Case IX: Chapter 4: Alternative Career Paths

 

Chapter 4: Alternative Career Paths

The professional careers of Conrad Alexander and Donald Pearsall continued to advance at New Mexico Power & Light although along somewhat different paths.  Both men were recognized for their abilities and potential and were given positions of increasing responsibility.  Both men had also acquired a “sponsor” to advocate for them and guide their respective careers.

Graham Wright had recognized Conrad Alexander’s potential at an early stage and routinely selected Alexander for important assignments as Wright’s own career advanced.  Utility companies are generally not the most forward-thinking type organizations and because they operate in a highly regulated environment, change comes slowly.  Wright believed that the Company had a responsibility to adapt to changing conditions and he committed himself to that goal.  From his perspective, the most critical area where change was necessary was in the choice of fuel used to generate power.  From its earliest stages, the Company had relied on the State’s coal resources as its primary fuel. This was a logical choice for a variety of reasons.  Coal was plentiful and inexpensive and it provided economic support for the State.  But, as the Company grew and additional power plants were built to meet the increasing demand, the problems associated with coal became more evident.  When oil was first discovered in southern New Mexico, the Company designed its newer generating stations to operate on heavy oil instead of coal.  A similar situation occurred as natural gas production increased in the Four Corners area.  The Company attempted to use the choice of fuels as a means to provide economic development throughout the State while continuing to meet the increasing needs for electricity.

For many years, the choice of fuel was based primarily on economic considerations, including the impact on local communities.  As the public awareness of environmental issues grew, the Company realized that it would need to adapt and become a more responsible citizen.  Graham Wright saw this as an opportunity for the Company to take a leadership position in this effort and the central issue would again become the choice of fuels.  He recognized, however, that this would not be an easy battle within the Company because of its long-held policy of relying on coal as the primary fuel.  There were also members of the Board of Directors who viewed the public concern for the environment and so-called climate change issues as so-much foolishness.

Graham Wright found an ally in Conrad Alexander and the two men began to develop a long-range plan to transition the Company’s choice of fuels.  It was actually Alexander who first proposed the approach of establishing dual criteria of economic benefit and environmental responsibility.  He believed that the Company could continue to operate profitably while reducing its dependence on coal.  He reasoned that the Company could work with the affected communities to replace the support provided by coal mining with jobs associated with cleaner fuels and energy sources.

Donald Pearsall remained firmly in the group within the Company that saw no reason to look at any fuel other than coal.  The Company had already made concessions to oil and gas, but these remained relatively minor portions of the overall fuel mix.  This group also did not feel that it was the Company’s responsibility to “save the planet”.  The Company’s primary responsibility, as they saw it, was to provide a cheap and consistent supply on electricity.  They argued that there was already too much interference from regulatory agencies and saw no advantage in the Company opening itself to additional scrutiny.

Pearsall’s position regarding coal was heavily influenced by Manny Vigil who had taken an increasing interest and role in Pearsall’s career. Vigil positioned Pearsall as the Champion of Coal to those within the Company’s Board who shared his perspective.  Vigil had increased his influence on Pearsall with additional financial incentives which had become quite significant over time.  Vigil himself continued to receive considerable financial support from the coal industry and passed much of this on to Pearsall.

Wright and Alexander recognized that any transition within the Company would be a slow and often painful process, but they also realized that it was necessary. They decided to build a case based on data and experience rather than simply trying to make an abstract argument about the future direction of the Company.  Wright convinced the Board to establish a New Ventures Department which would be charged with evaluating new technologies from both a technical feasibility and economic viability perspective.  The Board agreed to use the information developed in this Department to guide its decisions about the future of the Company.  Wright also convinced the Board that Conrad Alexander should direct this effort and he was named Vice President of Special Projects.  As somewhat of a concession to the Board’s “Old Guard”, Donald Pearsall was named Vice President of Operations, responsible for the day-to-day operations of all existing power generating stations.

These arrangements provided for a relatively stable and peaceful environment within the Company, but an undercurrent of competition and hostility was developing. Battle lines were drawn among the various vested interests on the Board and a series of power plays began to take shape.  Wright had recognized that much of this was inevitable and worked vigorously to maintain peace among these factions.  He could do nothing, however, to stem the growing jealousy that Pearsall felt for Conrad Alexander.

