Just when the embezzlement scandal that landed the former president of the Natural Gas Supply Association (NGSA) in prison two years ago was becoming a faint memory, two lawsuits have been filed in Superior Court in the District of Columbia that accuse the producer trade group’s current president, R. Skip Horvath, of “financial misconduct” and violating internal control procedures.

The two civil suits, which were filed Friday, claim Horvath often failed to provide proper receipts when seeking reimbursement for restaurant expenses involving “substantial” amounts, as is required by new internal control procedures enacted by NGSA; filed false names on his expense reports; increased the qualifying age limit for NGSA’s daycare/childcare credit to “his own personal benefit” without obtaining approval from the group’s board of directors; claimed more childcare expenses than he actually spent and could verify with receipts; and hired a personal friend as an NGSA consultant for an estimated $18,000 a year.

Although no figures were cited in the lawsuits, one source estimated that the restaurant receipts in dispute were in the neighborhood of $5,000.

The “wrongful termination” lawsuits were brought separately by Jodee Mosher Jackson, NGSA’s former comptroller, and Carol Burg, a former executive assistant (Nos. 01-0008472, 01-0008471, respectively). Both said they were “abruptly terminated” and allegedly escorted out of NGSA’s headquarters in Washington after confronting Horvath about the discrepancies on Feb. 23. Jackson specifically noted that she “was penalized for whistle-blowing and bringing the potential illegal activities to light” at NGSA, which represents major natural gas producers.

The two former NGSA employees are seeking from NGSA and Horvath $500,000 in compensatory damages for “loss of income and emotional distress,” another $500,000 in punitive damages, and attorney fees.

Jackson and Burg reportedly were relieved of their duties just days before they were due to report on Horvath’s “continued violations of NGSA’s procedures and his irregular activities” to the NGSA board’s Audit Committee, sources said. Following her firing, Jackson noted two members of the NGSA board asked her to continue investigating Horvath for “alleged misappropriations and misrepresentations.”

Both Jackson and Burg had been cited by the Federal Bureau of Investigation for uncovering the embezzlement scheme involving former NGSA president Nicholas Bush, who was sentenced in 1999 to 3 1/2 years in federal prison for defrauding the producer group of nearly $3 million over a period of more than a decade (See Daily GPI, Oct. 26, 1999). Horvath was tapped to succeed Bush in mid-June 1999.

“I can’t even dignify or respond to [these] rumors,” said NGSA spokeswoman Laurie Cramer Friday in response to published reports that lawsuits were imminent. “There’s no lawsuit that I know of…We do not have any litigation against us,” she told NGI. An industry source called the lawsuits “one of the worst-kept secrets” in Washington, noting that they had been widely rumored for months.

In her lawsuit, Jackson said she became concerned about potential financial violations when Horvath began submitting check stubs each month, rather than receipts from restaurants, for reimbursement of expenses incurred during 1999 and 2000. Horvath “gave several excuses for his need to submit handwritten stubs, including claiming certain restaurants did not provide receipts. This was, of course, false and further investigation revealed that the restaurants Mr. Horvath claimed did not provide receipts did, in fact, provide receipts,” the Jackson lawsuit said.

Horvath also said he “needed to submit handwritten stubs for cash reimbursement…because he was taking members of FERC to lunch; however he could not reveal their names.” Instead, he noted that “he used false names and paid cash so that there was no record of the lunch, claiming this was something ‘executives often do,'” according to the civil action.

Horvath further allegedly told Jackson that “he had instructed a director of NGSA to use false names on their expense reports when taking FERC members to lunch and paying cash.” Jackson said this “simply compounded [her] concern that NGSA coffers were at even greater jeopardy.”

Horvath “[had] managed to evade the financial controls which had been put in place to prevent a recurrence of the [fraud] abuses” that surfaced at NGSA in 1999, said the Burg lawsuit.

At an NGSA board meeting on Nov. 30, 2000, a board member, who “was specifically aware of Ms. Jackson’s concerns regarding Mr. Horvath’s improper reimbursement requests and lack of adherence to internal control procedures, requested the board to establish an Audit Committee to audit the financial status and internal control procedures of NGSA,” the lawsuit said. Jackson noted that she alerted Horvath that she intended to report his alleged financial and procedural inconsistencies to the Audit Committee, which was scheduled to meet Feb. 27, 2001 — four days after she was terminated from NGSA.

Also at the Nov. 30 meeting, Jackson contends that Horvath failed to inform the board that NGSA had a budget deficit for fiscal year 2000 of approximately $195,516. Instead, he allegedly told the board the information wasn’t available, she noted. Horvath “intentionally misled the board in giving them a false sense of security with regard to the budgetary status of NGSA.”

Both Jackson and Burg further claimed that Horvath had removed an emergency reserve account valued at more than $1.2 million from the NGSA comptroller’s purview and hired Charles Schwab to oversee it, making himself the sole signatory — an action they said that was expressly barred by NGSA following the Bush embezzlement scandal.

NGSA’s Management Committee created the emergency reserve account following the Bush scandal in order to pay debts in the event of the association’s dissolution or restructuring. The account includes funds that the court ordered Bush to pay back to NGSA.

Among other alleged inconsistences, Jackson reported that Horvath hired “one of his personal friends, who worked out of Canada, as an NGSA consultant.” The consultant, according to the lawsuit, billed the producer group for about $18,000 in less than one year.

Jackson also accused Horvath of revising ‘NGSA’s Policies and Procedures Manual’ with respect to employee daycare/childcare benefits without first seeking board approval. “This change was made for his own personal benefit to include children up to the age of 12 years (thereby including his youngest child),” the lawsuit said.

Horvath’s action “increased NGSA’s liability” for its childcare/daycare policy to “more than $100,000 per year and possibly as much as one million dollars over ten years, without informing the board of directors or receiving prior approval” from the board, it noted.

In addition to revising the childcare eligibility requirements, Burg alleges Horvath “took the maximum amount that NGSA provided employees [$10,320 per year] even though…he was entitled to receive the amount he actually spent and could support with receipts, which was considerably less.”

Furthermore, Burg said Horvath, who had previously worked at the Interstate Natural Gas Association of America (INGAA), had maintained “financial ties” to the interstate gas pipeline group while he was working at NGSA. For “nearly a year after he started working for NGSA, he was accepting health care benefits paid by INGAA, despite being offered benefits from NGSA,” her lawsuit noted. “This was a clear-cut conflict of interest for the president of an association representing producers.”

Last January, Jackson said Horvath was informed that “there did not seem to be a correlation” between overtime expenses and “specific events at NGSA.” The expenses had previously been “incurred or approved” by Horvath without board approval, she said.

But at a Feb. 5 board meeting, Horvath “maliciously proclaimed…that Ms. Jackson had tampered with the overtime sheets for her own personal benefit. This was a false and malicious statement,” according to the lawsuit.

In addition to the wrongful termination charges, Jackson and Burg allege that Horvath “willfully, wantonly, [and] maliciously” defamed their characters and reputations, still owes them back wages, and denied them salary increases and severance packages.

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