt payments weren’t disclosed at the time because of a “nondisclosure agreement required by the buyer.” In his letter, Kangas said Crow Wing’s directors earn $16,000 on average annually. That might be a current figure; federal tax filings indicate less pay in the 2000s.
Kangas, who has been on the Crow Wing Power board since 1997, did not respond to requests for further comment.
Paul Koering, a Crow Wing Power director since 2016, said the board made “a lot of good decisions about Hunt Technologies that were good for the co-op.” But Koering, a former state legislator and current Crow Wing County commissioner, disagreed with the idea of paying bonuses to directors on the Hunt sale.
“To me, when you are a member-owned company, any profits that are made should all be returned to the members,” he said. The fact that two board members declined the $70,000 payment “tells you it didn’t pass the smell test for some people,” he said.
Crow Wing Power company officials declined to comment.
Crow Wing Power provides electricity to about 38,000 mostly residential customers in Cass, Crow Wing and Morrison counties — the heart of Minnesota lake country.
It is one of the state’s many electricity co-ops, which are owned by their customer “members.”
Crow Wing did well on the sale of Hunt Technologies, distributing $12 million in proceeds to members. It used another $5.2 million for improvements on its electric system.
It also invested heavily in a manganese mining venture in Emily, Minn. From 2009 to the end of 2014, Crow Wing Power essentially spent $22.7 million on the mine project.
The Emily manganese deposit is one of only two in the country large enough for a significant mine, but the project has never gotten off the ground.
The Star Tribune reported in August that the Emily mine-sale agreement called for production royalties to be paid to Crow Wing Power’s top three executives.
Crow Wing Power’s board of directors authorized the royalty payments, Bruce Kraemer, Crow Wing Power’s CEO, said at the time. The co-op members were “probably not” told about the incentives, but compensation matters are usually not disclosed to them, Kraemer also said.
The issue of director compensation for the Hunt sale came up at Crow Wing Power’s monthly board meeting in March.
Last week, the Brainerd Dispatch published a letter from Dale Walz, a retired police officer and former state legislator from the Brainerd area, which asked: “Is it true that some Crow Wing Power board members, past and current, received an undisclosed $70,000 gift of the members’ money?”
In an interview, Walz said he was informed about the payments by Bryan McCulloch, a Crow Wing Power board member who had brought up the issue at the board meeting.
McCulloch confirmed he was the source, but declined to comment further. McCulloch was not on the Crow Wing board during the sale of Hunt Technologies or the purchase of the manganese mine.