 

Conrad Alexander assumed his new responsibilities with a sense of eagerness and urgency.  He realized that he would have to temper his own enthusiasm with reality and proceed with caution and patience.  He was realistic and understood that there would be setbacks and failures as he evaluated new technologies.  He decided to explore new ways to generate power such as wind and solar technologies as well as technologies to mitigate the harmful environmental effects of burning coal and oil.  He understood that he was facing a skeptical audience that would not accept a “one size fits all” answer; there was no “silver bullet”. His approach, therefore, was to develop a portfolio of solutions so that he could apply the most appropriate solution on a case-by-case basis.  He reasoned that this approach had the greatest chance for success technically, economically and politically.

Alexander initiated a series of small experimental projects and began to develop the information necessary to determine the technical and economic viability of various alternatives.  In addition to these new technologies for power generation, Alexander began to examine means to increase the efficiency of power usage for the Company’s residential, commercial and industrial customers.  This approach involved some new technologies to monitor usage as well as a large-scale educational program for customers.  It was these educational programs that gave Conrad Alexander greater exposure to the community in general.  In many ways, he became the public face of New Mexico Power & Light.

This ambitious program continued over the next ten years.  Energy consumption continued to grow despite improving efficiencies in usage among industrial customers.  Several of the approaches that were being evaluated for power generation exhibited significant promise while others proved too costly or technically inefficient.  The overall program had reached a critical stage and Wright and Alexander decided that it was time to make a major presentation to the Board and ask for permission to proceed to a larger-scale demonstration.

The focus of Conrad Alexander’s presentation was that these innovations would result in a gradual transition of New Mexico Power & Light from a coal-based electric utility to a national leader in clean energy.  He stressed that this transition would benefit every region of the State in terms of stable energy prices as well as economic development.  Alexander presented a plan for major capital expenditures to implement large-scale demonstration projects for the most promising technologies.  He also requested additional funds to expand the Company’s educational programs regarding energy efficiency.

The Board received Alexander’s presentation with moderate enthusiasm.  As expected, some were very supportive and others expressed that these changes, although gradual, would be disruptive.  A lively discussion ensued and eventually the Board approved Alexander’s plan.  Graham Wright then asked Alexander and Pearsall to leave the room.  In a closed-door session, Wright announced that he wanted to take a less active role in the daily operations of the Company while continuing to serve as Board Chairman.  He urged the Board to name Conrad Alexander President and Chief Executive Officer to serve in his place. Wright cited Alexander’s demonstrated leadership skills and his vision for the future.  With only limited dissent, the Board approved Wright’s recommendation, effective immediately.

Late that afternoon, Donald Pearsall received a phone call from Manny Vigil.  Vigil said that they must meet immediately to discuss the “disastrous decisions” made by the Board that morning.  Vigil said that he would meet Pearsall that evening at Duke City Wreckage, an auto body shop located a considerable distance south of the City.

Duke City Wreckage was a run-down set of buildings on a large lot filled with the rusted-out remains of all sorts of vehicles, cars, buses, motorcycles and some farm equipment.  Pearsall entered what he believed was the main building and found Manny Vigil standing in the center of a large empty warehouse or garage.  “Donald, I’m sure you are aware of the decisions made by the Board today.  As you know, I am totally opposed to these actions and we must act to prevent these idiots from destroying everything we’ve worked so hard for in the past.  We simply cannot allow the Company to abandon its obligations to the coal interests with these foolish programs.  You must do everything in your power to insure that none of these projects succeed.”

“I understand, Manny, but that fool Wright and his puppet Alexander stand in the way. You know my feelings about Alexander and his high-minded and misguided belief about the future direction of the Company.  And, I obviously should have been named President instead of him”.

“You leave Wright and Alexander to me.  I want you to concentrate on the actual projects.  It is vitally important that you and I maintain a safe distance in these matters. In that regard, I’ve enlisted some help for you.”

A large muscular man appeared out of the shadows and walked toward Vigil and Pearsall. Vigil introduced the man simply as “John Smith”.  “Mr. Smith is President of LRC Industries and I want you to hire his construction firm and assign them to each of these major demonstration projects.”

“And, what will they do?  What type of contract should I prepare?”

