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Duke fires Indiana president, ex-regulator in fallout from ethics scandal November 9, 2010

Posted by Laura Arnold in Duke Energy, Edwardsport IGCC Plant, Indiana Utility Regulatory Commission (IURC), Uncategorized.
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http://www.indystar.com/article/20101109/BUSINESS/11090334/Duke-Energy-fires-Indiana-president-and-a-former-regulator?odyssey=tab|topnews|text|IndyStar.com 
 
Editor’s Note: This action reported in today’s Indianapolis Star confirms the rumor circulating that Michael Reed and Scott Storms were not coming back from their administrative leave at Duke Energy.
 
Written by John Russell
 
Duke Energy Corp. has fired its Indiana president and a staff attorney in the wake of an ethics scandal that has cast a shadow over the company’s operations in the state, particularly construction of its controversial $2.9 billion power plant in Southern Indiana.

The electric utility told employees in an internal newsletter Monday that it had terminated the employment of Michael Reed, president of its Indiana operations, and Scott Storms, a lawyer in its regulatory affairs office. Both had worked in the company’s Plainfield office.

The utility had been stung in recent months by disclosures that Storms, while still an administrative law judge with the Indiana Utility Regulatory Commission, had presided over numerous cases this year involving Duke, even as he was talking to Reed about a job at the electric company.

At the same time, Storms had signed administrative orders that helped clear the way for Duke to pass on to customers the cost overruns for its coal gasification plant in Edwardsport.

Storms and Reed had received clearance from the Indiana State Ethics Commission to leave state government and begin working immediately for Duke. But the panel later decided to take another look at Storms’ case.

The ethics commission recently found probable cause that Storms had had a financial interest arising from employment or prospective employment at Duke and failed to notify his superiors of a potential conflict of interest. The panel is set to consider the matter Wednesday.

The ethics commission’s initial clearance of Storms’ move to Duke raised cries of foul from watchdog groups, which said the situation was a clear conflict of interest and a violation of the state ethics code.

Duke did not provide details Monday onthe terminations but said it took action “after careful consideration” of the findings of an investigation conducted by an outside law firm, Gibson, Dunn & Crutcher, which the company said it received Thursday. The company did not share the law firm’s report with employees or the media.

“Because the report involves personnel matters, we won’t be sharing it,” Duke spokeswoman Angeline Protogere said. She added that the company’s investigation is continuing. Duke also disclosed some of the personnel changes in a filing Monday afternoon with the Securities and Exchange Commission.

Neither Reed nor Storms could be reached for comment Monday. The two officials had been on administrative leave since Oct. 5, pending the outcome of the company investigation.

Adam Arceneaux, an attorney at Ice Miller who had represented Reed in June before the Indiana State Ethics Commission, sounded surprised by the news.

“You’re the first person to tell me about this,” he said. “I have no comment at all. I really don’t.”

Citizens Action Coalition of Indiana, which made Duke’s hiring of Storms public in September, on Monday called for Duke to release the full contents of its report that led to the firings.

“The public deserves to know all the facts in this case,” said Kerwin Olson, project director for the consumer watchdog group.

Another watchdog group, Common Cause/Indiana, renewed its call Monday for an outside, federal investigation into the matter.

“It looks like Duke wants to wash their hands of Reed and Storms, and given the stain they’ve left, it was the appropriate thing for them to do,” said Julia Vaughn, policy director with the group. “But we still think there could be more to it and think an outside investigation is needed.”

U.S. Attorney Joe Hogsett has referred calls for a federal investigation to the U.S. Justice Department but declined to comment further.

Concerns about a revolving door between the state regulatory agency and the utilities it oversees reached a climax in September. That’s when Gov. Mitch Daniels fired the chairman of the IURC, David Lott Hardy, saying Hardy had been aware of the job conversations between Storms and Reed but did not remove Storms from presiding over Duke cases. Daniels also asked the state inspector general’s office to investigate the matter for any possible violations of state law.

E-mails later obtained by The Indianapolis Star showed Reed and Storms apparently had been talking as early as June about a job for Storms at Duke.

“I’m still working on the ‘you’ issue with Duke mgt,” Reed told Storms in a June 27 e-mail. “Don’t sense a concern about
making this happen, rather more of an issue of when and how.”

A month after that e-mail exchange, Storms signed off on a lengthy administrative order that could result in the
IURC approving cost overruns for Duke’s Edwardsport plant.

In recent weeks, the IURC has begun reviewing all cases involving the Edwardsport plant back to 2006, along with other Duke matters back to January 2010.

Through a spokeswoman, IURC Chairman Jim Atterholt declined to comment Monday on Duke’s action. Jane Jankowski, press secretary to Daniels, also declined to comment. “It’s a Duke investigation,” she said.

Last week, Duke CEO Jim Rogers was called to appear before the IURC to answer questions about the company’s relationship with state regulators and to defend the plant.

He told the IURC he was confident there had been no improper communication between Duke employees and the IURC regarding the Edwardsport plant. He also said the company was investigating the e-mail matter and would take decisive action at the appropriate time.

Duke has spent about $2 billion so far on the Edwardsport plant, which is designed to serve hundreds of thousands of
households and will replace several older coal plants that Duke is planning to retire. Construction on the new plant is about half-completed.

On Monday, Duke, based in Charlotte, N.C., named Doug Esamann to succeed Reed as head of its Indiana operations. Esamann began serving as interim president Oct. 11.

Duke also said it is implementing “specific guidelines” related to hiring for certain job openings. The new guidelines specify that any job candidate linked to a regulatory or oversight group is to be removed from any matter concerning the company before being considered for the jobs.

—————————————————————————————-

Michael W. Reed

» Age: 59.

» Position: Former president, Duke Energy Indiana. Started job in June.

» Previous: Commissioner, Indiana Department of Transportation, February 2009 to June; executive director, Indiana Utility Regulatory Commission, 2006-09; previously held various positions at GTE/Verizon.

» Annual salary at IURC: $98,996.

» Education: Bachelor’s, business, Indiana University; master’s, finance and management, Ball State University.

Scott R. Storms

» Age: 50.

» Position: Previously was general counsel and chief legal adviser to the IURC. He left in September to work as a lawyer in Duke Energy’s regulatory division.

» Career: Joined the IURC in June 2000. He also served as the commission’s chief administrative law judge. He previously served as enforcement section chief in the office of legal counsel at the Indiana Department of Environmental Management.

» Annual salary at IURC: $93,375.

» Education: Indiana University School of Law-Indianapolis.

Sources: IURC, Duke Energy, Indiana State Personnel Department

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