Aquila officials have dismissed allegations in an anonymous letter from a group of the company’s own employees that charges that company executives falsified earnings and manipulated corporate accounting in an effort to boost executive compensation. The letter has been forwarded to a special audit committee for an investigation, and the audit committee has notified the Securities and Exchange Commission of the matter.

“The allegations in the letter are unfounded and we feel the independent counsel will come to the same conclusion,” said Aquila spokesman Al Butkus.

He said it was routine to send the letter to the audit committee, “on which there are no members of management. They conduct their own investigation as they see fit and in this case they have hired outside counsel that is doing the investigating. As a matter of course, although they are not required, they have let the SEC know that we are investigating the letter and the allegations in it.”

The letter, which was mailed to the Aquila board on May 12, alleges that the company’s earnings were inaccurate in 2000 and 2001 and contain inflated numbers used to increase executive bonuses. “The financial results were falsified through a manipulation of mark-to-market and mark-to-model earnings, fabrication of transactions with trading counterparties and creative purchasing account adjustments,” the letter said, according to Butkus. Named in the letter were Aquila CEO Richard Green, former CEO Robert Green, COO Keith Stamm and former CFO Dan Street.

“It’s totally untrue,” said Butkus. “Our records for 2000 and 2001 were audited twice because we changed auditors recently. And executive bonuses are based on a series of performance measures all of which are a matter of public record.”

The letter stated that those four executives received bonuses collectively of $30 million in 2000 and 2001. In 2000, Richard Green and Robert Green received bonuses of $3 million each, said Butkus. In 2001, the company’s best year in terms of financial performance, the salary and bonus for Richard Green was $3.9 million and for Robert Green they were $3.8 million. The salaries and bonuses for the two executives a year earlier were about $1 million lower, according to Butkus, who doubts that the total executive compensation of the four executives over the two years came to $30 million.

“The thing that is really blatant is that our numbers were audited twice,” he said. However, Butkus also noted that unlike several other energy companies, Aquila has not reviewed its accounting as part of an SEC investigation.

The letter also alleges that the purchase of Multinet, an Australian utility, was closed by falsifying financial forecasts to convince lenders to finance the project, and that Australian government officials were promised cash and employment to support the purchase.

It also claims questionable real estate deals were made through subsidiary Zimmer Cos. that were structured in such a way as to allow property to be acquired and then resold or leased to Aquila at a profit for the benefit of the Green brothers.

Aquila shares were down about 3% by mid-afternoon on Thursday to $2.62. In 2001, the company’s shares were worth more than $30.

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