“Use your imagination, Donald, and prepare some sort of general work contract.  Mr. Smith and his associates will take care of everything.  You know that I have always had your best interests in mind and this is certainly no exception.  When these foolish projects fail, it will discredit both Wright and Alexander and they will be finished.  Then, you and I can get this Company back on the proper course.  In the meantime, you will be well taken care of, even more generously than in the past. Do you understand, Donald?”

“Certainly, Mr. Vigil.  I will prepare a blanket-type work contract in the morning. Should I send it to Mr. Smith here at Duke City Wreckage?”

“That will not be necessary. Just call my office when it’s ready and I will send someone to your office to pick it up.  That will avoid any further delays. We must move quickly.”

Donald Alexander felt a sense of relief as he drove north toward Albuquerque.  As usual, Vigil had taken care of things.  All he had to do was to prepare a contract and go about his regular routine.  His hands would remain clean and his bank account would be further enhanced.

 

Despite his new position as CEO, Conrad Alexander remained a humble person.  He continued his practice of going to the Employee Cafeteria each morning where he would have a cup of coffee and read the Wall Street Journal. This routine and Alexander’s behavior were widely recognized and became part of the corporate culture.   People would say “Good Morning” as they passed through the Cafeteria or stopped to have breakfast.  Gradually, people would stop and exchange a few words, or make brief comments about various activities within the company.  Eventually, some individuals would actually sit down with Alexander and engage in conversation. These exchanges ranged from positive comments to expressions of concern.  Alexander treated each of these individuals and their comments with respect, which further encouraged people to talk openly with him.

One morning, a middle-aged woman who worked as a clerk in the Accounting Department approached Alexander and asked if she could have a few minutes of his time.  She had a stack of papers in her hand which she laid in front of her as she took a seat.   She started to speak in a halting voice. “My name is Doris Connell. I hate to bother you with this.  I’m sure it’s nothing.  But, I’ve been noticing some unusual activity with one of the sub-contractors working on the major new technology projects.  It’s a local outfit called LRC Industries and the paperwork says they were hired by Mr. Pearsall, but I can’t find any of the typical associated documentation.  What strikes me as odd is the payment record.  It seems that we are paying them exactly the same amount every month and have been for quite a while.  For most of the subs, the amount varies from month to month depending on what work they actually accomplish.”

“Thank you for bringing this to my attention, Mrs. Connell.  I appreciate your being so conscientious.  I will discuss this particular Contractor with Mr. Pearsall during our scheduled Morning Meeting today.  In the meantime, please feel free to let me know if you notice any other peculiarities with any of the accounts.”

“Thank you, Mr. Alexander.  Again, I’m sorry to trouble your morning.  I’m sure Mr. Pearsall can explain everything.”

At the completion of the Morning Executive Operating Meeting, Alexander asked Pearsall to remain.  “Don, I’m not familiar with one of our new local sub-contractors that seems to be doing quite a bit of work for us. What can you tell me about LRC Industries?  What kind of work are they doing?”

Pearsall looked directly at Alexander and said, “Just general kinds of things. They came highly recommended.  I’ve been using them to help out where needed.  It’s no big deal.”

“Thanks, Don. I was just curious.”

 

Over the next month, three of the priority development projects experienced a series of setbacks.  At one site, there were several equipment failures, resulting in significant delays in the overall schedule for completion.  At another site, there was a major accident which caused lost-time injuries to an entire work crew.  At the third site, several major pieces of critical instrumentation suddenly disappeared. Alexander received reports of each incident from the respective Project Manager.  This disturbed Alexander since he expected Pearsall to have brought these events to his immediate attention because of their importance.  When he questioned him about the delay, Pearsall simply dismissed his concern. “I’ve got everything under control, Conrad.  You should just focus on being President and making nice with the public.”

Although Alexander didn’t appreciate Pearsall’s attitude, he felt confident that the Project Managers would do their best to get the projects back on schedule and avoid any future setbacks.  To Alexander’s great dismay, however, all of the projects continued to experience problems.  None were quite as significant as the initial issues, but caused additional delays nonetheless.  Pearsall continued to provide excuses and began to blame the Project Mangers for the deteriorating situation.

Doris Connell approached Alexander in the cafeteria one morning later that week, carrying a single sheet of paper. As she sat down, Alexander thought that Mrs. Connell had aged quite a bit since their last discussion only a few months before. “Good morning, Mrs. Connell.  I hope you are doing well. “

“Just fine, Mr. Alexander.  I haven’t been able to sleep very well lately.”

