Payments to MarketSpan Execs Targeted by Class Action
A class action complaint was filed in the Supreme Court of New
York in Nassau County against MarketSpan Corp. and former senior
officers/directors of Long Island Lighting Company (LILCO). The
class action was filed on behalf of current shareholders of
MarketSpan who were stockholders of LILCO and/or The Brooklyn Union
Gas (BU) or its successor, KeySpan Energy, at the time of the
merger of LILCO and BU.
The complaint alleges defendants breached fiduciary duties by
paying to former senior LILCO and current MarketSpan officers
and/or directors about $67 million in retirement benefits and other
compensation upon the separate mergers of certain LILCO assets with
BU and other LILCO assets and stock with the Long Island Power
Authority (LIPA), including about $42 million to former LILCO and
current MarketSpan CEO William J. Catacosinos alone. The payments
were criticized last week by New York Governor George E. Pataki.
Richard M. Kessel, chairman of LIPA, also criticized the payments
"We have received the lawsuits and we are reviewing them and
will respond in a timely fashion," a MarketSpan spokeswoman said.
Plaintiffs seek to obtain "equitable" relief, including
disgorgement of the payments, an injunction preventing further
payments, and accounting, and/or compensatory damages for
defendants' breaches of their fiduciary duties to the plaintiffs.
In May, KeySpan Energy combined with LILCO to form holding
company MarketSpan. Headquartered in both Brooklyn and Hicksville,
MarketSpan owns LILCO's common plant, non-nuclear
electric-generation assets and operations, and the regulated gas
businesses of both LILCO and Brooklyn Union. In addition,
MarketSpan owns KeySpan's unregulated subsidiaries and its
investments in gas exploration, production and transportation -
including a 66% ownership in Houston Exploration Co.
The Long Island Power Authority, LIPA became the authority
providing electric service on Long Island. Brooklyn Union customers
in New York City and on Long Island, in general, were to begin
receiving an average reduction of 3.8% in their gas transportation
rate. In New York City, the reduction resulted from the
consolidation. On Long Island, the reduction resulted from both the
consolidation and a 2.1% reduction set by a rate agreement with the
New York State Public Service Commission Feb. 5.
Joe Fisher, Houston
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