ML19326B169

Responds to ASLB Questions Re Disqualification of Squire, Sanders & Dempsey.Certificate of Svc & Excerpts from Transcript of Kudukis 760614 Testimony in Civil Action C75-560 Encl

ML19326B169
Person / Time
Site:	Perry, Davis Besse
Issue date:	07/02/1976
From:	Goldberg R, Hjelmfelt D CLEVELAND, OH, GOLDBERG, FIELDMAN & HJELMFELT
To:	Atomic Safety and Licensing Board Panel
Shared Package
ML19326B170	List: ML19326B169 ML19326B175
References
NUDOCS 8003060966
Download: ML19326B169 (29)

Text

{{#Wiki_filter:.A'. UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Before the Atomic Safety and Licensing Board In the Matter of ) The Toledo Edison Company and Docket Nost The Cleveland Electric Illuminating ) 50-500A Company ) 50-501A (Davis-Besse Nuclear Power Station,) Units 1, 2 and 3) ) ) The Cleveland Electric Illuminating ) Docket Nos. 50-440A Company, et al. ) 50-441 A (Perry Nuclear Power Plant, ) Units 1 and 2) ) RESPONSE OF CITY OF CLEVELAND TO BOARD'S QUESTIONS REGARDING DISQUALIFICATION OF SQUIRE, SANDERS AND DEMPSEY The City of Cleveland (City) filed its motion on November 20, 1975, to disqualify tha law firm of Squire, Sanders and Dempsey (SS&D) and its Washington, D. C. affiliate from appearing on behalf of the Cleveland Electric Illuminating Company in these proceedings. On December 8,1975, hearings commenced with City's motion to disqualify still pending. On January 29, l 1976, this Board entered its order of suspension and disqualification and, 1 pursuant to Commission Rule 2. 713, referred the matter to a Special Board. j By order of February 4,1976, the Special Board entered its order dismissing the charges and vacating the order suspending counsel. By ite. order of i March 19,1976, this Board reinstated its order of suspension and disquali-fication and certified the matter to the Atomic Safety and Licensing Appeal

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. Board. By order of June 11, 1976, the Appeal Board remanded the dis-qualification proceedings to the Special Board for a full evidentiary hearing. The record in these antitrust proceedings is expected to be closed in early July. In all probability no final decision will be made on disqualification before the record is closed. Representatives of SS&D played an active role in the proceedings objecting to documents, filing motions, cross-exarnining witneaaes and conducting direet examination of CEI's faet witnesses. City objected to participation of SS&D at many points throughout the_ hearing (See, for example, Tr. 4839, 7379). In light of the foregoing facts, the Board has requested the City to state wherein it has been prejudiced by the representa-tion of CEI by SS&D and how the Board might remedy or remove that prejudice. In its order of remand the Appeal Board set forth, at pages 32 and 33, a numbe-of issues on which it believed the Special Board should hear evidence. Included were such matters as the nature of the work done for the City by SS&D and the relationship of that work to the present antitrust proceeding, the work done by Mr. O'Loughlin or his subordinates for the City and rela-tionships of that work to the present antitrust proceeding. l The burden of going forward in an evidentiary hearing is on the City l (Appeal Board, slip op. p. 30). The City is entitled to discovery to prepare t for the hearing (Slip op. p. 30, fn.13). Although the City has the burden of going forward, the Appeal' Board specifically rejected any notion that the City must show "hard evidence of injury-in-fact or at least evidences of specific ' confidences' that were breached." Instead, the Appeal Board adopted the statement by Judge E

s i Weinfeld in T. C. Theatre Corp. v. Warner Bros. Pictures, 113 FSupp 265, 268 (S. D. N. &.1953)(Slip op. pp. 24-25): I am not in accord with Mr. Cooke that Universal is required to show that during the Paramount litigation it disclosed matters to him related to the instant case. Rather, I hold that the former client need show no more than that the matters embraced within the pending suit wherein his former attorney appears on behalf of his adversary are sub-stantially related to the matters or cause of action wherein the attorney previously repre-sented him, the former client. At footnote 10, page 25 of its opinion, the Appeal Board quoted from pages 268-69 of Judge Weinfeld's opinion as follows: The Court will assume that during the course of the former representation confidences were disclosed to the attorney bearing on the subject matter of the representation. It will not inquire into their nature and extent. Only in this man-ner can the lawyer's duty of absolute fidelity be enforced and the spirit of the rule relating to privileged communications be maintained. To compel the client to show, in addition to establishing that the subject of the present ad-verse representation is related to the former, the actual confidential matters previously entrusted to the attorney and their possible value to the pre-sent client would tear aside the protective cloak drawn about the lawyer-client relationship. For the Court to probe further and sift the confidences in fact revealed would require the disclosure of the very matters intended to be protected by the rule. It would defeat an important purpose of the rule of secrecy -- to encourage clients fully and freely to make known to their attorneys all facts pertinent to their cause. Considerations of public policy, no less than the client's private interest, require rigid enforcement of the rule against disclosure. No client should ever be concerned with the possible use against him in future litigation of what he may have revealed l to his attorney, l 1

