Skip to comments.CMS Energy CEO Quits, Company Probes Power Trades (Update5)
Posted on 05/24/2002 1:08:23 PM PDT by Ernest_at_the_BeachEdited on 07/19/2004 2:10:00 PM PDT by Jim Robinson. [history]
Dearborn, Michigan, May 24 (Bloomberg) -- CMS Energy Corp., Michigan's largest utility owner, said Chief Executive Officer William T. McCormick Jr. resigned after the company disclosed $5.2 billion of revenue from sham electricity trades.
CMS financial statements will be revised for 2000 and 2001 to remove revenue from ``round-trip'' trades that are being investigated by regulators, company executives said. Board member Kenneth Whipple, a 67-year-old former Ford Motor Co. executive, will replace McCormick, 57, until a permanent successor is hired.
(Excerpt) Read more at quote.bloomberg.com ...
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(1) I wonder what Big 4 Accounting firms will have to say about power marketing clients if there were any financial deals that inflated transactions of income will do? I suspect after what they have seen has happened to Arthur Anderson, that they will emphatically say that earnings and annual reports will need to be restated and re-issued! I don't think any sane accounting/auditing firm would want to join AA at the moment. There was probably lots of screaming between the CEO and his outside auditor over what to do. Probably the Board of Directors was contacted and the CEO took the bullet for the company and the directors. Not a good month to be either a CEO, Director or Auditor.
(2)We are probably going to quickly see some similar announcements of CEO's, CFO's, COO's and others resigning from various power trading companies. I hope that if this happens enough, somebody asks Davis, if it is his turn to resign for the sins of Cal ISO and DWR?
(3) I think that FERC, when it gets all of its returns to its requests, is going to have some real interesting analysis to do.
(4)Davis will have a field day with this for a few moments until more and more federal congresssional democrats realize that this could hurt power companies in their home districts. At that point, the Democratic Congressmen/women may well question the party leadership in fronting this issue nationally.
Yes things should get interestings.
Not honestly. This is simply a matter of inflating sales volumes on the books so that it looks like the company is doing more business than it really is. It has nothing to do with pricing, and it doesn't affect bottom line profits. This company simply, in effect, bought and sold the same power over and over again at the same price so that it looked like they sure sold a lot of power last year.
There weren't any real buyers, and they didn't really sell the electricity. They didn't lie about the fact that there was no profit on these "sales" and they didn't claim any tax benefit. They simply exaggerated how much business they really did.
It looks bad to people who don't really understand the transactions, and Davis may use that to say that the companies were a bunch of frauds. To that extent it might score some points for him. But it had nothing to do with California or anyone else. The sales were all make-believe.
Sounds like the Arthur Andersen corporate culture on how to cook your books and then reheat them in the microwave, several times was a predominate corporate culture with this company.
Actually all of this disclosure could have an positive like a reduction on our bills as this stuff is forced to the phase out situation.
Watch him start whining about how all those greedy Repub corporations took advantage of poor, honest, innocent graydavis.
The point is that you can't escape it. You have to expose it for what it is and eliminate it as you come across it. It grows like weeds, always comming back, even after cutting off it's head. It's not a profitable thing to do, but a least you can look at yourself with a degree of pride.
A wiser and more ethical manager got up and said, "Does this mean you want anyone who is truthful and reports the truth, shot! If so, you had best shoot me."