Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: Bear Down who wrote (76480)	5/24/2002 2:45:06 PM
From: David Alon	Read Replies (1) \| Respond to of 122087

CMS Energy CEO Quits, Company Probes Power Trades (Update5) By Eileen O'Grady 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. Bogus trades and accounting errors disclosed by CMS, Dynegy Inc. and Reliant Resources Inc. in recent weeks led to probes by regulators already reviewing allegations that California's power market was manipulated. CMS, which had a loss of $545 million last year, inflated revenue by 28 percent over two years. Such transactions are ``just one more thing'' that helped to ``undermine investor confidence even more,'' said Edgar Peters, who helps manage about $15 billion at PanAgora Asset Management, including CMS shares. McCormick's departure is ``a step in the right direction,'' he said. Shares of Dearborn, Michigan-based CMS rose 40 cents to $18.10 in midafternoon trading. The stock is down 38 percent from a year ago. McCormick's resignation, after 17 years of running the company, was announced by a CMS Energy official at the start of the annual meeting today, sparking applause by some shareholders. Phantom Trades In a round-trip trade, a company simultaneously buys and sells power or natural gas at the same price and quantity. Such transactions have little use except to boost trading figures. The head of CMS Energy's trading business, Tamela Pallas, resigned last week after disclosure of the trades led to a federal investigation and a plunge in CMS stock. Two Reliant trading executives also have quit. ``There may not be anything illegal here, but this practice does not fit with the high standards of this company,'' Whipple told investors at the annual meeting, which was broadcast on a conference call. ``We're sorry we did it and aren't going to do it any more.'' CMS has been selling foreign assets to focus on its gas pipeline network in North America and energy trading. ``The company clearly has made some large missteps,'' said Jeffrey Gildersleeve, an analyst at Argus Research who has a ``hold'' rating on CMS shares and doesn't own any. ``This really is a good company with some big problems in a small part of its business. It's unfortunate.'' Restate Results CMS said it will restate $4.2 billion of trades for 2001 and another $1 billion for 2000. An estimated $3.3 billion of last year's revenue was from round-trip electricity trades, and another $900 million was related to an incomplete round-trip trade in gas, the statement said. The company had reported $9.6 million in revenue in 2001 and $8.7 billion in 2000. CMS officials are cooperating with probes of the trades by the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission and U.S. attorneys for the Southern District of New York and in Houston, who have requested information about the round-trip trades, CMS spokesman John Barnett said. Whipple said the board will begin to look for a new chief executive officer, a process that could take as long as a year. CMS President David Joos is among the candidates, Whipple said. Protect Dividend Until then, CMS Energy will seek to protect the annual dividend of $1.46 a share by proceeding with planned asset sales, which may slow the company's growth prospects, Whipple said. ``The thing that has to give, in our opinion, is high growth,'' he said. ``In the very short term, you're not going to see double-digit growth from this company.'' McCormick sits on numerous company boards including Bank One Corp., Rockwell International Corp. and Schlumberger Ltd. He earned $1.26 million last year, according to CMS documents.