. In cases of this sort the Court must ask whether it can reasonably be said that in the course of the former representation the attorney might have acquired information related to the subject of his subsequent representation. (foot-notes in the original omitted) 7 Although the City need not produce evidence of confidences disclosed to SS&D, the City is entitled to prevail on its motion even if evidence dis - closed by SS&D was obtainable from sources other than the City (Slip op. p. 26). In light of the pending evidentiary hearing before the Special Board in which the City will seek discovery of SS&D, which the City has not had in these proceedings, it would be inappropriate for the City to make specific factual arguments relating to specific prejudice before this Board. More-over, under the Appeal Board's order, City is under no duty to make such showing. Indeed, even complete discovery of SS&D's participation on behalf of CEI would not fully enable City to point to each instance of specific prejudice it has suffered through SS&D's participation against it in this proceeding. The court, in Emle Industries, Inc. v. Patentex. Inc., 478 F2d 562, 571 l 1 (1973), described the role of counsel in litigation as follows: j The dynamics of litigation are far too subtle, i the attorney's role in that process is far too critical, and the public's interest in the outcome is far too great to leave room for even the slightest doubt concerning the ethical propriety of a lawyer's representation in a given case. These considerations require application of a strict prophylactic rule to l prevent any possibility, however slight, that confi-l dential information acquired from a client during a i previous relationship may subsequently be used to the client's disadvantage.

i i . As so well described in Emle, counsel's role is critical and the dynamics of litigation are subtle. It is impossible to ever measure the prejudice to the City which arises from opposing counsel's moment-to-moment / determination of how far to purs'ue a line of cross-examination, what defenses to raise, what documents to introduce and which to object to. SS&D's long representation of the City for a period of more than 65 years gave it a fami-liarity with the City that surely requires application of a strict prophylactic rule. It should then be enough that the City show a substantial relationship between the subject matter of the former representation and the issues in the present case. Indeed, this Board has already found that such a substan-tial relationship exists (Order of January 19, 1976). Moreover, the Appeal Board has ruled that in the event that there is a doubt as to whether there is a substantial relationship between the subject matter of the former repre-sentation and the present one, that doubt should be resolved in favor of the City. ( Emle v. Patentex, suora, Fleis cher v. A. A. P., Inc., 163 FSupp 548 (S. D. N. Y. 1958), United States v. Standard Oil Co., 13 6 FSupp 345 (S. D. N. Y. 1955). A more difficult legal problem is raised by the Board's request for the City's suggestion regarding remedies. In the brief time available to the City to research the problem, it has found no case in point.. As the Appeal Board pointed out (Slip op. p. 24, fn. 9), the courts have generally held that an order denying a motion to disqualify is immediately appealable. Thus, it is unlikely that a trial or hearing will proceed prior to a final deter-

4 mination of the disqualification issue. The reason the matter is immediately appealable is that any harm done by permitting counsel to continue in the case is largely irreparable. IpTo'mlinson v. Florida Iron and Metal, Inc., 291 F2d 333, 335, (1961), the court concluded that an order denying disqualification is imme-diately appealable because: Here, if the order was in error, the harm resulting therefrom is in the nature of the frustration of a public policy which cannot be avoided or mitigated by any appeal taken after the trial with Davis participating is hally ended. To the same effect is the statement of the court in Greene v. The Singer Corp. (Nov. 2,1971 Unreported No. 71-1835) quoted in Silver Chrysler Plymouth, Inc. v. Chrysler Motors Corn., 49 6 F2d 800, 804-05 (1974): To require appellant to await a final judg-ment on the merits before testing the legality of the order denying the disquali-fication may, for practical purposes, deny it the reality of appellate process.... Conversely, if the appeal goes forward now, prior to trial, the possibility of irreparable injury would be substantially lessened. Even the Ninth Circuit which has held that a ruling on a motion to disqualify is not unmediately appealable has recognized the necessity of resolution of the matter before trial and it regularly reviews the matter ) under the All Writs Act, 28 USC $1651. The court pointed out in the oft-quoted language from Cord v. Smith, 338 F2d 516 (9th Cir.1964): Continued participation as an attorney, by one who is disqualified by conflict of interest

