Legal troubles for the once high-flying Avista Corp. continue toadd up, as federal investigators have begun looking into possibleenergy futures trading rule violations that may have occurred twoyears ago at a Houston subsidiary.

Investigators from the Commodity Futures Trading Commission(CFTC) are checking into whether subsidiary Avista Energy illegallymanipulated futures markets that in turn drove up the price of anelectricity futures contract in 1998.

The CFTC, created in 1974 by the U.S. Congress, monitors thesale of commodity futures and options markets across the country,and is similar to the Securities and Exchange Commission. It hasthe authority to bring civil charges into administrative or federalcourt, and also may refer alleged violations to the U.S. Departmentof Justice for criminal charges, according to attorney MichaelKoblenz.

Koblenz, a former CFTC assistant director and regional counsel,is representing Luis Pando, a former Avista Energy senior analystand trader, one of the four Avista Energy traders who sued thecorporation for bonuses, and whose case is still pending. Pandoclaims he is owed at least $300,000.

The CFTC is looking into trading in an August 1998 Palo Verdeand California-Oregon border electricity futures contract on theNew York Mercantile Exchange, according to one of the subpoenas.Pando said he had been questioned for two days in September by CFTCinvestigators in New York.

The CFTC investigation, however, is just a small part of thelegal difficulties that have descended upon Avista Corp. Fourformer Avista Energy electricity traders sued the corporation,alleging that their managers reneged on profit bonuses in 1998 and1999. Three of those lawsuits have been settled out of court forundisclosed sums.

Avista also is preparing its defense against four shareholderlawsuits filed after the company lost $123 million in energy tradinglosses from its regulated utility (see Daily GPI, Sept. 26).

And then, not nearly as surprising as it would have been lessthan a year ago, Tom Matthews resigned as chairman of the boardlast week, after being replaced in October as CEO. He said inrecent months that he considered himself to be the “lightning rod”for problems within the company, and that the focus had divertedattention from Avista’s numerous successes.

Matthews’ departure was not the only management change announcedlast week by the Avista board of directors. Erik J. Anderson wasappointed to the board of directors, filling a board vacancycreated by Matthews. Anderson is CEO of Seattle-based Matthew G.Norton Co., responsible for strategic planning and direction, assetallocation and principal investments within the company.

Larry A. Stanley was elected non-executive chairman of the boardof directors, replacing Matthews, and he will serve out Matthews’unexpired term as chairman until May 2001. Also, as expected, GaryG. Ely was officially appointed Avista president and CEO. InOctober, when Matthews resigned, the Avista board had named Elyacting president and CEO. Ely, who has been with Avista for 33years, had previously held the position of executive vice presidentof Avista Corp. He has overseen the refocus and strong financialturnaround of the company’s unregulated Avista Energy unit thispast year and has led the initial development of Avista’s growthbusinesses.

Scott L. Morris and Kelly O. Norwood were named corporate vicepresidents of Avista Corp. Morris also serves as president ofAvista Utilities, the company’s regulated electric and gasoperating division, and Norwood also serves as vice president andgeneral manager of Avista Utilities’ energy resources department.

“The board has affirmed its commitment to and remains fullysupportive of the company’s strategic direction. We will continueour goal of value creation and emphasize this as our number oneobjective. We also remain diligent in our work to strengthen ourutility business,” said Stanley.

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