The U.S. Attorney’s office in Washington D.C. has begun toexplore the possibility of criminal action in the case involvingNicholas J. Bush, former president of the Natural Gas SupplyAssociation (NGSA), who was relieved of his duties two weeks ago inthe wake of allegations that he defrauded the trade group of morethan $2.4 million over a 12-year period. NGSA made the allegationsin a lawsuit it filed two weeks ago.

Spokesman Channing Phillips said Justice Department policyprecluded him from confirming that an investigation was inprogress, but NGI has learned that prosecutors already have been incontact with certain parties close to the case. Criminal charges,if any are filed, would likely stem from allegations Bush createdphony bank accounts and mailing addresses, and misused taxinformation and individuals’ social security numbers as part of theapparent fraud scheme.

In the civil lawsuit, which was filed in D.C. Superior Court,NGSA accused Bush of causing the association to enter into bogusconsulting contracts as far back as 1987 and then establishing anelaborate scheme that enabled the former NGSA president to divertfor his own use the money that was paid to the phony consultantsover the years. A court hearing on the case was scheduled for thispast Friday, but was postponed 60 days because the “parties aretalking.” Details of the talks weren’t revealed.

In the meantime, the court has ordered several of Bush’s assetsin the district valued at up to $1.25 million to be attached andseized, including his home in the plush Palisades section ofWashington, his checking account and a safety deposit box, and achecking account allegedly established for one of the fictionalconsultants – James W. Rogers. NGSA estimated in its lawsuit thatthe bulk of the missing funds ($2.27 million) went to pay Rogersfor consulting fees and expenses.

The court also has enjoined Bush, according to legal documents,from “selling, transferring, assigning, disposing, encumbering orremoving” any of the association’s assets, with the exception of”necessaries.” The NGSA has posted a bond in the amount of $2.5million in the event it’s found that Bush was “wrongfully enjoined”or his assets “improperly attached.”

Some sources questioned whether the NGSA civil lawsuit everwould reach the trial stage. And while a settlement is always apossibility, they doubted the association would retrieve much ofthe missing funds in the end. It will be “lucky to get 25 cents ona dollar,” or about $600,000, said one observer. But another wasmore pessimistic. That money is “like the antebellum South, it’s’Gone with the Wind.'” In its civil action, the association isseeking damages of $2.43 million, plus $5 million in punitivedamages.

The 14% of the missing funds that NGSA has been able to trace sofar primarily went for Bush’s own personal use – acquiring hisPalisades home, making mortgage payments, and paying off creditcard and utility bills, according to the NGSA lawsuit. Some lastweek speculated that part of the money also could have gone forlobbyist activities on Capitol Hill. “I’m not discounting the factthat it could have been that,” NGI was told.

Official Washington and industry representatives reacted to thenews with shock and dismay last week, with many asking how Bush -if the allegations have merit – or anyone, for that matter, couldcarry out a fraud scheme undetected for so many years.

Although many sympathized with NGSA and saw it as the victim, anindustry observer said the association’s board of directors”whether they like it or not has to assume some of theresponsibility for this…It doesn’t reflect very well on themright now. It makes it look like they’ve been asleep at the wheel.”Several directors were in Washington Friday to meet with NGSAstaff. The fallout from the scandal could affect other associationsas well, the observer noted. “Board members are going to say if ithappened there [NGSA], it could happen here.”

The disclosure of the alleged fraud scheme once again has fueleddebate over NGSA’s future as a stand-alone organization -specifically, whether it should be folded into the AmericanPetroleum Institute (API) from where it was spun off originally.The members of NGSA, both large and small producers, were “prettyloud and clear” when they decided last fall that they wanted NGSAto continue representing them, said one source, and that hasn’tchanged. But another believes the turmoil “very stronglystrengthens [API’s] hand” now. “If they [API] don’t take advantageof this, they’re making a big mistake.”

Some believe NGSA has more immediate, pressing concerns at hand.It has a “lack of leadership problem that only gets worse as timegoes on” and a “morale problem,” which could “potentiallyundermine” the trade group’s effectiveness in representing the gasindustry, remarked one industry observer.

The alleged fraud scheme was detected in late January when thereal James W. Rogers, who lives in Colorado, contacted NGSA afterhe received a tax bill for 1997 for $275,000 in income that he wasalleged to have been paid for providing consulting services to theassociation. He never received the funds or had any relationshipwith NGSA, he said in an affidavit filed with the court. Further,he noted Bush called him and “indicated that there was some sort ofconfusion in his accounting department that had resulted fromout-sourcing the accounting function of NGSA. Mr. Bush apologizedfor the mistake and indicated that it would be taken care ofpromptly.”

But then John Sharp, NGSA’s vice president of federal and stateaffairs and general counsel, contacted Rogers and asked him torecount his story, according to the affidavit, and this led to theunraveling of the alleged fraud scheme. Sharp has been givenresponsibility for the day-to-day operations of the association inthe absence of Bush.

Susan Parker

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