. from so doing, will bring about the very evil which the rule against his participation is designed to prevent, and a subsequent reversal based upon such participation can-not undo the damage that will have been done as a result of such participation. p It has beeri recognized elsewhere that participation by an attorney who should have been disqualified is grounds for reversal.. In United States

v. Bishop, 90 F2d 65, 66(1937), it was said:

We consider this error so vital that even though no other error appeared, the judgment necessarily must be reversed. City believes that on the facts of this case it is entitled to prevail 1 on the merits. Should the City not prevail on the merits, participation in 1 the proceedings by SS&D for C,EI and against City alone entitles City to a new hearing with no further showing of error or prejudice required. Even a new hearing cannot remedy the injury done the City by its former counsel's participation against it. Clearly nothing short of a new hearing would suffice. As an alternative to a new hearing, City has considered the possibility of striking certhin matters raised by CEI / by way of defense, such as the 1 poor state of repair of the City's electric facilities, alleged mismanagement of the City's electric system and matters relating to the ability of the City to finance its system. City does not agree that these defenses, even if true, would constitute valid defenses. Moreover, the wide range of SS&D's activities j contrary to the City's interest, participation by SS&D in discussions with l l i J_/ CEI continued to use SS&D as counsel after protest by City, and thereby reaped the benefits of SS&D's breach of faith. Accordingly, CEI should not be heard to complain. CEI regarding City's request for wheeling, or CAPCO membership, make it nearly impossible to segregate portions of CEI's case to be stricken. ! Respeetfully submitted, RYJc Reuben Goldberg David C. Hjelmfelt Goldberg, Fieldman & Hjelmfelt 1700 Pennsylvania Avenue, N. W. Washington, D. C. 20006 Telephone (202) 659-2333 Vincent C. Campanella Director of Law Robert D. Hart First Assistant Director of Law City of Cleveland 213 City Hall Cleveland, Ohio 44114 Telephone (216) 694-2737 Attorneys for City of Cleveland, Ohio July 2, 1976 2/ The extent of SS&D's knowledge gained from its representation of the City is described in the attached pages from the transcript of the testi-many of Mr. Kudukis given June 14, 1976, in Civil Action No. C75-560 l in the District Court of the United States for the Northern District of Ohio Eastern Division. i

~ CERTIFICATE OF SERVICE I hereby certify that I have served a copy of the foregoing Response Of City Of Cleveland To Board's Questions Regarding Disqualification Of Squire, Sanders and Dempsey on the parties listed on the attachment this 2nd day of July,1976, be depositing copies in the United States mail, first class postage prepaid. s /

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r l .u-..-.- _.t-David C. Hjelmfelt 4 i e +.

