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Lateef to Place Ownership of dPi Energy in Trust
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November 9, 2010
Zahed "Ed" Lateef, owner of dPi Energy, LLC, intends to divest 100% of the ownership of dPi held by members of the Lateef family so that dPi Energy can receive an amendment to its Texas REP certificate which is currently being contested by Staff for, among other reasons, Lateef's prior involvement with Riverway Power, which was subject to an involuntary mass transition (37917).
Staff has argued that Lateef's role at Riverway immediately prior to the mass transition constituted that of a principal, and principals of REPs experiencing an involuntary mass transition may not own more than 10% of a REP and may not directly or indirectly control a REP.
In direct testimony in a certificate revocation proceeding brought by Staff, Lateef said that he has asked his counsel to prepare a trust into which 100% of the assets of dPi Energy will be placed. "As a matter of law, the execution of the trust will divest 100% of my ownership of dPi Energy and, consequently, 100% of my control of dPi Energy, which, after execution will be subject to the control of the named trustee and the individuals he or she appoints to manage dPi Energy. The result will be that I will have no ownership or control of dPi Energy as both a legal and practical matter," Lateef testified.
"Because the execution of the trust must be done with great precision to address the applicable Internal Revenue Code requirements, as well as the applicable regulatory requirements, the trust is still being structured to ensure that it works as a financial planning vehicle as well as a vehicle to achieve compliance with Commission Substantive Rule 25.107(g)(1)(D)," Lateef added, stating that additional details will be provided in responsive testimony.
Lateef reported that although he has received offers to purchase dPi Energy, the revocation petition as well as a separate Notice of Violation proceeding have devalued dPi Energy relative to Lateef's initial investment in the company. "Consequently, the offers I have received are not only below the value of my investment in the Company, they are below what I would regard as an appropriate market valuation for the Company," Lateef said.
Principally, the purchase offers have been for the customer book, but not dPi itself. dPi has approximately 25,000 customers.
Staff, however, filed direct testimony seeking certificate revocation for reasons in addition to the ownership issue. Covering arguments previously reported in connection with Staff's initial petition for revocation (7/5), Staff alleged that dPi's change of control application, which was not timely filed, contained "several material deficiencies, including several material misrepresentations and failure to make required disclosures regarding its owner, Mr. Lateef and affiliated REPs of which he had common ownership/control."
Staff alleged such misrepresentations, "provide[] further evidence that dPi Energy lacks the managerial resources and ability to operate as a REP in accordance with PURA and Commission rules." Additionally, Staff testified that, "dPi Energy has demonstrated a cavalier attitude toward compliance," citing, among other things, a pending Notice of Violation under which dPi has agreed to pay a penalty of $104,250 for over two dozen violations of the substantive rules.
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