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Ex-NGSA Official Faces Criminal Charges

Ex-NGSA Official Faces Criminal Charges

Nicholas J. Bush, former president of the Natural Gas Supply Association (NGSA), has been charged with one count of criminal mail fraud and one count of tax evasion in connection for his role in allegedly embezzling more than $2.8 million through fake consulting contracts from the producer trade group.

Each charge carries with it a maximum term of five years, but federal sentencing guidelines would more likely put Bush in federal prison for 30-37 months if convicted, said a spokesman for the U.S. Attorney's Office in Washington D.C. That's a "rough calculation" based on "what we know about him at this time," he noted. The charges were contained in a "criminal information" filed by prosecutors , which means Bush has waived his right to have those charges verified by a grand jury.

Bush, who was ousted from NGSA when the fraud was discovered in February, could be arraigned before U.S. District Court Judge Emmet G. Sullivan on the charges as early as June 15. However, if his attorney, William Murphy of Baltimore, isn't finished with another case that he's trying by that date, the arraignment will be pushed back to July 1, the spokesman said.

The arraignment will mark the first public appearance by Bush since details of the fraud were revealed in a civil lawsuit brought by NGSA nearly four months ago. The civil action spawned the subsequent criminal investigation, and even has pointed the finger at parties in Canada. Compounding Bush's legal woes, his wife, Katherine, filed for a divorce last month in Fairfax County (VA) Circuit Court.

The spokesman declined to say whether the U.S. Attorney's Office also was investigating Margaret Elizabeth Martin, now an employee of TransCanada PipeLines Ltd. in Ottawa, who allegedly discovered Bush's fraud activities while living with him in the early 1990s, but agreed to keep quiet in return for "certain purchases" made with the stolen money. The NGSA made the allegations in an amended lawsuit in late April, but then quickly withdrew them. The spokesman indicated that "statute of limitation problems" and Martin's Canadian residency would complicate any investigation of her.

The charge of mail fraud, plus aiding and abetting mail fraud, covers Bush's role in the entire scheme in which he "trick[ed] the NGSA into paying over $2.8 million to him under the assumed names of 'James W. Rogers,' 'James S. Rosebush,' and 'Kenneth A. Duberstein'" of The Duberstein Group, a consulting firm in Washington, according to documents filed by the Economic Crime Section of the U.S. Attorney's Office in federal court. The fraud began in 1983 - much earlier than initially was believed - and continued until January 1999, prosecutors contend.

Prosecutors charge Bush violated the federal mail fraud code when "on or about" January 1998 he "did knowingly cause to be delivered by the United States Postal Service to the Internal Revenue Service" Form 1099 tax information - regarding non-employee compensation - that had been altered to hide NGSA's payment of $275,000 to Rogers for consulting work that was to have been performed during 1997. Rogers was unaware of the scheme, and the money was pocketed by Bush, they said.

Prosecutors said that Bush between 1991 and 1998 routinely intercepted Form 1099 tax information that was mailed to the three "consultants" so that "these individuals were not aware that the NGSA issued checks made payable in their names." During the same period, Bush also regularly intercepted and altered the Form 1099 notices that were mailed to the IRS in order to "void" entries showing the consulting income for the phantom consultants, according to court documents.

In an attempt to further conceal the "consultant" payments, Bush filed a "false and fraudulent" income tax return "on behalf of himself and his spouse" for calendar year 1997, prosecutors said. Bush listed their joint taxable income for that year as $212,088 even though he "knew and believed" at the time it was "substantially in excess" of that amount. The Bushes paid $60,332 in taxes for 1997.

Specifically, prosecutors said Bush caused the NGSA to issue - and then pocketed - more than $2.6 million worth of checks made payable to Rogers, $160,000 worth of checks made payable to Rosebush, and a $60,000 check to Duberstein over a 16-year period. The three "consultants" were unwitting parties to the fraud scheme engineered by Bush. In each case, "Bush took control of this money and thereafter spent it for his own personal use," they charged.

To perpetrate the fraud, Bush forged the signatures of Rogers, Rosebush and Duberstein on bogus retainer agreements, and then submitted and approved "false and fraudulent expense requests" in their names, according to prosecutors. They further said Bush "on or about" 1983 forged Rogers' signature to open a checking account at a Washington D.C. bank.

In the civil area, Bush last month responded to the charges brought against him by NGSA in the amended complaint filed in D.C. Superior Court, conceding that he entered into bogus contracts with the three "consultants," that they provided no work for the association and that he received "personal benefit" from the contracts. But he took issue with the amount of money that NGSA has accused him of stealing and the damages being sought - $3 million in compensatory damages and $5 million in punitive damages.

Bush further acknowledged that none of the Form 1099 tax information was ever sent to Rogers' actual address, and that Rogers was completely unaware that his name was being used to carry out the consulting scheme.

Interestingly, Bush also admitted that TransCanada's Martin, who at the time was an aide in the Canadian Embassy in Washington, did uncover his fraud activities in the early 1990s and that he bought her certain items - a summer home in Canada, jewelry and a mink coat - as inducements not to report his actions to authorities. But while he hoped the items, especially the $250,000 vacation home, would help to sway her not to turn him in, Bush denied that Martin struck any kind of bargain with him in return for the purchases.

Susan Parker

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