U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18503 / December 12, 2003
Accounting and Auditing Enforcement
Release No. 1923 / December 12, 2003
SEC v. Stoffer et al., (U.S.D.C. N.D. Ill., Civil Action No. 03 C 8910, filed December 10, 2003)
FOUR NICOR ENERGY SENIOR EXECUTIVES SUED FOR INFLATING INCOME
On December 10, 2003, the Securities and Exchange Commission filed a civil enforcement action in the United States District Court for the Northern District of Illinois against four former senior executives of Nicor Energy LLC ("Nicor Energy"), a joint venture between Nicor Inc. ("Nicor") and Dynegy Inc. ("Dynegy"). In its complaint, the SEC charged that Kevin M. Stoffer, Nicor Energy's former president and Chief Executive Officer, Andrew J. Johnson, Nicor Energy's former Director of Financial Services, John Fringer, Nicor Energy's former Vice President of Power Services and Regulatory Affairs, and John F. Weir, Nicor Energy's former Director of Gas Services and Major Markets, engaged in a scheme that improperly inflated Nicor Energy's net income by over $11 million. Stoffer, Fringer and Johnson were indicted in connection with the same conduct.
In its case, the SEC alleged that the defendants, using Nicor as a conduit, made material misstatements, and omitted to state material facts, to the investing public regarding Nicor Energy's financial condition and results of operations for its fiscal year ended December 31, 2001. The complaint alleges that the defendants knowingly or recklessly overstated Nicor Energy's unbilled revenue accounts, understated Nicor Energy's accounts receivable (bad debt) reserve, shifted 2001 expenses into 2002 and shifted 2002 income into 2001, in order to inflate Nicor Energy's 2001 income by more than $11 million. As a result of the fraud, Nicor Energy erroneously reported to Nicor and Dynegy net income of $4.097 million instead of losses of $7.47 million for 2001.
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 ("the Exchange Act") 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 acknowledges the assistance and cooperation of the United States Attorney's Office for the Northern District of Illinois, the Federal Bureau of Investigation and the Postal Inspector's Office. The Commission's investigation is continuing.
SEC Complaint in this matter