The Tennessee Valley Authority created an appearance of favoritism in the way it granted valuable lakefront access last year to a real estate group that included U.S. Rep. Heath Shuler, D-N.C., according to a TVA audit released Monday.
TVA's inspector general said agency officials bypassed a standard committee review and Rep. Shuler personally pursued the water access while sitting on a congressional committee with oversight of TVA.
"The appearance of preferential treatment was exacerbated by Shuler's representatives dropping Shuler's name with TVA employees," TVA Inspector General Richard Moore said in a 58-page report.
The TVA audit released Monday was in response to questions about TVA's decade-old policy of swapping lakefront properties. Under the "maintain and gain" policy, TVA has agreed to grant dock or recreation access to lakefront property to private developers in exchange for similar or more land elsewhere being given to TVA.
But in most of the nine instances in which TVA has allowed developers to swap properties under the policy, the TVA inspector general said the property exchanges were arbitrary or not well documented.
"The OIG has determined that the 'Maintain and Gain' process is administered in an arbitrary and inconsistent manner that contributes, in some instances, to the appearance of preferential treatment," the report concludes.
In response to the critical audit, TVA President Tom Kilgore said the policy was suspended in December and he will recommend to the TVA board that such shoreline swaps be ended altogether.
"In addition to recommending that the program be terminated, TVA is establishing a clearly defined protocol, which creates a procedure for identifying inherent conflicts of interest by those applying for any TVA benefit," Mr. Kilgore said in a prepared statement released late Monday. "No matter who makes the request when something of value is being sought from TVA, the decision-making process needs to be fair, impartial, transparent, and even-handed, both in fact and in appearance."
The audit found no evidence that Rep. Shuler used his congressional seat to pressure TVA to grant the water access and concluded that TVA employees worked "in an apparent good faith effort" to implement the shoreline policy. But the cases were handled inconsistently, according to the inspector general.
Rep. Shuler, who didn't respond to a request for comment on Monday, invested more than $5 million in The Cove at Blackberry Ridge LLC, which is developing lakefront lots on Watts Bar lake in Roane County. Before being elected to Congress in 2006, Mr. Shuler was a quarterback for the University of Tennessee and the Washington Redskins.
To gain 145 feet of deep water access and permission for a boat dock on the shoreline of Watts Bar, Mr. Shuler's Blackberry Ridge group gave up 150 feet of shallow water access on Watts Bar in Rhea County and funded a $15,000 riverbank stabilization project elsewhere on Watts Bar.
In another instance, the general manager of TVA distributor Paris Board of Public Utilities in Kentucky - Charles Perry - was allowed to install a boat dock on the Kentucky Reservoir, which appears to violate TVA's normal standards. One TVA staffer acknowledged that, "TVA probably would not have considered this action were it not for (Mr. Perry's) position as general manager of a TVA distributor."
The cases reviewed by the Inspector General involved instances in which lakefront easements or boat dock permits were granted in exchange for developers providing other compensation and property to TVA.
Chattanooga developer John "Thunder" Thornton used a similar, though much larger, land exchange four years ago to gain TVA's approval for his $450 million "NIckajack Shores" golf course and residential development in Marion County. TVA spokesman John Moulton said Mr. Thornton's exchange of 1,100 acres of riverfront property for 578 acres of TVA land on Nickajack was not a part of the "Maintain and Gain" policy for lakefront access.
Mr. Thornton's land purchase came after TVA declared the land surplus and the land was put up for bid and the development was reviewed by TVA environmental officials and the TVA board, Mr. Moulton said.