KeySpan Corp. disclosed Friday in a proxy statement that the Securities and Exchange Commission (SEC) issued a formal order of investigation on March 5 for alleged insider trading by individual officers of the company that may have occurred before it announced a special charge last July. The individual officers being investigated were not named.

KeySpan indicated it has cooperated with preliminary inquiries from the U.S. attorney’s office and the SEC regarding stock trading by individual officers of KeySpan before July 17, 2001. On July 17, KeySpan announced it would take a special charge in its energy services business and would reduce its 2001 earnings forecast (see Daily GPI, July 18, 2001).

Last July, KeySpan said it would take a $30 million after-tax second quarter charge , or 22 cents per share, against earnings to tie up some recently discovered loose ends on several construction projects of its Roy Kay Cos. subsidiary, which it purchased in 2000. CEO Robert Catell also said then that declines in gas and power prices had forced a downward revision in full-year results for the company.

Catell said the following in a statement last July, “The special charge reflects the recently discovered cost to KeySpan to complete the work on certain Roy Kay construction projects. The charge also reflects unanticipated costs to correct inaccuracies on the books of these companies on several construction projects as well as inaccuracies related to their overall financial and operational performance. The performance of the former owners of the Roy Kay Cos. was not commensurate with the high standards demanded by KeySpan. As a result we have terminated their employment and installed new management in their place. KeySpan and Roy Kay are engaged in litigation relating to the termination of the former owners and other matters relating to the acquisition of these companies. Let me assure you we intend to pursue all available legal remedies to recover the damages we have incurred as a result of their activities.”

The company also indicated in the filing that the SEC is investigating the company’s compliance record regarding reporting rules and regulations, generally during the period following KeySpan’s acquisition of the Roy Kay Cos. through the July 17, 2001 announcement.

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