The investigation that led the Natural Gas Supply Association(NGSA), to accuse its president of misappropriating funds wassparked by a bill from the Internal Revenue Service, requiring aconsultant to pay taxes on income he never received for services henever provided to NGSA.

The investigation, begun in late January, led to the filing of acivil suit last week against Nicholas J. Bush, accusing him ofmisappropriating more than $2.4 million from the group since thelate 1980s. (See Daily GPI, Feb. 19) The D.C. Superior Court, wherethe suit was filed, has issued a temporary restraining orderagainst Bush and has continued the case until Feb. 26 [Docket No.1028-99].

The civil action alleges that Bush breached his fiduciary dutyto the association and engaged in unjust enrichment bymisappropriating funds over a 11-year period. It claims he enteredinto a series of “sham” consulting contracts, using either phonynames or real names and social security numbers of acquaintancesfor the consultants, as well as setting up phony addresses and bankaccounts and intercepting tax information to carry out the scheme.

Bush was able to carry out this activity for so many yearsbecause he had the authority to sign checks without any oversight,according to the lawsuit. Also, when a check was cut to pay thebogus consultants, he always offered to give it to them directly,it noted. Further, the IRS form 1099 that was sent by NGSA to theconsultants each year actually went to a phony address that was setup by Bush, according to the suit.

The NGSA has since changed its operating practice with respectto its check-writing policy. The association reportedly isinvestigating the possibility that others – previous associationemployees – may have either known about Bush’s alleged activity oreven participated in it.

The NGSA doesn’t intend to seek criminal action against Bush atthis time, sources said, but primarily is seeking recovery of themissing funds, plus punitive damages of $5 million. It mayreconsider bringing criminal charges if it can’t retrieve themoney. For now, the association expects that the IRS and otheragencies will hold Bush criminally liable.

An affidavit filed by James M. Cottos of KPMG Forensic &Litigation Services in Washington, D.C., which helped NGSA conductits investigation into the matter, shows bogus payments to oneconsultant ranging from $13,000 to $420,084 every year since 1987,all signed by Bush.

The lawsuit puts the amount of funds taken from NGSA at about$2.4 million. But since filing with the court, “we have foundanother $100,000 [missing],” an association source said, addingthere was a “possibility there may be more.” Bush reportedly usedthe funds to acquire his Palisades home, make mortgage payments,make landscaping improvements to his home, and pay off utility andcredit card bills, according to an affidavit submitted along withthe lawsuit. The payments account for only a small part of thedispersed amount.

Observers have questioned whether this disclosure might advanceefforts on the part of some members to roll NGSA back into theAmerican Petroleum Institute from which it originally was spun off.Bush had successfully fended off those efforts last year.

Bush had been president of NGSA for more than 18 years and hadbeen a longtime employee of Exxon before that. His salary prior toNGSA’s restructuring was more than $400,000, sources said.

NGSA’s executive committee, made up of executives from AnadarkoPetroleum, Devon Energy and Texaco Natural Gas North America, willbe handling the day-to-day affairs of the association. They alsowill decide whether to appoint a temporary replacement for Bush.NGSA’s policy committee has named a committee to review theorganization’s leadership.

“NGSA will remain active representing natural gas producers,especially in responding to the significant industry restructuringproposals now before the FERC,” the association said in astatement. Bush could not be reached for comment. His home phonenumber is unlisted and association employees said they have neverhad his home number.

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