Natural gas distribution company Nicor Inc. will reportedly pay a $10 million fine to settle charges of deceptive accounting practices brought by the Securities and Exchange Commission.
Nicor first announced its accounting problems in July 2002, saying that a subsidiary had accounted for natural gas costs between 2000 and 2002 under a performance-based rate program. Under the program, the company's total supply costs were compared to a benchmark tied to a market index. Any savings or losses in comparison to the benchmark were to have been split between the company and consumers.
Consumer groups and Illinois state regulators accused Nicor of using the program to manipulate how it accounted for natural gas purchases, sales, transportation and storage in an effort to bilk consumers. Nicor's stock price dropped 40 percent and the company eventually restated almost four years of financials.
The company also said that an internal review had uncovered accounting irregularities at Nicor Energy LLC, a retail energy marketing company.
Under the tentative settlement, which still must be approved by the SEC, Nicor will pay $1 in disgorgement and a fine of $10 million. Nicor will neither admit, nor deny wrongdoing in the matter, and will be subject to undisclosed injunctive obligations. In 2004, Nicor settled a lawsuit filed with its shareholders for $38.4 million. A case brought by the Citizens Utility Board is still pending before the Illinois Commerce Commission and criminal charges could still be coming from the federal government.
"We are pleased to be taking another step in the direction of a final resolution regarding this matter," said senior vice president and general counsel Paul Gracey, in a statement. "Most importantly, since these events surfaced nearly four years ago, the company has taken significant actions to improve the internal controls and oversight of our gas supply area and to prevent a recurrence of the activities that led to this investigation."
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