With a brief explanation in its Securities and Exchange Commission (SEC) 10-Q filing, Duke Energy Corp. in late August reduced the before-tax earnings of its Duke Energy North America (DENA) unit by $17 million, and cut another $2 million from other units that were associated with the trading unit in the second quarter.

The regulatory filing made Aug. 20 confirmed the company had conducted 89 sham or “round-trip” energy trades, which amounted to revenue of about $217 million between 1999 and June 2002 out of a total revenue of $75.6 billion.

“As a result of Duke Energy’s findings related to the SEC’s informal inquiry on electricity trades involving simultaneous purchases and sales of power at the same time (round-trip trades), DENA recorded adjustments which reduced its EBIT by $17 million during the quarter ended June 30, 2002,” Duke reported in the filing. “An additional $2 million charge was recorded in other Duke Energy business segments related to these findings.”

Of approximately 750,000 trades between Jan. 1, 1999 and June 30, 2002, Duke identified 28 round-trip transactions “done for the apparent purpose of increasing volumes on the Intercontinental Exchange and 61 round-trip transactions done at the direction of one of Duke Energy’s traders that did not have a legitimate business purpose and were contrary to corporate policy. Duke Energy determined that the financial impact of these ’round-trip’ transactions was not material.”

Duke also reported that since April 2002, 16 shareholder class action lawsuits have been filed against the company, all related to its trading activities. It also has received a shareholder’s derivative notice demanding it begin litigation against executives, the auditor, and investment bankers. Commenting on the investigations by the Federal Energy Regulatory Commission, Commodity Futures Trading Commission and a grand jury subpoena issued by the U.S. Attorney’s office in Houston about its round-trip trading activities, Duke said it “is cooperating with the respective governmental agencies on each of these inquiries.”

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.