During the Arizona Corporation Commission’s investigation into the billing and water quality issues of Johnson Utilities one question came up multiple times and no matter who was asked nobody knew where the money went. A lot of the times they didn’t even know how much money they made from their own companies, or what the companies purpose was.
In a document that was recently uploaded to the docket, we get a few answers when it comes to Ultra and Hunt Management.
In the matter of the Arizona Corporation Commission’s Investigation of the billing and water quality issues of Johnson Utilities LLC.
During the Contempt hearing that was held in this matter on August 24 and August 27, 2018, there were questions raised regarding the ownership structure of Ultra Management, LLC including the Pinetop II Trust. At the end of the hearing on August 28, 2018, the Administrative Law Judge asked that if Johnson Utilities, LLC could get the agreement, that it should be filed as a late-filed exhibit by September 4, 2018. Johnson filed its late exhibits on September 4, 2018. In that filing, Johnson indicated that it requested a copy of the Agreement but was unable to obtain a copy.
Staff was able to locate a copy of the agreement in another matter pending before the Maricopa County Superior Court.
Below are a few excerpts from the agreement. You can view the entire document by visiting http://docket.images.azcc.gov/0000192297.pdf
The testimony before the Corporation Commission shows, as does the documents produced in this litigation, that Ultra provides all of the day-to-day services for JU. Ultra provides those services through a separate contract it has with Hunt Management, LLC. The court may recall from other briefings in this case that Hunt and Ultra are the two businesses that the defendants created in late 2009 and late 2010 to replace RRT asset Shea Utilities Services Company, Inc. The defendants in this litigation created Hunt and Ultra when they went about their efforts to destroy AK’s 5% beneficial interest in the RRT by dismantling and looting the RRT and its assets in order to comply with the wishes of George H. Johnson that AK would never benefit from the RRT.
Christopher Johnson testified before the commission that JU has been paying Ultra on an annual basis $15 million in management fees. Other than providing billing and leasing services, Christopher Johnson claims he does not know what other services ultra is providing to JU to justify its receipt of $15 million in management fees per year.
However, Brad Cole knows where the money goes. Mr. Cole is the fiance to one of George H. Johnson’s daughters and is Chief Operating Officer of Hunt. As such, Mr. Cole testified that of the $15 million JU annually pays to Ultra, $6 to $7 million of it gets paid annually to Hunt and the balance of $8 to $9 million annually remains with the owner of Ultra.
Christopher Johnson testified that he and his sister Barbara Johnson are the trustees of Pinetop Trust II, which is the legal owner of Ultra. He further testified that he and his sister receive annually the $8 to $9 million balance that remains with Ultra.
Ultra has existed since its creation in late 2010 when it was known as “Greek Fox” LLC.” The Pinetop Trust II, including its pre-predecessor, “Pinetop Trust,” also has existed since 2010. Ultra, therefore, has had annual net revenues of $8 to $9 million that has flowed to its owner, Pinetop Trust II (or the initial trust version) from 2010 to 2018.
If the sworn testimony of Christopher Johnson and Mr. Cole is correct, that would mean that from 2010 to 2018 Ultra has received a total of roughly $80 to $90 million in net revenues. And, as Christopher Johnson testified, those tens of millions of dollars all flow to the owners of Ultra (himself, Barbara Johnson, and Margaret Johnson through the Pinetop Trust II).
Assuming the foregoing testimony is correct and assuming that Christopher Johnson, Barbara Johnson, and Margaret Johnson each receive, or are to receive, equal 33% shares or distributions of the Pinetop Trust II’s value, Christopher Johnson and Barbara Johnson have a combined 66% beneficial interest in the value of the Pinetop Trust II. That necessarily would mean that Christopher Johnson and Barbara Johnson’s sworn net worth interrogatory answers have each been understated by $26.4 to 29.7 million.