Oneok Inc., the successful bidder for Southwest Gas Corp., threwdown the gauntlet earlier this week, challenging losing bidderSouthern Union (SU) to present evidence by today to support itsallegations that Oneok conspired to illegally influence SouthwestGas in its choice of merger partner.

“Oneok has now been asked several times to provide informationto rebut charges based on innuendo and conjecture. We suggest it istime to ask the source of the innuendo and conjecture, SouthernUnion, to provide promptly – we suggest by this Friday [today] -any reliable or credible evidence it has to support itsaccusations,” wrote Michael M. Grant, an outside attorney for Oneokin Arizona, in an Aug. 25th letter to Chairman Carl J. Kunasek ofthe Arizona Corporation Commission (ACC).

The Oneok letter was in response to earlier correspondence fromKunasek in which he said he had “real concerns…about whether theparties to the proposed transaction have been honest andforthcoming in their answers to my questions about the eventsleading up to the Oneok/Southwest filing” with the ACC. Theproposed merger is pending before regulators in both Arizona andCalifornia. It already has been approved in Nevada..

Kunasek urged Oneok and Southwest Gas to allow Southern Union toparticipate in a hearing on the merger at the ACC, despite afederal injunction obtained by Oneok that prohibits Southern Unionfrom interfering in the merger. He said he wanted Southern Union tointervene to address the controversy over the alleged improprietiesassociated with the proposed sale, but Oneok and Southwest Gas areopposed to such a move. They are concerned that Southern Unionmight use the forum to sabotage the merger.

Southern Union of Austin, TX, and Oneok, a Tulsa, OK-based LDC,have been in a fierce bidding war for Southwest Gas, which servescustomers in parts of Arizona, Nevada and California. LastDecember, Southwest chose Oneok to purchase it, even thoughSouthern Union made a higher bid for the company. Since then,Southern Union has initiated legal action in three different courtsin an attempt to block the merger. As a result of its civil lawsuitfiled in Arizona, the U.S. Attorney’s Office, the FBI and theMaricopa County (AZ) Attorney’s Office are investigatingallegations that a former ACC chairman, Jim Irvin, and others-atOneok’s request-may have tried to illegally influence Southwest tochoose Oneok over Southern Union. And, in the meantime, proceedingson the merger in Arizona have stalled.

“I’m concerned that Oneok, perhaps even Southwest Gas, have usedthe regulatory process to deny shareholders full and completeinformation about competing offers,” such as the one made bySouthern Union, Kunasek wrote. He noted he was undertaking aninquiry to “determine whether Oneok, its subsidiaries, or itsrepresentatives engaged in a coordinated plan” to use Irvin (now anACC commissioner) and Jack Rose, former executive secretary at theACC, to persuade Southwest Gas to pick Oneok. “This, I believe goesto the heart of whether Oneok is fit to acquire Southwest Gas andprovide utility service in Arizona,” Kunasek said.

“Oneok did not ask Commissioner Irvin-either directly, throughJack Rose, or otherwise-to lobby for the Oneok/Southwesttransaction,” countered Grant. Nor, did it enter into “anyfinancial arrangements ” with either Irvin or Rose in connectionwith the merger, the attorney told Kunasek. Southern Union contendsthe two men-at Oneok’s request-attempted to influence regulators inCalifornia and Nevada to send a joint letter to Southwest Gas’board of directors favoring Oneok as a merger choice.

“We now know that Mr. Rose made several trips in an effort toadvance the Oneok proposal,” Kunasek said in his Aug. 22nd letterto Oneok. “He made trips to Nevada, Oklahoma, California, Kansas,New York and perhaps Missouri. We know that Commissioner Irvinattended meetings in Nevada and California which were neverreported to me…”

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