Hard drives missing in utility case
Posted on Thursday, August 21, 2008
URL: http://www.nwanews.com/adg/Business/234921/
Computer hard drives said to hold key evidence in a state investigation of alleged fraudulent natural gas pricing by Center-Point Energy Inc. and affiliates are missing from a law firm that represents the Houston-based utility.
The law firm, Houston-based Baker Botts LLC, has hired retired Circuit Judge John Plegge to conduct what it called an independent probe and report his findings to the Arkansas Public Service Commission, which regulates public utilities.
But counsel for Weldon Johnson, a Texarkana businessman who is pressing the case against CenterPoint, wants “whatever is left” of the drives handed over to Johnson’s experts or commission Judge Ted Thomas.
They argue that Plegge’s probe, which is expected to conclude by early September, “will only delay” getting to the truth.
“This destruction of critical information must be explored further and quickly if justice is to be achieved in these proceedings,” Johnson’s attorney, Phillip Cockrell of Texarkana, told the commission in a Monday filing.
Johnson accuses CenterPoint of charging above-market fuel costs to residential and commercial customers through its regulated units in a “high-low” pricing scheme that would thereby allow its unregulated units to sell gas at below-market costs to gain a “competitive advantage” with industrial users.
Commission Chief of Staff Dave Slaton said it’s too early to draw conclusions on what could happen — such as potential criminal charges — if it’s found that the drives appear to have been intentionally lost or destroyed. “All I know is what I’ve read in the pleadings. For all we know, they may find the missing drives,” he said. “Occasionally there’s a [separate ] hearing, and, in this case, there’s already been at least one. So that possibility does exist. But I haven’t talked to [Judge Thomas ].” Attorney General Dustin McDaniel’s office said it has “concerns” about the missing drives but has no authority to investigate the matter other than through the commission. “It is our only option,” spokesman Gabe Holmstrom said. “Our office has concerns and is conducting discovery in an effort to determine what happened and what it means to the claims,” Holmstrom said. Johnson has pursued litigation since 2004 against Center-Point and dozens of affiliates and related companies.
‘INTRICATE MAZE’ The scheme relied on “an intricate maze of contracts, trades and deals” since at least 1994 and went undetected by regulators in six states where CenterPoint supplies natural gas to 2. 7 million customers, Johnson’s attorneys contend.
Those states include Arkansas, Texas, Louisiana, Mississippi, Oklahoma and Minnesota. CenterPoint is Arkansas ’ largest natural gas provider with 424, 000 customers.
“They were used to manipulate, and even hide, the true cost of natural gas sold,” Johnson’s attorneys argue. “Those transactions were never reported to, nor routinely reviewed by [Arkansas regulators ] or any other state agency.”
CenterPoint says Johnson — despite nearly four years of efforts — has yet to prove a thing.
The utility has since 2006 given Johnson’s attorneys unlimited Internet access to millions of files from the main computer for CenterPoint’s gas operations, company attorney Kenny Henderson told the commission in an Aug. 15 filing.
CenterPoint also set up a computer in Houston allowing “unprecedented” access to its transaction database, he said. But Johnson’s counsel “made only a couple of brief visits and ran only a few queries,” Henderson said.
“[Johnson’s counsel ] has not, and cannot point to, a single contract that embodies the alleged conspiracy nor find any support for its theories in the books and records of the company,” he said. “It is time for [Johnson ] to support his allegations with sworn testimony and real evidence showing how Arkansas ratepayers have been adversely affected.” The hard drives are evidence leftover from a similar case against CenterPoint in 2002 that was later dismissed in Wharton County, Texas. They come from computers used by current and former CenterPoint employees and were turned over to Baker Botts, the law firm for the company, in 2003 for the earlier case.
Those drives were to be examined by a forensic expert for deleted e-mails, documents or parts of documents related to the Arkansas case, according to an Aug. 8 filing by McDaniel’s office. Baker Botts attorney Mark Robeck told Cockrell, Johnson’s attorney, in a July 24 letter that three drives thought to be originals turned out to be copies when exams found they held “ghosted” images of CenterPoint data and had previously been used by a Baker Botts employee. Ghosting is a process that copies active data but not areas on the drive that store deleted items. “It appears that the... computers were misplaced or mistakenly disposed of by Baker Botts between 2003 and 2007,” Robeck told Cockrell. So far, a search for the original drives has yielded nothing. “Although that search is not quite complete, we have been unable to locate the original hard drives and have no reason to believe at this time that the hard drives will be located,” Robeck wrote. The loss of the hard drives is “regrettable,” Henderson said. “But given [Johnson’s ] failure to search the documents that they have had for years, the inadvertent loss of some ‘file fragments’ cannot justify an openended continuance of this case,” he said.
NOT THE FIRST TIME For Plegge, it’s not his first intermediary role in a contentious case. He also was chairman of a seven-member panel that investigated spending by the Little Rock Convention and Visitors Bureau after a six-month investigation by the Arkansas Democrat-Gazette in 2006 found the agency often failed to follow local bidding laws and its own purchasing policies. The panel found that bureau leaders broke at least three state laws and a local ordinance, but its final report did not identify those responsible.
Plegge previously served as circuit judge of the 6 th Judicial District from 1989 to 2003. He’s now a certified mediator and arbitrator and works as an attorney with Watts, Donovan, & Tilley, P. A., in Little Rock.
Johnson is a lifelong resident of Texarkana and former city director who is also owner and founder of Jet Concrete Inc., which specializes in highway repair. He declined specific comments on the case Tuesday, but said his company maintains two CenterPoint accounts.
“There’s no telling how it’s going to turn out,” Johnson said. “But my attorneys have spent a lot of hours working really hard on this case.”
Johnson’s case initially was filed in Miller County Circuit Court. But in a 4-2 ruling, the Arkansas Supreme Court ruled in June 2007 that the Arkansas commission held “sole and exclusive jurisdiction.”
The Supreme Court restated its decision in February after the Miller County court stayed a “claims pending action” by the Arkansas commission. A public evidentiary hearing is scheduled for Feb. 2 in Little Rock.