SEC Sues Former Executives of Nicor Energy for Role in Financial Fraud
FOR IMMEDIATE RELEASE
Washington, D.C., Dec. 10, 2003 - The Securities and Exchange Commission today filed a civil enforcement action against four former senior executives of Nicor Energy LLC, alleging that the executives inflated net income by $11 million in 2001. Nicor Energy is a joint venture between Nicor Inc. and Dynegy Inc. In its complaint, the SEC alleged that the executives used an array of improper accounting tools for the express purpose of hitting earnings targets.
In its case, filed in the U.S. District Court for the Northern District of Illinois, the SEC alleged that the defendants, using Nicor as a conduit, defrauded the investing public regarding Nicor Energy's financial condition and results of operations for its fiscal year ended December 31, 2001. As a result of the fraud, Nicor Energy falsely reported to Nicor net income of $4.097 million instead of losses of $7.47 million for 2001, and these results were in turn reported to Nicor's investors.
Also today, the U.S. Attorney for the Northern District of Illinois announced the indictment of three of the four executives, and one other individual.
Stephen Cutler, Director of the SEC's Enforcement Division, said, "Officers of a private entity such as Nicor Energy deceive the investing public when they provide false financial information to their parent corporation. The Complaint we filed today alleges that defendants did just that. We will seek stiff sanctions and work closely with the U.S. Attorney's Office to ensure that this serious breach of trust is addressed."
Robert Burson, Senior Associate Regional Director of the SEC's Midwest Regional Office added, "According to the complaint, the defendants overstated Nicor Energy's unbilled revenue accounts, understated Nicor Energy's accounts receivable reserve, shifted 2001 expenses into 2002 and shifted 2002 income into 2001, all in order to inflate Nicor Energy's 2001 income by more than $11 million."
Named as defendants in the complaint are:
- Kevin M. Stoffer, Nicor Energy's former president and Chief Executive Officer and a resident of Naperville, Illinois;
- Andrew J. Johnson, Nicor Energy's former Director of Financial Services and a resident of Elmhurst, Illinois;
- John Fringer, Nicor Energy's former Vice President of Power Services and Regulatory Affairs and a resident of Naperville, Illinois; and
- John F. Weir, Nicor Energy's former Director of Gas Services and Major Markets and a resident of Trevor, Wisconsin.
The complaint charged the defendants with violating the antifraud and internal control provisions of the federal securities laws (Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder). It further charged the defendants with aiding and abetting Nicor Energy's violations of those same provisions. The complaint finally charged Stoffer as a controlling person for Nicor Energy's violations of those provisions.
The SEC seeks an order permanently enjoining the defendants from violating federal securities laws, granting civil penalties and permanently barring the defendants from serving as an officer or director of a public company.
The Commission thanks the United States Attorney's Office for the Northern District of Illinois, the Federal Bureau of Investigation and the Postal Inspector's Office for their cooperation. The Commission's investigation is continuing.
Mary E. Keefe: (312)353-9338
Robert J. Burson: (312)353-7428