Lured by the promise of big savings, Bethlehem Township, along with the coal region towns of Coaldale, Lansford, Nesquehoning, Jim Thorpe and Tamaqua, paid Municipal Energy Managers hundreds of thousands of dollars to help them buy street lights from PPL instead of leasing them.

But instead of negotiating the sale of the lights, and then upgrading and maintaining them and seeking better energy rates, MEM principals Robert J. Kearns and Patrick J. McLaine instead allegedly siphoned the $832,460 paid them by Bethlehem Township into their own bank accounts and possibly a trip to Disney World, according to Northampton County District Attorney John Morganelli.Kearns and McLean, who each face up to 16 years in jail and $40,000 fines, are charged with third-degree felony charges of theft by failure to make required disposition of funds and criminal conspiracy, and misdemeanor charges of misapplication of entrusted property.If convicted, the Lackawanna County men could each serve up to 16 years in jail and fined $40,000.Although arrest warrants were issued, the men are expected turn themselves in to Bethlehem Township District Judge Joseph Barner, Morganelli said at a news conference Monday afternoon.The charges followed a Northampton grand jury investigation that began in September, a few months after a lawsuit filed against MEM by Bethlehem Township aroused Morganelli's suspicions. The suit alleged MEM had failed to do work for which it had been paid.As of Tuesday, it was unclear how the turn of events would affect other towns that contracted with MEM to help buy, then upgrade and maintain the lights."I'm going to advise the municipalities I represent that we should proceed in the same manner, through criminal proceedings, in additional to civil remedies we are seeking to address," said attorney Michael Greek, who serves as solicitor for Coaldale, Lansford and Tamaqua.All three communities took out hefty loans, trusting MEM to fulfill its contracts and save them significant amounts in energy bills over the next 20 years.Greek began drafting complaints to the state Public Utility Commission after MEM failed to to complete negotiations with PPL and refused to return telephone calls and letters from the towns.The alleged scam hit the struggling coal region communities hard. Both Coaldale and Lansford face property tax increases this year. Coaldale borrowed $182,400 for the MEM contract, and Lansford $306,100. In June, Tamaqua borough council voted to withhold a $2,500 payment to MEM because it failed to do what it had contracted to do.MEM continued to make promises through at least July 15, 2010, when it sent letters to the officials of 18 municipalities, including Lansford, Coaldale, Nesquehoning and Tamaqua. In that letter, the firm said that on July 14, its attorney received an email from PPL saying that a draft contract would be sent within a day or two.Meanwhile, MEM blamed PPL for the delays. On Monday, PPL spokesman Michael Wood said the company had not heard from MEM in many months.The criminal charges against Kearns and McLaine were announced at Monday's news conference. Morganelli also offered details of the 23-page grand jury report.The Bethlehem Township trouble had its roots in a 2007 agreement with MEM, the report states.At that time, Concord Public Finance, the township's then financial adviser, introduced a project under which the township would buy its street lights from PPL, after which it could shop around for the lowest electricity rates. MEM would facilitate the purchase, and would be paid only $50,000 on a million-dollar project.At the time, MEM specialized in helping municipalities privatize their lighting systems. It had numerous municipal agreements throughout the state, including Allentown, Bethlehem, Whitehall, Scranton, Wilkes-Barre, Hazleton and Tamaqua."As you brighten your streets you will lighten your budget," the company's website boasts.Through Concord, the township borrowed $1.2 million for the project, and paid MEM $832,460 so that the company could start purchasing the street light systems from PPL as a "fast track purchase." Privatization was supposed to be completed in 18 months. Instead, the township found that it was increasingly in the dark. For more than two years after payment, MEM did nothing.Things came to a head in 2009. Township officials like Finance Director Andrew Freda were being stonewalled by Kearns and MEM consultant Peter Wernsdorfer. Freda would be told, "We'll take care of it" or "We're getting the bucket truck out."Wernsdorfer, who has not been charged, was Allentown's Public Works Director, but resigned in Oct. 2007. A member of the Executive Board of Lehigh County's Democratic Committee, Wernsdorfer now states, "They [MEM] owe me more than $50,000. I filed my own complaint in Lehigh County last month."In 2009, the township hired the Bethlehem law firm of Broughal and DeVito as their new solicitors, who learned from PPL that the township borrowed over one million dollars for a project that would only cost $271,180.Broughal and DeVito sued on the township's behalf in April 2010. Through the discovery process, township lawyers learned that the $832,460 paid to MEM was deposited in a corporate bank account on July 5, 2007, and commingled with money from other sources, yielding a $1.8 million balance.Not long after that, Kearns and McLaine began withdrawing large sums. One check for $366,600 went to Kearns. Two checks, totaling $608.945, went to McLain. All three checks were signed by both Kearns and McLain. When asked to explain the purpose for these checks during civil depositions, neither could recall.The money went fast. MEM received $832,460 on July 3, 2007. By Nov. 1, 2007 just short of four months it was gone, paid out to Kearns and McLaine to themselves and for other personal matters, the grand jury indictment states.But MEM's corporate tax return for that year reported $1.8 million in income to its two officers, Kearns and McLaine. On Kearns' individual return that year, he reported wages of $920,000. McLaine reported $1.5 million in wages.McLaine is by now familiar with the criminal system. According to a report in a Lackawanna County newspaper, he testified under immunity in June in the public corruption case against former Lackawanna County Commissioner Robert C. Cordaro. McLaine admitted to paying $10,000 every month to retain county contracts. According to Morganelli, police officials in Cumberland County have also expressed interest in the MEM investigation.Bethlehem Township solicitor Leo DeVito, in a prepared statement, thanked Morganelli and the grand jury for "their hard work in this matter. In addition to the criminal indictment, Bethlehem Township has ongoing litigation against both MEM and Robert Kearns and Patrick McLaine. This litigation was commenced in 2010. In addition, in a separate civil action, Concord Financial Services has also been sued by Bethlehem Township. Since all of these matters are currently pending and involve ongoing litigation, both civilly and now criminally, we offer no further comment on these matters at this time."But that was no consolation to Barry Roth, a member of the township's planning commission. "We should have been stopping this two years ago, before we got this far in debt."DeVito declined to comment on why there was no performance bond in the 2007 agreement under the township's previous solicitor, Thomas Elliott.Morganelli was unsure how much money Concord Public Finance was paid as a result of the 2007 agreement."We believe there was some kind of contact, but there wasn't a big conspiracy," he noted.Reading-based Concord is still financial adviser in Easton and Bethlehem. In 2004, Concord recommended a controversial swaption to Northampton County. In exchange for a quick $1.9 million in 2004, the county is at current interest rates stuck with a $25.9 bill in October.Morganelli stated his investigation remains open.