ATTACHMENT Douglas V. Rigler, Esq. Chairman Christopher R. Schraff, Esq. Atomic Safety and Licensing Board Assistant Attorney General Foley, Lardner, Hollabaugh and Jacobs Environmental Law Section 815 Connecticut Avenue, N. W. 361 East Broad Street, 8th floor Washington, D. C. 20006 Columbus, Ohio 43215 Alan S. Rosenthal, Chairman Ivan W. Smith, Esq. ' Atomic Safety and Licensing Appeal Board John M. Frysiak, Esq. U.S. Nuclear Regulatory Commission Atomic Safety and Licensing Board Washington, D. C. 20555 U. S. Nuclear Regulatcry Commission Washington, D. C. 20555 Richard S. Salzman Jerome E. Shariman Andrew C. Goodhope, Esq. Atomic Safety and Licensing Appeal Board 3320 Estelle Terrace U. S. Nuclear Regulatory Commission Wheaton, Maryland 20906 Washington, D. C. 20555 Robert M. Lazo, Esq., Chairman Howard K. Shapar, Esq. Atomic Safety and Licensing Board Panel . Executive Legal Director U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission Washington, D. C. 20555 Washington, D. C. 20555 Daniel M. Head, Esq., Member - Mr. Frank W. Karas, Chief Atomic Safety and Licensing Board Panel Public Proceedings Branch U. S. Nuclear Regulatory Commission Offi,ce of the Secretary Washington, D. C. 20555 U.S. Nuclear Regulatory Commission Washington, D. C. 20555 Atomic Safety and Licensing Appeal Board Panel Abraham Braitman, Esq. U. S. Nuclear Regulatory Commission Office of Antitrust and Indemnity Washington, D. C. 20555 U. S. Nuclear Regulatory Commission Washington, D. C. 20555 Joseph Rutberg, Esq.. Jack R. Goldberg, Esq. Frank R. Clokey, Esq. Office of the Executive Legal Director Special Assistant Attorney General U. S. Nuclear Regulatory Commission Towne House Apartments, Room 219 Washington, D. C. 20555 Harrisburg, Pennsylvania 17105 Benjamin H. Vogler, Esq. Edwa rd A. Matto, Esq. Robert J. Verdisco, Esq. Assistant Attorney General Roy P. Les sy, Jr., Esq. Chief, Antitrust Section Office of the General Counsel 30 East Broad Street, 15th floor Regulation Columbus, Ohio 43215' U. S. Nuclear Regulatory Commission Washington, D. C. 20555

.m \\ s ATTACHMENT (continued) Melvin G. Berger, Esq. David McNeill Olds, Esq. Jeseph J. Saunders, Esq. William S. Lerach, Esq. Steven M. Charno, Esq. Reed, Smith, Shaw & McClay David A. Leckie, Esq. Post Office Box 2009 Janet R. Urban, Esq. Pittsburgh, Pennsylvania 15230 Antitrust Division Dapartment of Justice Terrence H. Benbow, Esq. Post Office Box 7513 Steven B. Peri, Esq. Washingten, D. C. 20044 Winthrop, Stimson, Putnam & Roberts 40 Wall Street Karen H. Adkins, Esq. New York, New York 10005 Richard M. Firestone, Esq. Assistant Attorneys General Alan P. Buchmann, Esq. Antitrust Section Squire, Sanders & Dempsey 30 East Broad Street, 15th floor 1800 Union Commerce Building Columbus, Ohio 43215 Cleveland, Ohio 44115 Russell J. Spetrino, Esq. Leslie Henry, Esq. Thomas A. Kayuha, Esq. Michael M. Briley, Esq. Ohio Edison Company Roger P. Klee, Esq. 47 North Main Street Fuller, Henry, Hodge & Snyder ) Akron, Ohio 44308 Post Office Box 2088 Toledo, Ohio 43604 John Lansdale, Jr., Esq. Cox, Langford & Brown James R. Edgerly, Esq. 21 Dupont Circle, N. W. Secretary and General Counsel Washington, D. C. 20036 Pennsylvania Power Company One East Washington Street Richard A. Miller, Esq. New Castle, Pennsylvania 16103 Vice President and General Counsel The Cleveland Electric Illuminating Co. Donald H. Hauser, Esq. Post Office Box 5000 Victor A. Greenslade, Jr., Esq. Cleveland, Ohio 44101 The Cleveland Electric Illuminating Co. Post Office Box 5000 Gsrald Charnoff, Esq. Cleveland, Ohio 44101 Wm. Bradford Reynolds, Esq. Robert E. Zahler, Esq. Thomas J. Munsch, Jr., Esq. Jcy H. Berstein, Esq. General Attorney Shaw, Pittman, Potts & Trowbridge Duquesne Light Company 1800 M Street, N. W. 435 Sixth Avenue Washington, D. C. 20036 Pittsburgh, Pennsylvania 15219 Atomic Safety and Licensing Board Panel Docketing and Service Section U. S. Nuclear Regulatory Commission Office of the Secretary Washington, D. C. 20555 U.S. Nuclear Regulatory Commission l Washington, D. C. 20555

, 's ATTACHMENT (continued) Joseph A. Rieser, Esq. Reed, Smith, Shaw & McClay 1155 Fifteenth Street, N. W. Washington, D. C. 20005 John C. Engle, President AMP-O, Inc. ' 20 High Street Hamilton, Ohio 45012 Michael R. Gallagher, Esq. 630 Bulkley Building 1501 Euclid ~ Cleveland, Ohio 44115 p n

.l y i 's

i Kuubkis direct ll l

g And were these to be general obl1Gation issues, revenue ~.....g . fj-]- 3 issues, or what? b - These were to be subordinate mortgage revenue. 3 e 0 All P1 ht. Can you tell the Court Generally how these 6 ?e. j. things were to be paid? In other words, what was the g .5 -{ source-of funds or revenues to repay these? g bi 5 6 A They would have to be paid from revenues generated by 5i' the municipal light plant. i 1 q How extensive was the information sought by Mr.

