U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20060/ March 29, 2007
Securities and Exchange Commission v. Nicor Inc and Jeffrey L. Metz, United States District Court for the Northern District of Illinois Eastern Division, Civil Action No. 07C 1739
On March 29, 2007, the Securities and Exchange Commission filed a settled civil injunctive action against Nicor, Inc. and Jeffrey Metz, alleging financial fraud lasting from 1999 to 2002. Nicor, a major Chicago-area natural gas distributor, and Metz, its former Assistant Vice President and Controller, will pay more than $10 million to settle charges that they engaged in improper transactions, made material misrepresentations, and failed to disclose material information regarding Nicor's gas inventory in order to meet earnings targets and increase the company's revenues under a performance-based rate plan administered by the Illinois Commerce Commission.
The complaint alleges that in 1999, Nicor, acting through Metz and senior officers, devised a method by which it could profit by accessing its low-cost last-in, first-out (LIFO) layers of inventory. As a result, from 1999 through 2001, Nicor, with the assistance of senior officers, entered into a series of improper transactions designed to shift inventory off of its books so that Nicor could access a substantial portion of its low-cost LIFO layers of inventory. These transactions allowed Nicor to ensure that it met its earnings targets. By entering into these transactions, Nicor inflated its reported income for 2000 and 2001, and for each of the quarters within those years ("Reports") and the financial statements filed with those Reports.
Additionally, Nicor failed to disclose, in either its Management's Discussion & Analysis section of its Reports, or in its financial statements filed with those Reports, that it had recorded material credits to income resulting from LIFO liquidations.
Without admitting or denying the Commission's allegations, Nicor has consented to a permanent injunction from violating the antifraud and reporting provisions of the federal securities laws. Specifically, Nicor has consented to be enjoined from violating Section 17(a) and of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. Nicor has also consented to pay $1 of disgorgement and a civil penalty of $10 Million which will be placed in a Fair Fund for distribution to affected shareholders of Nicor's fraud. The settlement is subject to approval by the United States District Court for the Northern District of Illinois.
Without admitting or denying the Commission's allegations, Metz has consented to a permanent injunction from violating and/or aiding and abetting violations of the antifraud and reporting provisions of the federal securities laws. Specifically, Metz has consented to be enjoined from violating Section 17(a) and of the Securities Act, Section 10(b) of the Securities Exchange Act, and Rule 10b-5 thereunder, and from aiding and abetting violations of Sections 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. Metz has also consented to pay disgorgement of $7,404, prejudgment interest of $2,647, a civil penalty of $50,000, and to be barred from serving as an officer or director of a public company for five years following the date of entry of Final Judgment. The settlement is subject to approval by the United States District Court for the Northern District of Illinois.
The Commission's investigation in this matter is continuing.