Former Nicor Energy Executives Indicted
CHICAGO -- - Three former top executives of an energy marketing company and an attorney were indicted recently on charges of inflating earnings by as much as $6 million two years ago to earn bonuses.
The indictment charged fraud at Nicor Energy, a now-defunct joint venture of Naperville, Ill.-based Nicor Inc. and Houston-based Dynegy Inc. to buy and sell natural gas and electricity. The executives also were charged with civil fraud Wednesday in a separate lawsuit brought by the Securities and Exchange Commission.
``The essence of the fraud was that Nicor Energy cooked the books so the three executives could get bonuses and the lawyer could keep getting legal business,'' U.S. Attorney Patrick J. Fitzgerald said in unveiling the five-count wire fraud indictment.
It was the latest problem for Nicor Inc., which has also been accused of deceiving the Illinois Commerce Commission in promising to buy low-cost gas and split the savings with consumers. It allegedly used gas that it had been storing since the 1950s.
Nicor Energy was a joint venture of Nicor Inc. and Houston-based Dynegy Inc., to buy and sell natural gas and electricity. Nicor Inc., which was not accused of wrongdoing in the indictment, saw its stock tumble roughly 40 percent when it revealed the financial problems at Nicor Energy.
Fitzgerald said the three executives have told federal prosecutors they will plead guilty in the criminal case and are cooperating in the ongoing investigation. He declined to provide details, and the executives' lawyers could not immediately be reached for comment.
The executives are Kevin Stoffer, 45, of Naperville, former president and chief executive officer of Nicor Energy; Andrew Johnson, 43, of Elmhurst, former director of financial services; and John Fringer, 43, of Naperville, who headed the company's electric power business.
Also charged was Michael Munson, 38, of Chicago, the company's attorney. Fitzgerald said he helped to engineer the alleged fraud with an eye to getting more legal business from Nicor Energy and eventually landing a job as its general counsel.
Munson attorney Steven M. Kowal said his client was innocent of any wrongdoing.
``We hope a jury will understand that Mr. Munson is not responsible for the decisions of the company's management,'' Kowal said.
Wire fraud carries a maximum penalty of five years in prison and a $250,000 fine.
While federal prosecutors were unveiling the criminal indictment, the Securities and Exchange Commission was filing a civil lawsuit against the three executives and another one, John F. Weir of Trevor, Wis., former director of gas services and the major markets division.
The SEC said the profit of more than $4 million the company declared for 2001 was bogus and should have been reported as a $7.47 million loss.
``This shows a disturbing pattern of accounting shenanigans,'' said Robert J. Burson, SEC senior associate regional director.
Officials said the three executives were attempting to meet 2001 profit targets that would have triggered a total of $400,000 in bonuses for themselves and others at the company.
``This wasn't generally accepted accounting principles in this case, or the new math,'' said Thomas J. Kneir, head of the FBI's Chicago office. ``This was plain simple fraud.''
Nicor Inc. is a holding company whose major asset is Nicor Gas, which supplies natural gas to 2 million customers throughout the northern third of Illinois outside Chicago. Spokesman Don Ingle said last year the company had before-tax income of $186 million. Nicor Inc. invested about $15 million in Nicor Energy, which had 130,000 customers.
``We discovered the accounting irregularities at Nicor Energy as part of our year-end audit, and we publicly disclosed those findings to the federal authorities and the investment community,'' Ingle said. ``We've cooperated fully throughout the investigation, and we're pleased that this has come to a resolution.''
Shares of Nicor close down 43 cents at $33.38 in trading Wednesday on the New York Stock Exchange, while Dynegy shares dropped 5 cents to $3.99.
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