Nicholas J. Bush, former president of the Natural Gas SupplyAssociation (NGSA), has been charged with one count of criminalmail fraud and one count of tax evasion in connection for his rolein allegedly embezzling more than $2.8 million through fakeconsulting contracts from the producer trade group.

Each charge carries with it a maximum term of five years, butfederal sentencing guidelines would more likely put Bush in federalprison 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. Thecharges were contained in a “criminal information” filed byprosecutors , which means Bush has waived his right to have thosecharges verified by a grand jury.

Bush, who was ousted from NGSA when the fraud was discovered inFebruary, could be arraigned before U.S. District Court Judge EmmetG. Sullivan on the charges as early as June 15. However, if hisattorney, William Murphy of Baltimore, isn’t finished with anothercase that he’s trying by that date, the arraignment will be pushedback to July 1, the spokesman said.

The arraignment will mark the first public appearance by Bushsince details of the fraud were revealed in a civil lawsuit broughtby NGSA nearly four months ago. The civil action spawned thesubsequent criminal investigation, and even has pointed the fingerat 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 Officealso was investigating Margaret Elizabeth Martin, now an employeeof TransCanada PipeLines Ltd. in Ottawa, who allegedly discoveredBush’s fraud activities while living with him in the early 1990s,but agreed to keep quiet in return for “certain purchases” madewith the stolen money. The NGSA made the allegations in an amendedlawsuit in late April, but then quickly withdrew them. Thespokesman indicated that “statute of limitation problems” andMartin’s Canadian residency would complicate any investigation ofher.

The charge of mail fraud, plus aiding and abetting mail fraud,covers Bush’s role in the entire scheme in which he “trick[ed] theNGSA into paying over $2.8 million to him under the assumed namesof ‘James W. Rogers,’ ‘James S. Rosebush,’ and ‘Kenneth A.Duberstein'” of The Duberstein Group, a consulting firm inWashington, according to documents filed by the Economic CrimeSection of the U.S. Attorney’s Office in federal court. The fraudbegan in 1983 – much earlier than initially was believed – andcontinued until January 1999, prosecutors contend.

Prosecutors charge Bush violated the federal mail fraud codewhen “on or about” January 1998 he “did knowingly cause to bedelivered by the United States Postal Service to the InternalRevenue Service” Form 1099 tax information – regarding non-employeecompensation – that had been altered to hide NGSA’s payment of$275,000 to Rogers for consulting work that was to have beenperformed during 1997. Rogers was unaware of the scheme, and themoney was pocketed by Bush, they said.

Prosecutors said that Bush between 1991 and 1998 routinelyintercepted Form 1099 tax information that was mailed to the three”consultants” so that “these individuals were not aware that theNGSA issued checks made payable in their names.” During the sameperiod, Bush also regularly intercepted and altered the Form 1099notices that were mailed to the IRS in order to “void” entriesshowing the consulting income for the phantom consultants,according to court documents.

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

Specifically, prosecutors said Bush caused the NGSA to issue -and then pocketed – more than $2.6 million worth of checks madepayable to Rogers, $160,000 worth of checks made payable toRosebush, and a $60,000 check to Duberstein over a 16-year period.The three “consultants” were unwitting parties to the fraud schemeengineered by Bush. In each case, “Bush took control of this moneyand 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 thensubmitted and approved “false and fraudulent expense requests” intheir names, according to prosecutors. They further said Bush “onor about” 1983 forged Rogers’ signature to open a checking accountat a Washington D.C. bank.

In the civil area, Bush last month responded to the chargesbrought against him by NGSA in the amended complaint filed in D.C.Superior Court, conceding that he entered into bogus contracts withthe three “consultants,” that they provided no work for theassociation and that he received “personal benefit” from thecontracts. But he took issue with the amount of money that NGSA hasaccused him of stealing and the damages being sought – $3 millionin compensatory damages and $5 million in punitive damages.

Bush further acknowledged that none of the Form 1099 taxinformation was ever sent to Rogers’ actual address, and thatRogers was completely unaware that his name was being used to carryout the consulting scheme.

Interestingly, Bush also admitted that TransCanada’s Martin, whoat the time was an aide in the Canadian Embassy in Washington, diduncover his fraud activities in the early 1990s and that he boughther certain items – a summer home in Canada, jewelry and a minkcoat – as inducements not to report his actions to authorities. Butwhile he hoped the items, especially the $250,000 vacation home,would help to sway her not to turn him in, Bush denied that Martinstruck any kind of bargain with him in return for the purchases.

Susan Parker

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