Investigators Probing Avista's Trading Practices
Legal troubles for the once high-flying Avista Corp. continue to add up, as federal investigators have begun looking into possible energy futures trading rule violations that may have occurred two years ago at a Houston subsidiary.
Investigators from the Commodity Futures Trading Commission (CFTC) are checking into whether subsidiary Avista Energy illegally manipulated futures markets that in turn drove up the price of an electricity futures contract in 1998.
The CFTC, created in 1974 by the U.S. Congress, monitors the sale of commodity futures and options markets across the country, and is similar to the Securities and Exchange Commission. It has the authority to bring civil charges into administrative or federal court, and also may refer alleged violations to the U.S. Department of Justice for criminal charges, according to attorney Michael Koblenz.
Koblenz, a former CFTC assistant director and regional counsel, is representing Luis Pando, a former Avista Energy senior analyst and trader, one of the four Avista Energy traders who sued the corporation for bonuses, and whose case is still pending. Pando claims he is owed at least $300,000.
The CFTC is looking into trading in an August 1998 Palo Verde and California-Oregon border electricity futures contract on the New York Mercantile Exchange, according to one of the subpoenas. Pando said he had been questioned for two days in September by CFTC investigators in New York.
The CFTC investigation, however, is just a small part of the legal difficulties that have descended upon Avista Corp. Four former Avista Energy electricity traders sued the corporation, alleging that their managers reneged on profit bonuses in 1998 and 1999. Three of those lawsuits have been settled out of court for undisclosed sums.
Avista also is preparing its defense against four shareholder lawsuits filed after the company lost $123 million in energy trading losses from its regulated utility (see Daily GPI, Sept. 26).
And then, not nearly as surprising as it would have been less than a year ago, Tom Matthews resigned as chairman of the board last week, after being replaced in October as CEO. He said in recent months that he considered himself to be the "lightning rod" for problems within the company, and that the focus had diverted attention from Avista's numerous successes.
Matthews' departure was not the only management change announced last week by the Avista board of directors. Erik J. Anderson was appointed to the board of directors, filling a board vacancy created by Matthews. Anderson is CEO of Seattle-based Matthew G. Norton Co., responsible for strategic planning and direction, asset allocation and principal investments within the company.
Larry A. Stanley was elected non-executive chairman of the board of directors, replacing Matthews, and he will serve out Matthews' unexpired term as chairman until May 2001. Also, as expected, Gary G. Ely was officially appointed Avista president and CEO. In October, when Matthews resigned, the Avista board had named Ely acting president and CEO. Ely, who has been with Avista for 33 years, had previously held the position of executive vice president of Avista Corp. He has overseen the refocus and strong financial turnaround of the company's unregulated Avista Energy unit this past year and has led the initial development of Avista's growth businesses.
Scott L. Morris and Kelly O. Norwood were named corporate vice presidents of Avista Corp. Morris also serves as president of Avista Utilities, the company's regulated electric and gas operating division, and Norwood also serves as vice president and general manager of Avista Utilities' energy resources department.
"The board has affirmed its commitment to and remains fully supportive of the company's strategic direction. We will continue our goal of value creation and emphasize this as our number one objective. We also remain diligent in our work to strengthen our utility business," said Stanley.
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