“I don’t mean to stick my nose in your personal life, but is everything OK at home?”

“Sorry if I seem upset. Everything is fine at home. Thank you for asking.  Mr. Alexander, I believe I’ve stumbled on to some very disturbing information and I don’t know what to do about it.”

“Perhaps if you were to just tell me what’s troubling you; I don’t have anything scheduled until later in the day. I assume it has to do with the paper you’re carrying.”

“Oh, these are just a few notes. I mentioned to you that I found the payments to this LRC Industries unusual. Well, I’ve made it a point to follow them more closely and dig into their invoices in some detail.  It appears that the total amount of their invoices has increased significantly and that they seem to be working at every single project site, which is very unusual for a sub-contractor.  I’ve also noticed that each invoice now contains a separate line item called “Administrative Fee” and I’ve never seen that before on any contract.”

“That does seem a bit out of the ordinary.”

Doris Connell lowered her head and spoke in a barely audible whisper.  “There is something else.  It looks as though a separate account has been set up recently and this Administrative Fee is automatically transferred to that account as soon as we pay the LRC invoice.”

“That is most unusual and somewhat suspicious.”

“That new account is part of the Expense Account Reimbursement account for Mr. Pearsall’s personal expenses,” she said with her eyes now totally downcast and fixed on her hands which were in her lap.

It took Conrad Alexander a few minute to recover from the shock of what he heard and fully comprehend its significance.  “This is very serious indeed, Mrs. Connell.  I assume you have checked all of this to insure it’s correct?”

Doris Connell was trembling. “Mr. Alexander, at first I could not believe what I found, but I’ve been over things repeatedly.  I know how serious this is.  I mean, Mr. Pearsall is a very important person and I didn’t want to say anything at first.  But, this has been going on for some time and each month this Fee gets a bit larger and there is no question now about where that money is going.”

“No need to worry, Mrs. Connell. You’ve done the right thing and I appreciate the courage it took for you to come forward.  I assume you have complete documentation for all of this?”

“Certainly.  I’ve put all of the information in a separate computer file and transferred it to a thumb drive that I keep in my purse.  It’s been very stressful for me and several of my co-workers in Accounting have begun to worry about my behavior and appearance.”

“Mrs. Connell, if you’ll give me your thumb drive, I’ll take care of this. Once again, I want you to know how much I appreciate your hard work and diligence.”

“I forgot my usual purse today and left the thumb drive in it at home.  Maybe I’m getting a bit paranoid about all of this.  Can I bring it to you tomorrow?”

“That would be fine. You know where to find me almost every morning.  I’ll make a point of being here in the cafeteria first thing tomorrow.”

It was almost ten o’clock in the morning when Conrad Alexander and Doris Connell left the cafeteria. Their extended discussion and late departure did not go unnoticed by the rough-looking man sitting in the corner of the cafeteria dressed in workman’s clothes.

 

Conrad Alexander cancelled all of his meetings for that day and spent his time going over what Doris Connell had told him in his mind.  He was a trusting person and was struggling to understand Don Pearsall’s actions.  He wanted to believe that there was some rational explanation and that Mrs. Connell has misinterpreted the information.  Pearsall had invested too much of his life and career in New Mexico Power & Light to succumb to what appeared to be some sort of payments.  It remained a rather unproductive day for Alexander and he decided to go home.   He absent-mindedly turned on the car radio as he drove.  The relaxing classical music was interrupted by a traffic bulletin.  The reporter said that there had been a major traffic accident on I-40 west of Albuquerque, near the Unser Boulevard interchange.  Fortunately, Alexander was heading north on I-25.

Conrad Alexander arrived at the cafeteria early the following morning, anxious to talk further with Doris Connell. When she did not show up and he had finished reading the Wall Street Journal, he picked up a discarded copy of the Albuquerque Journal. There were pictures of the I-40 and Unser traffic fatality on the front page.  The initial police reports were that a woman driving alone had been killed in the fiery crash and the police were investigating witness reports that the accident had been caused by a group of motorcyclists. Although the woman’s body was badly burned, the police had identified the victim as a Doris Connell of Albuquerque.

 

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