A Chicago-based gas company’s CFO and other senior executives are being pursued by the SEC for financial fraud between 1999 and 2002.
The SEC stated yesterday that former executives of the Nicor gas company engaged in, or approved, improper transactions and misrepresented Nicor’s gas inventory in order to meet earnings targets and increase the company’s revenues under a performance-based utility rate plan.
The regulator has named the chairman, CEO and president Thomas Fisher, former CFO and executive vice-president Kathleen Halloran, and former treasurer and vice-president George Behrens, in civil filings.
'This action against three senior officers of Nicor demonstrates the Commission’s continued commitment to holding individual decision-makers accountable for their conduct when it results in fraudulent financial statements,' said SEC director of enforcement, Linda Thomsen.
Director of the SEC's regional office in Chicago, Merri Jo Gillette, said the SEC will not tolerate 'accounting ploys'.
'Fisher, Halloran and Behrens engaged in a scheme to manipulate Nicor’s earnings through fraudulent transactions and mislead investors by making improper disclosures regarding Nicor’s financial performance,' said Gillette. 'This case, like others, shows that the Commission will not tolerate accounting ploys and misleading disclosures by senior officers who are intent on making their numbers.'
The SEC alleges that Fisher, Halloran and Behrens:
● participated in 1999 in devising a method by which Nicor could profit by accessing its low-cost last-in, first-out (LIFO) layers of gas inventory;
● engaged in or approved improper transactions, and made material misrepresentations in financial statements and documents filed with the Commission,
● failed to disclose material information regarding Nicor’s rigged reductions in gas inventory levels that enabled it to improperly manipulate its earnings a nd to increase Nicor’s revenues under a performance-based utility rate plan;
● materially understated Nicor’s expenses during the first and second quarters of 2001 by improperly bundling a weather-insurance contract with an agreement to supply gas to Nicor’s insurance provider at below-market prices;
● caused the losses on the supply agreement with the insurance provider to be improperly charged to Nicor’s utility customers;
● allowed improper transactions that enabled Nicor to understate its expenses and to manipulate its earnings to achieve its earnings targets.
As a result of the manipulative scheme, the SEC alleges, Nicor materially overstated its reported income for the years ending 2000 and 2001, and for each of the quarters within those years and the financial statements filed with those reports.
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