Indiana utility's role in troubled land deal questioned

CHESTERTON, Ind. -- - A citizens watchdog group wants to know whether Northern Indiana Public Service Co. ratepayers are helping to subsidize a related company involved in a $10 million land deal that is under federal investigation.

The Citizens Action Coalition's concerns focus on Coffee Creek Center, a planned community in Porter County developed by a sister company of NIPSCO.

Peter Manous, the former state Democratic chairman, and Gerry Nannenga, former business manager for the Northwest Indiana Regional Council of Carpenters, have pleaded guilty to accepting kickbacks for influencing the union to invest the money from its pension fund to buy 55 acres in the development.

Pension fund officials in a report to the U.S. Department of Labor last year estimated the land's value was less than $5 million. The land came from the Lake Erie Land Co., a subsidiary of NiSource Inc., which also owns NIPSCO.

Citizens Action Coalition officials said the kickbacks raised questions about oversight at NiSource subsidiaries and that they have asked the U.S. attorney's office to expand its probe of Coffee Creek.

"Do we still have a situation where Lake Erie Land is still a cash sinkhole and NIPSCO is a cash cow?" said Michael Mullett, an attorney for the Indianapolis-based group.

Officials at Merrillville-based NiSource said investigators have told them that NiSource was not a target of the government probe.

"This was a sale of land in the fair market value, arms length transaction," NiSource spokeswoman Kris Falzone said.

Kevin Pastrick, a son of longtime East Chicago Mayor Robert Pastrick, has pleaded guilty to making the kickback payments to Manous and Nannenga out of his $600,000 sale commission. Manous was an attorney for the carpenters union when it was considering whether to invest in the development about 15 miles east of Gary.

Pastrick was an independent contractor and his work with Lake Erie Land was not related to Coffee Creek, Falzone said. Lake Erie Land's activities are overseen by NiSource's senior management, she said.

When NiSource merged with the Virginia-based Columbia Energy Group in 2000, it asked the U.S. Securities and Exchange Commission for permission to keep Lake Erie Land even though it had been underperforming financially.

Lake Erie Land's balance sheets and income statements are treated as confidential when NiSource files its annual report with the SEC.

NiSource is parent company of utilities serving more than 3.7 million customers in an area stretching from the Gulf of Mexico through the Midwest to New England. NIPSCO provides natural gas to about 700,000 customers and electricity to 430,000 customers.