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a Brueckel from you in' connection with preparing these ] for legislation? ? uiA Well -- THE COURT: Mr. Davis, it would a ~ a, probably be better if you would just ask him what t infornation was requested.- "How extensive was it." I is a conclusory question. Obviously his answer has i { to be a conclusion. i MR. DAVIS: Very well, your Honor. 1 I O What information did Mr. Brueckel seek of you in the I i course of his preparation of the legislation? f i A Well, as I recall, in our discuccion we tried to give j .n him, and be wanted to know, the total picture, if you t ~ [ will, of Muny Light, in other words, what the condi- ~ ^ t$on was, what the financial condit. ion was, what tho .h5 m~~ -n _h- -m j -MMMA - - P *s 17'

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'.f Y \\ 's I Kudukis - direct 182 i physical condition was, what our plans are.for the V. 3 present, short-term, long-term, and in short the total a picture on Muny Light. 5 Q All right. What, if any, discussions did you have with him with re6ard to the physical condition of equipment? 4 1 A Well, I have indicated that we needed the issue to + 3 _rchabilitate the plant. And in the course of that we 3 had to describe to him the condition of the plant.

s Without going into any very specific details, we

t.

t touched the main areas that are necessary, the recon-c* L:. ditioning of the boilers, the reconditioning of the ~i turbines, things of that nature. Q Was there any discussion about plans of MELP for , :S nuclear generation?

5 A

Well, that -- yes, that uas -- as I tried to give him the total picture, I indicated our plans for the

s future, which would. include trying to obtain nuclear

3 power, trying to obtain third-party wheeling, possi-D bility of, oh, building a recyc' ling plant across from Muny Licht that would provide steam, and I would say all of the things associated with these plans that 3

would make it necessary for us to accomplish it. \\ You know, when you talk about third-party wheeling you have to talk about some type of planning, .~.l-G e

SOM# n ? I Kudukis - direct 18" coordinated planning. Things of that nature. In 3 other words, the basic total picture as far as I 4 could describe it. 7:3 5 g What, if any, discussion was there about pasny 5 power? i A Only to the, extent that it was a cheap source of 5 power and that we were doing our best to try and 3 acquire it, that we felt.that we were entitled to a

)

substantial part of it, and that we will do our best to obtain the wheeling rights necessary to transport 3 pasny power. Q Wha ~c, if any, discussion was there about an interconnec-M tion,with CEI? 3 A Well, this was, again, something that we were pursuing t at that time. We had a system known a's low transfer points and we found that not to be adequate, and our t intention was to ultimately obtain -- THE COURT: Read the question back i 4 to the witness, please. Mr..Kudukis, please listen j to the question. 1 (Last question read by the court reporter.) I j THE COURT: Will.you tell us what the 1 discussion was, if there was.any, what you said and uhat he said, to the best of your recollection? 4 5 ^-%----

$[ i 3 "? w i 4 Kudukis - direct 1C TiiE WITNESS: 'l To the best of my ~ recollection, your Honor, I indicated that we are 3 a trying to obtain a synchronous interconnection with CEI. THE COURT: What did he say? L g THE WITHESS: I don't recall any specific replye THE COURT: Proceed, IIr. Davis. Q All right. What, if any, discussion did you have A with reference to what that synchronous interconnection i

1 meant to your future planning?

