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NGSA's President Accused of Misappropriating $2.4 Million

NGSA's President Accused of Misappropriating $2.4 Million

The Natural Gas Supply Association (NGSA), which represents the nation's major gas producers, last week placed its president, Nicholas J. Bush, on administrative leave without pay in the wake of an investigation and a subsequent lawsuit. The suit accuses him of fraud and misappropriating more than $2.4 million from the group since the late 1980s. The D.C. Superior Court, where the suit was filed, has issued a temporary restraining order against Bush and has continued the case until Feb. 26 [Docket No. 1028-99].

The civil action alleges that Bush breached his fiduciary duty to the association and engaged in unjust enrichment by misappropriating funds over an 11-year period. It claims Bush entered into a series of "sham" consulting contracts, using either phony names or real names and social security numbers of acquaintances for the consultants, as well as setting up phony addresses and bank accounts and intercepting tax information to carry out the scheme. The activity was discovered in late January when one of the individuals whose name was being used secretly by Bush as one of NGSA's bogus consultants received a tax bill for 1997 from the Internal Revenue Service (IRS) for income he never received stemming from services he never provided to NGSA.

Bush was able to carry out this activity for so many years because he had the authority to sign checks without any oversight, according to the lawsuit. Also, when checks were cut to pay the bogus consultants, he always offered to deliver them personally, it noted. The NGSA has since changed its operating practice to require more than one signature on checks. The association reportedly is investigating the possibility that others - previous association employees - may have either known about Bush's alleged activity or even participated in it.

The NGSA doesn't intend to initiate criminal action against Bush at this time, sources said, but primarily is seeking recovery of the missing funds, plus punitive damages of $5 million. It may reconsider bringing criminal charges if it can't retrieve the money. For now, the association expects that the IRS and other agencies will hold Bush criminally liable.

Beginning in 1987 through the present, the suit alleges that Bush entered into a number of bogus contracts with a W. Rogers for nearly $2.3 million. The social security number used belongs to James W.O. Rogers, who lives in Colorado and who once negotiated a lease termination for Bush on a house that he was renting. Rogers was unaware of the fraudulent scheme, the lawsuit said.

The alleged scheme went undetected for years because Bush promised to hand deliver the checks to Rogers, it noted. Further, the IRS form 1099 that was sent by NGSA to Rogers each year actually went to a phony address that was set up by Bush, according to the suit.

An affidavit filed by James M. Cottos of KPMG Forensic &amp Litigation Services in Washington, D.C., which helped NGSA conduct its investigation into the matter, shows payments to Rogers, ranging from $13,000 to $420,084 every year since 1987, all signed by Bush.

In January 1991, the lawsuit further contends Bush caused NGSA to enter into another bogus consulting contract - this time with James S. Rosebush for about $160,000. His address was listed as 580 Park Ave. in New York. It is believed that Rosebush was the previous owner of Bush's house at 5184 Palisades Lane in Washington D.C.

The lawsuit puts the amount of funds taken from NGSA at about $2.4 million. But since filing with the court, "we have found another $100,000 [missing]," an association source said, adding there was a "possibility there may be more." Bush reportedly used the funds to acquire his Palisades home, make mortgage payments, make landscaping improvements to his home, and pay off utility and credit card bills, according to the affidavit accompanying the lawsuit. The payments account for only $326,000 of the nearly $2.3 million in checks that were written to Rogers. It hasn't been determined for what purpose the payments to Rosebush were used, it said.

"The lawsuit pretty much says all there is to say," said Eugene Propper, the lead attorney in the case for the D.C. firm of Holland and Knight. "We have a fair amount of detail in there. We have filed not only a complaint but injunctive papers. What happened is a very unfortunate thing, but we plan to deal with it in the courts."

NGSA spokeswoman Linda Schoumacher said the alleged misappropriation of funds has taken its toll on NGSA. "We have a small budget so any misuse of the budget will obviously be felt." Nevertheless, she noted the group's members still are "very strongly" behind NGSA. One outside source, however, suggested this disclosure might advance efforts on the part of some members to roll NGSA back into the American Petroleum Institute from which it originally was spun off. Bush had successfully fended off those efforts last year.

Bush had been president of NGSA for more than 17 years. Prior to joining NGSA in October 1981, he was vice president of the Midcontinent Oil &amp Gas Association. He was with Exxon Corp. for seven years, Exxon Co. USA in Houston for three years and spent four years for Exxon Co. USA in Washington, D.C. Bush also spent seven years with Ford Motor Co. in Cleveland and Detroit. He holds an undergraduate degree in economics and has done graduate work in economics at Case-Western Reserve University in Cleveland. Bush's salary prior to NGSA's restructuring was more than $400,000, sources said.

"It really is regrettable," said one source. "For many years [NGSA was an] organization that was preeminent among the Washington D.C. trades, and it got to that point because of the intellectual vigor of its [employees] and their intellectual modesty. I mean it supported deregulation when it was good for NGSA and when it was not good for NGSA. It's terribly disappointing," said one source.

Schoumacher said NGSA's executive committee, which is made up of Dick Sharples of Anadarko Petroleum, J. Larry Nichols of Devon Energy Corp., and Terry Hudgens of Texaco Natural Gas North America, will be handling the day-to-day affairs of the association. It also will decide whether to appoint a temporary replacement for Bush. NGSA's policy committee has named a committee to review the organization's leadership.

"NGSA will remain active representing natural gas producers, especially in responding to the significant industry restructuring proposals now before the FERC," the association said in a statement. Bush could not be reached for comment. His home phone number is unlisted and association employees said they have never had his home number.

Susan Parker, Rocco Canonica

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