Duke Energy Corp. subpoenaed by grand jury in North Carolina

Documents are sought in audit regarding profits

February 18, 2003|By BLOOMBERG NEWS

Duke Energy Corp., the No. 2 U.S. utility owner, has been subpoenaed by a federal grand jury for documents related to an audit that led to a $25 million settlement with state regulators for understating profits.

Duke received the subpoena Friday from a Western District of North Carolina grand jury and will cooperate with the inquiry, the company said in a statement. Duke settled a dispute with North Carolina and South Carolina regulators last year, agreeing to credit $25 million to consumers after understating profits.

An auditor retained by the states said the company misstated $123.7 million in profits between January 1998 and July 2001, allowing Duke to avoid lowering rates. The subpoena comes amid increased scrutiny of energy companies by regulators and credit-rating companies after the December 2001 collapse of Enron Corp.

"Investor confidence has already been eroded in the sector, and in the short term investors are asking, `When will it end?'" said Barry Abramson, of Gabelli Asset Management.

Regulators approve utility rates based on profit margins they deem acceptable. Charlotte-based Duke attributed the understatement of earnings to accounting mistakes and denied any intent to mislead state officials or customers.

Duke, Reliant Resources Inc., Dynegy Inc. and other energy companies have received inquires or subpoenas from federal prosecutors in Houston and San Francisco and from the Securities and Exchange Commission.

Those cases involve investigations of allegedly improper trades and whether suppliers manipulated prices during the California energy crisis.

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