News: CJ Exclusives

Governor’s pipeline negotiator had ties to Duke Energy

Utility was a client of Eudy's public relations firm; unclear when Eudy severed ties with firm

Gov. Roy Cooper (CJ file photo by Kari Travis)
Gov. Roy Cooper (CJ file photo by Kari Travis)

Ken Eudy, policy adviser to Gov. Roy Cooper (image from Eudy’s Twitter account)

Ken Eudy, Gov. Roy Cooper’s policy adviser, was the governor’s key negotiator with Duke Energy in developing a $57.8 discretionary Atlantic Coast Pipeline fund Duke and its utility partners would pay to Cooper.

Duke Energy also was a client of Capstrat, the marketing, advertising, lobbying and public relations firm Eudy co-founded in 1994. Documents released by Cooper’s office show Eudy negotiated directly with Duke’s chief lobbyist Kathy Hawkins.

Ethics disclosure documents Eudy filed suggest he left Capstrat sometime before January 2017, when he joined the Cooper administration. But an annual report filed in April 2017 with the Secretary of State’s office listed Eudy as one of Capstrat’s four managers.

No one in the governor’s office has explained to Carolina Journal if Eudy was working with Capstrat after he started working for the governor. Neither Eudy nor Cooper’s Chief of Staff Kristi Jones responded to multiple requests to clear up the issue. CJ also hasn’t been able to determine what services Capstrat was providing Duke in 2017.

A person who knowingly conceals information or files false information on his Statement of Economic Interest may be charged with a felony or misdemeanor.

Any relationship Eudy might have had with either Duke Energy or Capstrat after he joined Cooper’s administration should have posed ethical concerns for the governor. Records released by the governor’s office in late December show Eudy intervened in negotiations with the Federal Energy Regulatory Commission over the pipeline. In one instance, he demanded a signed agreement between FERC and the Department of Natural and Cultural Resources be revoked temporarily because it was concluded without his final approval.

News articles and internet postings indicate Duke Energy has been a Capstrat client since at least 2013. CJ hasn’t been able to determine when Eudy severed ties to Capstrat or its successor company Ketchum — a New York-based global public relations firm that bought Capstrat from Eudy in 2013. Eudy stayed on as president of Capstrat until 2015, when he left that role and remained the firm’s chairman.

Duke Energy spokeswoman Tammie McGee couldn’t say if Duke remains a Capstrat or Ketchum client. “The last Capstrat invoice we processed for professional services for our Corporate Communications Department was on March 22, 2017, for services in February of 2017. I don’t have insight into other groups in the company,” McGee told CJ.

Cooper’s office announced the $57.8 million discretionary fund immediately after the state Department of Environmental Quality announced it approved a critical water quality permit for the ACP. Both announcements were made Jan. 26, 2018. The Memorandum of Understanding between the governor’s office and the four utilities building the pipeline (including Duke) said the money would be used to mitigate environmental impacts of the pipeline; for economic development projects in the affected counties; and for renewable energy projects in the affected counties.

CJ was the first news organization to note the unusual arrangement. It was created outside normal legislative budgeting functions. Several legislators said Cooper violated the separation-of-powers doctrine in the state constitution, which says all state spending must be authorized by the General Assembly. (See CJ‘s series on the ACP at this link.)

In February, the legislature voted to redirect the ACP discretionary fund to the school systems in the eight counties crossed by the pipeline. To date, the state has received no money.

In December, a legislative committee hired a team of former federal agents to investigate the permit process and the creation of the $57.8 million discretionary fund.

Statement of Economic Interest

High-level state employees, including employees of the governor’s office, must file Statements of Economic Interest with the State Ethics Commission. (In December 2016, the General Assembly passed a law combining the Ethics Commission with the State Board of Elections, but after a successful legal challenge by the governor, the General Assembly passed a law in December returning those functions to separate boards effective Feb. 1.)

Eudy had a lengthy career in journalism and politics before joining Cooper’s administration. After graduating from UNC Chapel Hill in 1975 with a degree in journalism, Eudy worked as a TV reporter and then for The Charlotte Observer as a political reporter. From 1987-89 he served as executive director of the N.C. Democratic Party. In 1994 he co-founded Capstrat. News articles state his clients included Duke Energy, Blue Cross, Lenovo, Quintiles, and UNC Health Care.

