U.S. Attorney's Office Probes NGSA Scandal
The U.S. Attorney's office in Washington D.C. has begun to
explore the possibility of criminal action in the case involving
Nicholas J. Bush, former president of the Natural Gas Supply
Association (NGSA), who was relieved of his duties two weeks ago in
the wake of allegations that he defrauded the trade group of more
than $2.4 million over a 12-year period. NGSA made the allegations
in a lawsuit it filed two weeks ago.
Spokesman Channing Phillips said Justice Department policy
precluded him from confirming that an investigation was in
progress, but NGI has learned that prosecutors already have been in
contact with certain parties close to the case. Criminal charges,
if any are filed, would likely stem from allegations Bush created
phony bank accounts and mailing addresses, and misused tax
information and individuals' social security numbers as part of the
apparent fraud scheme.
In the civil lawsuit, which was filed in D.C. Superior Court,
NGSA accused Bush of causing the association to enter into bogus
consulting contracts as far back as 1987 and then establishing an
elaborate scheme that enabled the former NGSA president to divert
for his own use the money that was paid to the phony consultants
over the years. A court hearing on the case was scheduled for this
past Friday, but was postponed 60 days because the "parties are
talking." Details of the talks weren't revealed.
In the meantime, the court has ordered several of Bush's assets
in the district valued at up to $1.25 million to be attached and
seized, including his home in the plush Palisades section of
Washington, his checking account and a safety deposit box, and a
checking account allegedly established for one of the fictional
consultants - James W. Rogers. NGSA estimated in its lawsuit that
the bulk of the missing funds ($2.27 million) went to pay Rogers
for consulting fees and expenses.
The court also has enjoined Bush, according to legal documents,
from "selling, transferring, assigning, disposing, encumbering or
removing" any of the association's assets, with the exception of
"necessaries." The NGSA has posted a bond in the amount of $2.5
million in the event it's found that Bush was "wrongfully enjoined"
or his assets "improperly attached."
Some sources questioned whether the NGSA civil lawsuit ever
would reach the trial stage. And while a settlement is always a
possibility, they doubted the association would retrieve much of
the missing funds in the end. It will be "lucky to get 25 cents on
a dollar," or about $600,000, said one observer. But another was
more pessimistic. That money is "like the antebellum South, it's
'Gone with the Wind.'" In its civil action, the association is
seeking damages of $2.43 million, plus $5 million in punitive
The 14% of the missing funds that NGSA has been able to trace so
far primarily went for Bush's own personal use - acquiring his
Palisades home, making mortgage payments, and paying off credit
card and utility bills, according to the NGSA lawsuit. Some last
week speculated that part of the money also could have gone for
lobbyist activities on Capitol Hill. "I'm not discounting the fact
that it could have been that," NGI was told.
Official Washington and industry representatives reacted to the
news with shock and dismay last week, with many asking how Bush -
if the allegations have merit - or anyone, for that matter, could
carry out a fraud scheme undetected for so many years.
Although many sympathized with NGSA and saw it as the victim, an
industry observer said the association's board of directors
"whether they like it or not has to assume some of the
responsibility for this...It doesn't reflect very well on them
right now. It makes it look like they've been asleep at the wheel."
Several directors were in Washington Friday to meet with NGSA
staff. The fallout from the scandal could affect other associations
as well, the observer noted. "Board members are going to say if it
happened there [NGSA], it could happen here."
The disclosure of the alleged fraud scheme once again has fueled
debate over NGSA's future as a stand-alone organization -
specifically, whether it should be folded into the American
Petroleum Institute (API) from where it was spun off originally.
The members of NGSA, both large and small producers, were "pretty
loud and clear" when they decided last fall that they wanted NGSA
to continue representing them, said one source, and that hasn't
changed. But another believes the turmoil "very strongly
strengthens [API's] hand" now. "If they [API] don't take advantage
of this, they're making a big mistake."
Some believe NGSA has more immediate, pressing concerns at hand.
It has a "lack of leadership problem that only gets worse as time
goes on" and a "morale problem," which could "potentially
undermine" the trade group's effectiveness in representing the gas
industry, remarked one industry observer.
The alleged fraud scheme was detected in late January when the
real James W. Rogers, who lives in Colorado, contacted NGSA after
he received a tax bill for 1997 for $275,000 in income that he was
alleged to have been paid for providing consulting services to the
association. He never received the funds or had any relationship
with NGSA, he said in an affidavit filed with the court. Further,
he noted Bush called him and "indicated that there was some sort of
confusion in his accounting department that had resulted from
out-sourcing the accounting function of NGSA. Mr. Bush apologized
for the mistake and indicated that it would be taken care of
But then John Sharp, NGSA's vice president of federal and state
affairs and general counsel, contacted Rogers and asked him to
recount his story, according to the affidavit, and this led to the
unraveling of the alleged fraud scheme. Sharp has been given
responsibility for the day-to-day operations of the association in
the absence of Bush.