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SEC Files Fraud Charges Against Nicor's Former CEO, CFO and Treasurer


Washington, D.C., Aug. 9, 2007 - The Securities and Exchange Commission today announced the filing of a civil injunctive action against former senior officials of Nicor, Inc., a major Chicago-area natural gas distributor, alleging financial fraud lasting from 1999 to 2002. The SEC's complaint alleges that former Chairman, CEO and President Thomas Fisher, former CFO and Executive Vice-President Kathleen Halloran, and former Treasurer and Vice-President George Behrens 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.

Linda Thomsen, Director of the Commission's Division of Enforcement, said, "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."

Merri Jo Gillette, Director of the Commission's Chicago Regional Office, added, "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. 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 complaint alleges that in 1999, Fisher, Halloran and Behrens participated in devising a method by which Nicor could profit by accessing its low-cost last-in, first-out (LIFO) layers of gas inventory. As a result, the former officers engaged in or approved improper transactions, and made material misrepresentations in financial statements and documents filed with the Commission. They also failed to disclose material information regarding Nicor's rigged reductions in gas inventory levels that enabled it to improperly manipulate its earnings and to increase Nicor's revenues under a performance-based utility rate plan. In addition, the former officers 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. Moreover, they caused the losses on the supply agreement with the insurance provider to be improperly charged to Nicor's utility customers. These improper transactions enabled Nicor to understate its expenses and to manipulate its earnings to achieve its earnings targets. As a result of the manipulative scheme, 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.

Additionally, the former officers failed to make disclosures required by GAAP about the effects of LIFO inventory liquidations on Nicor's reported income. Nicor, through Fisher, Halloran and Behrens, failed to disclose in either the Management's Discussion & Analysis section of its 2000 and 2001 annual and quarterly reports, or in financial statements filed with those reports, that it had recorded material increases to income resulting from the liquidation of its LIFO inventory, and that the continued liquidation of Nicor's low-cost inventory was not sustainable.

On March 29, 2007, Nicor consented to the entry of a court order enjoining it from violating the antifraud and reporting provisions of the federal securities laws and ordering that it pay a $10 million civil penalty (LR-20060).

The Commission's action seeks injunctive relief, disgorgement, civil penalties, and officer and director bars against Fisher, Halloran and Behrens.

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For further information contact:

Merri Jo Gillette
Regional Director
SEC Chicago Regional Office
(312) 353-9338

Robert J. Burson
Senior Associate Regional Director
SEC Chicago Regional Office
(312) 353-7428

  Additional materials: Litigation Release No. 20233



Modified: 08/09/2007