") iA u ll, to the point that it was needed to alituiuave e g I blackouts for our present operation and that in the future the same could ' e used for wheeling of power. ,a g THE COURT: What did he say, if yo'u remember, tir. Kudukis? Tile WITNESS: Your Honor, if I may ,. I explain, as I recall that conversation it was a situation where I tried to give him a total n; picture of th' e Muny Light situation and I sat there and went through all of these things that u a we are talking about. In other uords, I explained where we are, where we are goinc, and 3 l how we are trying to achieve it. I don't think j ' ' D*' t - r 1%.,... e m. m

l liudukis - dircet g, 18 i-there..as a direct response to every point that e I made. 5 THE COURT: 4 Did he say anything to you during the course of the conference that you 5 are testifying to? 6 This is one conference, I bake it? THE WITNESS: 5 Yes, it was a discussion, I believe, in my office and -- 4 THE COURT: Wait a minute. How did 23 we get to your office? The last my notes reflect is that you were meeting with Mr. Brueckel in his office re short ter= pcpcr that you were going to roll over within five years and then it was

8 to become permanent.

Hbw did we get from his office, which was the third quarter' of 19727 Now, how did he get over to your office? THE WITNESS: Well -- g THE COURT: Is this a different con-versation? 1 THE WITNESS: Yes. As I recall, I was asked -- THE COURT: You see, Mr. Davis, the problems that we are cetting into. I have abcc-lutely no way of understanding what this c.an is _f__

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-+f ~, E 1 Kudukls - dircct ,l testifying to, who is there. You are just Q 3 rambling on, Mr. Davis, and the witnesses just J7 4 ramble on. ? 5 I have requested both counsel to please 6 att'empt to specify time frames, the conversations as between people, and not relate this thing to y 2; conclusions of a uitness. I mean, all of these m. witnesses have been doing the same thing on _3 g direct and cross-examination both. 0 gg MR. DAVIS:- Well,-I think, your Honor, we have indeed specified, as best the witness can 1 i, 23 recall, the approximate time of this meeting some 14 years ago. I will be happy to ask him who other 15 than himself and Mr. Brueckel was present.

s TIIE' COURT:

Mr. Davis, obviously he is not testifying to the incident in the third is quarter of 1972 that he commenced to testify to

)

originally in response to your question, because

)

he specifically said that that meeting took place in this fellow Brueckel's office. Now he is talking about conversations at some other period

3 of time in his office.

ti Q All right. Directing your attention, Mr. Kudukis, to O a meeting in your office, where I believe you testified ~

ih'- I Eudukis - direct 180 ,] Mr. Brueckci was present, can you once again attempt to i 3 establish the time of that meetin6 as best you can? 4 A - To the best of my recollection, it took place a 5 couple of weeks after the initial meeting in Mr. Y Brueckel's office. 6 y q Which would place it in w' hat year? 3 A It would place it, again, in the same quarter of 1972. 9 Q All right. And who else may have been present at that go meeting? 11 A Possibly Commissioner Hinche, but I don't recall for 12 sure. 13

3 Q

All right. And going on, what, if any, discussion was 3 there about your plans to wheel power from other 25 municipalities to Cleveland? 16 THE COURT: Mr. Davis, why don't you 27 ask him the simple question, did you have a

s discussion relative to wheeling power from other

s areas?

His answer to that can be yes or no.

3 When he answers 3.t.

if his annuer is yes, you can

1 ask him the next simple question, what did you say n

and what did he say, to the best of your a recollection? That way we will not get into

i these problems that I have bsen complaining atout 25 to you.

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i Kudukis - direct I 1i j q All right. Did you discuss plans, your future plans to wheel -- strike that -- Did you discuss your plans 3 ? to wheel power from other municipalities with Mr. a 5 Drueckel? 6 A Yes. 7 Q All right. To the best of your recollection, what did 3 you tell him, in substancc? In substance, that we have the intention of goin6 3 A after pasny power and in order to achieve it we had 30 to work out some sort of a wheeling' arrangement with 31 the electric companies needed to transport that power 32

3 to the municipal lit;ht system.

It Q Which companies were those that were involved? 15 A Well, it would involve, of course, CEI and a company Is in New York, I guess. It was from the power authority

7 of the State of New York, so it would have to go

s through there, and I believe through Allegheny, but I to am not sure at this point.