Eudy’s 2017 SEI is dated Jan. 15, 2017. One section requires the individual filing to report sources of income more than $5,000 during the previous year. In that section, Eudy listed only his Capstrat salary. Another section requires a list of financial interests valued at $10,000 or more in publicly or non-publicly owned companies at the end of the previous year. As of Dec. 31, 2016, Eudy listed one company — Waste Zero.

He did not list Capstrat LLC or Ketchum.

 On April 12, 2017, Capstrat LLC filed a required annual report with the N.C. Secretary of State. In the section labeled “Company Officials,” the report listed Dale A. Adams, Kenneth L. Eudy, Jr. and Craig Gangi as managers, and Deborah V. Reed as chief financial officer. Reed also certified and signed the report.

CJ wasn’t able to discuss the annual report with Reed. She recently retired from Capstrat and Ketchum. Reed left a voice message with a CJ reporter saying the report was filed by Debbie Brannan of Ketchum’s holding company, DAS Global. Brannan hasn’t responded to a request to discuss Eudy’s tenure at Ketchum.

Pull that agreement                               

Along with negotiating the MOU for the $57.8 million pipeline fund, Eudy was involved in other ACP issues. Some of these activities came to light in late December, when Cooper’s office — responding to records requests from a number of media organizations — released 19,000 pages of documents related to the ACP. WRAL News put the documents into a searchable database.

Before FERC would approve the ACP, the state of North Carolina had to devise a “Plan for the Unanticipated Discovery of Historic Properties or Human Remains During Construction in North Carolina.” The task wound up with the N.C. Department of Natural and Cultural Resources, which prepared a plan and transmitted a copy to FERC Jan. 12, 2018.

Eudy — from the transcript of a February 2018 interview he gave to WRAL — tried to get back the signature page of the plan when he learned Natural and Cultural Resources had submitted the plan to FERC without his knowledge or consent.

Emails show how closely Eudy was involved in the details of the ACP negotiations.

At 10:38 a.m. Sunday, Jan. 14, two days after the plan was sent to FERC, Cultural Resources Deputy Secretary Kevin Cherry emailed FERC’s Kevin Bowman and David Swearingen: “I would like to recall our signature page on the Atlantic Coast Pipeline Programmatic Agreement. I signed this form by mistake.

“I was in the field all day on Friday and arrived back at my desk late to find a number of forms waiting for my signature. One stack held items which I had been briefed and had reviewed. Other items were near it. The ACP Programmatic Agreement was then inadvertently signed as I headed out the door to make another appointment.

“I am sorry for this misunderstanding.”

At 10:59, Bowman responded: “Received thank you for letting us know. Please call me if there is anything you’d like to discuss further here regarding this PA.”

At 10:59, Cherry wrote to Eudy: “Sorry for just now getting this to you. I sent [DNCR] Secretary [Susi] Hamilton immediately upon request and thought that she was forwarding then.”

At 11:05, Cherry wrote to FERC’s Bowman: “Thank you for your understanding. I am most appreciative.”

At 1:35 p.m. Eudy emailed Cooper policy director Jenni Owens: “Please let me know why this issue didn’t get elevated to the governor’s office as we were discussing ACP issues.”

Eudy then appeared to scold DEQ Secretary Michael Regan about another issue. At 1:37 p.m. Eudy to Regan: “Michael, please help me understand why the issue of tree-cutting permits has not been part of any of our conversations about ACP.”

At 1:42, Eudy wrote Cooper legal counsel William McKinney: “I need to know how this could get negotiated and signed at DNCR without their legal counsel’s review.”

Twelve minutes later, Eudy wrote McKinney: “NC’s PA agreement signature page has been recalled.”

Within days, records suggest a change of heart, as Eudy and others decided the agreement with FERC needed to go through.

At 12:18 p.m. Jan. 18, Eudy emailed McKinney: “Don’t wanna be hyper on this but Phil and Kevin Cherry know that that means signed and sent today, right?” Phil is Phillip Feagan, general counsel for DNCR.

At 3:10 p.m., Cherry emailed FERC the signature page, consummating the programmatic agreement for the Atlantic Coast Pipeline Project.

Investigations continue

On Jan. 13, Charlotte’s WBTV released investigative reports showing Eudy, legal counsel McKinney, and Cooper discussed withholding approval of the MOU until Duke Energy reached an agreement with solar company executives on an interpretation of House Bill 589 – Competitive Energy Solutions for North Carolina.