The Natural Gas Supply Association (NGSA), which represents thenation’s major gas producers, last week placed its president,Nicholas J. Bush, on administrative leave without pay in the wakeof an investigation and a subsequent lawsuit. The suit accuses himof fraud and misappropriating more than $2.4 million from the groupsince the late 1980s. The D.C. Superior Court, where the suit wasfiled, has issued a temporary restraining order against Bush andhas continued the case until Feb. 26 [Docket No. 1028-99].

The civil action alleges that Bush breached his fiduciary dutyto the association and engaged in unjust enrichment bymisappropriating funds over an 11-year period. It claims Bushentered into a series of “sham” consulting contracts, using eitherphony names or real names and social security numbers ofacquaintances for the consultants, as well as setting up phonyaddresses and bank accounts and intercepting tax information tocarry out the scheme. The activity was discovered in late Januarywhen one of the individuals whose name was being used secretly byBush as one of NGSA’s bogus consultants received a tax bill for1997 from the Internal Revenue Service (IRS) for income he neverreceived stemming from services he never provided to NGSA.

Bush was able to carry out this activity for so many yearsbecause he had the authority to sign checks without any oversight,according to the lawsuit. Also, when checks were cut to pay thebogus consultants, he always offered to deliver them personally, itnoted. The NGSA has since changed its operating practice to requiremore than one signature on checks. The association reportedly isinvestigating the possibility that others – previous associationemployees – may have either known about Bush’s alleged activity oreven participated in it.

The NGSA doesn’t intend to initiate criminal action against Bushat this time, sources said, but primarily is seeking recovery ofthe missing funds, plus punitive damages of $5 million. It mayreconsider bringing criminal charges if it can’t retrieve themoney. For now, the association expects that the IRS and otheragencies will hold Bush criminally liable.

Beginning in 1987 through the present, the suit alleges thatBush entered into a number of bogus contracts with a W. Rogers fornearly $2.3 million. The social security number used belongs toJames W.O. Rogers, who lives in Colorado and who once negotiated alease termination for Bush on a house that he was renting. Rogerswas unaware of the fraudulent scheme, the lawsuit said.

The alleged scheme went undetected for years because Bushpromised to hand deliver the checks to Rogers, it noted. Further,the IRS form 1099 that was sent by NGSA to Rogers each yearactually went to a phony address that was set up by Bush, accordingto the suit.

An affidavit filed by James M. Cottos of KPMG Forensic &ampLitigation Services in Washington, D.C., which helped NGSA conductits investigation into the matter, shows payments to Rogers,ranging from $13,000 to $420,084 every year since 1987, all signedby Bush.

In January 1991, the lawsuit further contends Bush caused NGSAto enter into another bogus consulting contract – this time withJames S. Rosebush for about $160,000. His address was listed as 580Park Ave. in New York. It is believed that Rosebush was theprevious owner of Bush’s house at 5184 Palisades Lane in WashingtonD.C.

The lawsuit puts the amount of funds taken from NGSA at about$2.4 million. But since filing with the court, “we have foundanother $100,000 [missing],” an association source said, addingthere was a “possibility there may be more.” Bush reportedly usedthe funds to acquire his Palisades home, make mortgage payments,make landscaping improvements to his home, and pay off utility andcredit card bills, according to the affidavit accompanying thelawsuit. The payments account for only $326,000 of the nearly $2.3million in checks that were written to Rogers. It hasn’t beendetermined for what purpose the payments to Rosebush were used, itsaid.

“The lawsuit pretty much says all there is to say,” said EugenePropper, the lead attorney in the case for the D.C. firm of Hollandand Knight. “We have a fair amount of detail in there. We havefiled not only a complaint but injunctive papers. What happened isa very unfortunate thing, but we plan to deal with it in thecourts.”

NGSA spokeswoman Linda Schoumacher said the allegedmisappropriation of funds has taken its toll on NGSA. “We have asmall budget so any misuse of the budget will obviously be felt.”Nevertheless, she noted the group’s members still are “verystrongly” behind NGSA. One outside source, however, suggested thisdisclosure might advance efforts on the part of some members toroll NGSA back into the American Petroleum Institute from which itoriginally was spun off. Bush had successfully fended off thoseefforts last year.

Bush had been president of NGSA for more than 17 years. Prior tojoining NGSA in October 1981, he was vice president of theMidcontinent Oil &amp Gas Association. He was with Exxon Corp. forseven years, Exxon Co. USA in Houston for three years and spentfour years for Exxon Co. USA in Washington, D.C. Bush also spentseven years with Ford Motor Co. in Cleveland and Detroit. He holdsan undergraduate degree in economics and has done graduate work ineconomics at Case-Western Reserve University in Cleveland. Bush’ssalary prior to NGSA’s restructuring was more than $400,000,sources said.

“It really is regrettable,” said one source. “For many years[NGSA was an] organization that was preeminent among the WashingtonD.C. trades, and it got to that point because of the intellectualvigor of its [employees] and their intellectual modesty. I mean itsupported deregulation when it was good for NGSA and when it wasnot good for NGSA. It’s terribly disappointing,” said one source.

Schoumacher said NGSA’s executive committee, which is made up ofDick Sharples of Anadarko Petroleum, J. Larry Nichols of DevonEnergy Corp., and Terry Hudgens of Texaco Natural Gas NorthAmerica, will be handling the day-to-day affairs of theassociation. It also will decide whether to appoint a temporaryreplacement for Bush. NGSA’s policy committee has named a committeeto review the organization’s leadership.

“NGSA will remain active representing natural gas producers,especially in responding to the significant industry restructuringproposals now before the FERC,” the association said in astatement. Bush could not be reached for comment. His home phonenumber is unlisted and association employees said they have neverhad his home number.

Susan Parker, Rocco Canonica

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