NGI The Weekly Gas Market Report
The bloody battle over the right to merge with Southwest GasCorp. has recently claimed another victim: Arizona CorporationCommissioner (ACC) Jim Irvin. Federal and state authorities areinvestigating allegations that the state regulator illegallyinfluenced Southwest Gas to go with Oneok Inc. as a merger partnerinstead of rival suitor Southern Union Co.
The U.S. Attorney’s Office, the FBI and the Maricopa County (AZ)Attorney’s Office are probing the allegations that were brought bySouthern Union “in concert with certain individuals within theArizona Corporation Commission,” a knowledgeable source told NGI.
While the source confirmed a criminal investigation was ongoing,he and others refused to disclose further details. “[These threeoffices] are looking into a matter that involves the ArizonaCorporation Commission. I will make no other comment,” said BillFitzGerald, a spokesman for the Maricopa County Attorney’s Office.”It would be totally inappropriate for us to [comment] at thispoint,” said a spokeswoman for the U.S. Attorney’s Office inPhoenix.
The investigation sprang out of a civil action filed in July bySouthern Union and certain unnamed members of the ACC, accusingIrvin of improperly using his position as then-chairman of theArizona commission to nudge Southwest Gas toward Oneok, a Tulsa,OK-based LDC. The lawsuit calls for $750 million in damages.
Both Oneok and Southern Union of Austin, TX, have been in afierce bidding war to acquire Southwest Gas. Last December,Southwest – which serves gas users in parts of Arizona, Nevada andCalifornia – selected Oneok as its buyer, even though SouthernUnion had bid higher for the company ($32 per share vs. $30 pershare from Oneok). Southwest’s board of directors at the timeexpressed doubts about whether Southern Union could finance thedeal and whether it could obtain the needed regulatory okays.
The lawsuit contends Irvin got Southwest Gas’ board to acceptOneok’s merger proposal by strongly suggesting that a SouthernUnion deal would run into problems at the regulatory level. “Thefacts of this case will expose the absurdity of this claim,” theArizona regulator responded in a prepared statement.
Irvin vehemently disavowed all charges. “I categorically denyeach and every civil and criminal allegation, and am confident myactions were not only within the confines of state and federal law,but were taken on behalf of the interests of the Arizona consumersI represent.”
Irvin said the lawsuit was politically and financiallymotivated. “.It is clear to me that Southern has been working inconjunction with individuals within the Commission to apply thepolitical pressure necessary in thwarting consideration of theSouthwest-Oneok merger. Again, this attack on my reputation fromentities outside of and within this Commission will not gounchallenged.”
Some of the allegations were made in affidavits provided byJames Fisher, an executive assistant for a former commissioner,according to Irvin. Fisher “has a history of wrongdoing at theCommission…..[His] prior actions cast serious doubt on hiscredibility as a witness for Southern,” he said.
The allegations are an act of “political gamesmanship,” whichIrvin says “is no stranger to this commission.” In the past coupleof months, Irvin was forced to step down as chairman after the twothen-Commissioners Tony West and Carl J. Kunasek threatened to votehim out; Commissioner West was removed from office by the ArizonaSupreme Court for holding a valid securities license; and now Irvinfinds himself the target of a civil lawsuit and criminalinvestigation. Even the most loyal of staff members characterizethe commission as being in a state of “chaos.”
As to the status of the Southwest Gas-Oneok merger, the Arizonacommission plans to take it up again in early September. It hadintended to address the transaction at a hearing in July, but thatwas postponed when news of the criminal investigation broke. Theproposed marriage has been approved by Nevada regulators, but itstill awaits action in California.
John Norris, Susan Parker
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