.:0 Q All right. Did you discuss coordinating the activities 21 or operations of MELP uith CEI? A Well, yes, this was -- a Tl!E COURT: Well, what did he say with reference to your first statement, Mr. .a Kudukic? -m- -4

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,,,_ ~ m. I Kudukis - diret.., Tile WITNESS: I don 't recall -- if 1 could, your Honor, if I could just describe the 3 situation, probably it would be easier. 8 Tile COURT: Yes, I understand that it y 5 vould be easier, Mr. Kudukis, but unfortunately we f. are here to elicit the facts, and the fac'ts have f to be interpreted by the Court. So, if you will be kind enough to tell us what you said and what 5 he said in response to your question, that would .3 permit the Court to serve its function, namely,

t to arrive at a conclusion as to what actually occurred at that time, rather than your conclusory

~,

I

- statenents and your characterizations of what hs.ppened. Do you understand, sir?

t THE WITNESS:

Yes. I don't -- THE COURT: Very well. Tile WITNESS: -- recall a response to my explanation of our plans for wheeling.or for coordinating the activities, which is part of wheeling. { 'Q All right. { What was the significance or the inportance of coordinating planning with CEI? 1 ,' A Well, in order to achieve any whccline; arrance:::ent, l I

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e.., s. J s;g - ~ i Kudukis - dircet li-there has to be some coordination in'just the physical 3 layout of the system. In other words, if you are Coing to wheel, you have to know which lines you are g Goin6 to use, which lines are goin6 to be built and 5 what side they will be and, in short, as it relates to. the whole idea of wheeling. Did you discuss the rate structure of MELP? Q 3 A Yes. .r 3 THE COURT: The first question, Mr. 4 Kudukis, is did you discuss the rate structure of .g MELP? i g The next question Mr. Davis is going to place is what did you say and what did he cay. A I described the basic -- THE COURT: No, not what you described. Tell us what you said. .i THE WITNESS: Your Honor, I don't remember,the exact words since this took place in 1972. Q Will, you tell us the substance of what you said, as best you can recall?

A

.I described our rate structure and, basically, in ' General terms, what the rates brought in.

• ,Q Did you discitss with him what plans for thoce rates

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.jf ) Kudukis - direct 190 I would be in the future? s 3 . A Yes, I did. g q And again in substance, as best you can recall, what 3 did you tell him? s A Well, I indicated we had sonie restrictions. We had a limitat$on on our fuel of 5 or 10 percent and I indi-cated this was causing us some great difficulties and that we had' plans for removing these restrictions, y 3 going before City Council to get that accomplished and 3 also indicated we were anticipating some work in the g air pollution area and that we felt we were going to 3 try to put into the rate structure some position that ,a would help us faice revenue for those facilities in 3 the event we were ordered to install them. Q Did you discuss 'the load of MELP? i: A Yes.

s Q

Again, in substance, tell us in lay terms what is the load in electricity? ~ A Usually you try to describe the m.'.ximum output and the average output and the minimum, if you will, which, of course, varies seasonally. You have peak l 1 cads during certain summer months and you have peak 23 loads of slightly lessor intensity during some winter i' ~ months. You usually describe these in terms of p l e hDM-" & "T% WI48*O

9l3,9/ 'W , g,p 3 Kudukis - direct mecowatts to give an indication as to the basic output or capability of a utility, also as a description of 3 4 its sico. Did you discuss the personnel of the light plant with q Mr. Brueckelf A Yes, in general terms. Again in substance as best you can recall, what did you 3 Q 9 tell him? a In Ee,neral terms, the type of management that I felt A we had and the areas,where I felt we could use some og improvement and some plans, basically, that I felt g 4. we could implemens, et cetera. g Did you discusb power schedules with him? Q A In a general sense. Q Before we get into this again, can you tell us in lay terms, what do you refer to by po. er cchedules?

s A

Well, basically, the cost of obtaining power, like in terms of wheeling, and it comes down to how much are 3 you going to pay for the power you receive. Q Were you then buying electricity from CEI9 A Yes. Q t Did some of those schedules -- t 'fiiE COURT: Are we still now talkinc 4 about this meeting in his office? .~.- i h ~ e

.z ' ;p[ sg. I Kudukis - direct 19 Mll. DAVIS: I am, your Honor. 3 Tile COURT: All right. Is that a your understanding, Mr. Kudukic? s THE WITNESS: Yes. 6 By Mr. Davis: q Did you discuss with Mr. Brueckel your plans for 3 expansion of Muny L16ht? s A Yes.

g Q

Again in substance, what was he told?

1 A

Well, in substance, that in order for us to survive, we have to grow and in order for us to grow, we have \\

3 to put more units on the line, we have to get out-side, sources of power, we have to get nuclear parti-

3 cipation and we have to get some capital dollars to upgrade the system to achieve these things.

