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Denton nearly finished with investigation into DME contracts

Denton City Manager Todd Hileman said it will be a few more days before city officials can make a full public statement about possible contracting irregularities at Denton Municipal Electric. 

The City Council received a closed-door briefing on the month-old investigation into the irregularities Wednesday afternoon. The meeting included the city manager and assistant managers, the internal auditor, several city staff attorneys, the city's bond attorney and the attorneys investigating the construction contracts for the Denton Energy Center. 

The energy center is a new, natural gas-fired power plant DME is building north and west of Denton Enterprise Airport.

Wednesday's meeting lasted four-and-a-half hours and was the second briefing on the matter. But city officials still don't plan on making any kind of statement until next week, Hileman said. 

"We need to brief the Public Utilities Board on Monday and meet with City Council again," he said. 

The seven-member Public Utilities Board, or PUB,  is appointed by the City Council. The volunteer body of local residents meets twice a month to review budget and policy items from city utility departments. After their review, they make recommendations to the City Council, which has final approval. 

For example, many contracts to buy goods and services for DME are reviewed first by the PUB before going to the council's consent agenda.  

After the city staff and attorneys brief board members during their regular meeting Monday and council members are briefed again, as soon as Tuesday, residents and ratepayers can expect an announcement about the investigation, Hileman said.

Even though the city's bond attorney attended Wednesday's briefing, the attorney was there for questions, Hileman said. He does not expect the city to amend its bond disclosures in relation to the energy center. 

"I don't foresee that happening, not at this point," Hileman said. 

Last fall, the City Council authorized $265 million in utility revenue bonds to finance the project. Most of the bonds were issued this winter. Federal regulations require bond issuers to update investors when a financial situation changes in a material way. 

While it's not entirely clear what triggered the investigation, Hileman hired an attorney with expertise in investigating employee misconduct about a month ago. That attorney and the deputy city manager interviewed city employees about DME contracting practices. Four DME employees were placed on leave as the city examined how a pair of $100 million contracts came together for the energy center. 

Within a week, DME's general manager resigned. Several days later, two other high-level employees were fired. Those two employees also filed a lawsuit against the city the day before they were terminated.

The city has not yet answered the lawsuit, but Hileman said previously the city believes the lawsuit has no merit.  

Council member Sara Bagheri declined to answer questions about the investigation, saying there's a lot at stake for the city. 

"We have to proceed with caution in order to protect the taxpayers' and the ratepayers' interests," Bagheri said. 

Council member Gerard Hudspeth left the meeting at the four-hour mark, about 30 minutes before everyone else left, because of a family obligation. 

Hudspeth campaigned on improving government transparency from City Hall. It's been difficult for him to keep quiet, he said. 

"I don't like this at all," Hudspeth said. "I look forward to lots of succinct discussion, and very soon." 

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. 

FEATURED PHOTO: Construction continues on the Denton Energy Center beside a substation on Jim Christal Road.