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Aloha Utilities attorney says escrow fund transfer was legal

TRINITY — The lawyer for Aloha Utilities says his clients did nothing improper by putting the $375,000 in disputed escrow money in a separate account. The former utility merely wants a fair decision about who gets what, he said.

"The point of this is it's obvious to us that this matter is going to be resolved by a judge," said William Sundstrom, the attorney for the now defunct Aloha. "Customers have demanded a solution that is not acceptable to us and we have demanded a solution that is not acceptable to them. At the end of the day, a judge is going to have to resolve this issue. We want to do the right thing here."

At issue is whether the money belongs to Aloha's shareholders or its 25,000 former customers in the Seven Springs and Trinity area.

The money came from customers who paid temporary rate hikes that ultimately weren't approved. Instead of getting a refund, however, the customers agreed to let Aloha put the money toward system upgrades — but those improvements were scrapped when Aloha sold its water and wastewater systems earlier this year to the Florida Governmental Utility Authority.

The money was being held in an escrow account at a Regions Bank branch in Holiday. The dispute was set to be heard by the Florida Public Service Commission.

Aloha revealed in a lawsuit filed Friday against the PSC that it had been holding the money in a "separate, segregated account" since March 23.

The company filed a motion Tuesday and express mailed it to Pasco County Circuit Court asking for an order to put the money into the court registry until a judge can hear the case.

Officials have questioned how Aloha could move the funds out of the escrow account without the PSC's blessing. Sundstrom said the recent Bank Rescue Act abolished the two-party check rule, which required two signatures for money to be released from joint accounts.

The lawsuit argues that the PSC has no authority to decide the matter as Aloha ceased being a utility when its assets were sold.

It also says the PSC is a politically appointed body and would be pressured to side with former customers.

The news that Aloha had possession of the money drew outrage from critics, including state Sen. Mike Fasano. He sent letters Tuesday to Florida's Attorney General Bill McCollum and Chief Financial Office Alex Sink asking them to investigate.

"In my opinion an escrow account that is created to hold funds in trust, and was created with two signatories, cannot be emptied without the permission of both parties," the letters said. "I believe that the bank mentioned in the article, Regions Bank of Holiday, may have broken the law. I would appreciate it if you would investigate the actions taken by Regions Bank in this situation."

Fasano, who is also a former Aloha customer, called Sundstrom's explanations "farfetched" and said even if it was legal, bankers should have had the sense to notify a second party if that party is a government agency.

Tim Dayton, a spokesman for the Alabama-based bank, said Tuesday that laws prohibited him from commenting on details of client relationships but that the bank was aware of the situation.

"We're working with the organizations to resolve the issue," he said.

Lisa Buie can be reached at buie@sptimes.com or (813) 909-4604.

Aloha Utilities attorney says escrow fund transfer was legal 03/31/09 [Last modified: Tuesday, March 31, 2009 9:13pm]

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