Q Did you discuss with Mr. Brueckel your plans to obtain

s future customers or to expand your customers?

-) A In the sense that we have to, obviously, in order to

)

expand the system, we have to obtain more customers. 21 Q Did you discuss with him in geographical terms where you intended to go to get more customers? A Well, geographical terms --

i Q.

Or in any other terms, for that matter. A Well, only to the effect that ue had to expand ou-t i .w

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Kudukis - direct 197 i service area. I don't believe I indicated to him y specifically that we were going to Eo on the east g side or the west side. 3 q Did you tell Mr. Brucckel anything that would have had an s'dverse effect on MELP if communicated to a 7 ' competitor? e A Well, I would think that. 9 MR. GALLAGHER: Objection. THE COURT: Mr. Gallagher, I have .g told you time and time again, if you have an objection, please stand so you will attract my attention. MR. GALLAGHER: Yes. THE COURT: Are you objecting? I MR. GALLAGHER: I am objecting. 3 THE COURT: All right. Sustained. } t Not as to substance, only as to form. By Mr. Davis: Q Going back over the information you have just described to the Court that you discussed with Mr. Brueckel, how much of this information was available publicly? A Part of it where it deals with the numerical analysis, the numbers, if you will, thoco were public records. i 1

• our thought,3 for the future, I don't believe thonc

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f,P o af. 4.. s ~ ~ - Kudukis - direct 19^ were available. In other words, the policy which we 3 were developing as far as the future of Muny Light, 2 . I don't believe that all of that was available publicly. 5 g Uhat financial informabion, if any, did you supply Mr. Hrueckel at that meeting or subsequently? 7 Well, the basic financial informatio.n, I directed him A to niy staff and I directed my staff to give him everything he wanted. g Uhat financial reports were prepared at that time by Q 3 Mr. Iyde n? A Oh, I think the overall, you know, thethings.dealkng g g with profit at d loss, cash flow information. I would 3 say t,he total financial information to describe the 3 functioning of the utility. Q Is.there an annual report? 3 A Yes. Q Did you give copies of the ar.nual reports to Mr. 3 Brueckel? l A Yes, I believe' those were transmitted. Q Did you deny Mr. Brueckel any information that he cought? l A flo, sir. Q Did there cone a point in your dealings with Mr. Brueckel over this bolid ordinance s. hen you and your l_ f

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'$ i.5..'.*N,Y l ? Kudukis - direct 1: staff prepared a breakdown of electric rates and whether they would support the bond? Well, yes, my staff worked on that. That was, I I a think, the crux of the whole issue, whether our 3 rates could support it, and my staff worked on that I and it was submitted. MR.'GALLAGHER: May we have a tir.e reference on that, your Honor? THE COURT: Yes. q Yes. Can you answer,that, Mr. Kudukis? y A I can't place it in the exact time, but I would have j to say during that, period, the third and fourth quarter I of 1972. o i g Q Did you have a chance to see that sometime? A Some of this information, yes, I looked through. As copies were prepared, I would get copies. Q What uns the conclusion, if you know, as to whether your electr'ic rates then would support the issuance of bonds at 9.8 million dollars?

; A Our conclusion at that time was if the 9.8 was sold t

-l that we could recondition our equipment and we would have sufficient rates to support the issue. THE COURT: Read the question back. (Thereupon, the previous question was raad l i '"%=-. _ y -- ~ - c.mp. q 7p. o. 4 - - - - - - ~

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l Kudukts - direct 19E by the reporter.

3 Tile COURT: The rates at that par-ticular time? 3 MR. DAVI3: I think that was my ques-g ti6n, your Honor. Our conclusion was that the rates that we had, provided f A ~' .S we received the capital funds from the issue, would 3 3 support the issue. Again in connection with this bond ordinance, did you ,3 Q and your staff perform profit and loss statements or balance statements? A I did not. My staff put all of unat information ,a together. Q Was this given to Mr. Drueckel? .i A Yes, I believe so. MR. GALLAGHER: Well, I object, your i, Honor. He says he believes so, i THE COURT: Do you know if it was given to him? THE WITNESS: I, personally, didn't i S ve it to him. My staff reported that it tas 4 I given to him. l 7 TI!Z COURT: Overruled. Q All rir,ht. Tell u: Generally the cecuence of events H I i 3-D.7 :- .T. _ _. r. - - - -}}