Some Parties Found Not Liable in Nucorp Case

The tangled web of lawsuits generated by Nucorp Energy’s July, 1982, collapse has moved closer to resolution in the wake of a jury finding that an accounting firm, a bank and one of Nucorp’s major investors were not liable for stockholder losses that occurred after the financially troubled energy company entered bankruptcy proceedings.

The jury delivered its verdict Monday to U.S. District Judge J. Lawrence Irving in San Diego after 12 1/2 days of deliberation. During the complex, 72-day trial, attorneys presented jurors with 13,000 pages of testimony, stacks of exhibits and scores of visual aids.

Defendants in the trial included Phoenix-based Circle K Corp., a convenience store chain that at one time owned about 11% of Nucorp’s stock; Continental Illinois Bank & Trust of Chicago, which provided banking services to Nucorp; Arthur Andersen & Co., which audited Nucorp books, and Houston-based Erco Petroleum Services.

Plaintiffs, including Beverly Hills-based Executive Life Insurance Co. and thousands of individual investors, had sought more than $200 million in damages.

They had alleged that the defendants knowingly helped Nucorp to conceal the San Diego-based company’s growing financial problems so Nucorp could complete offerings of common stock and debt. Nucorp entered Chapter 11 bankruptcy proceedings shortly after those offerings were completed.

“This was an extraordinarily conscientious jury,” attorney Stuart L. Kadison, who represented Arthur Andersen, told Associated Press. “If you’re right, you win.”

The six-person jury returned a “definitive verdict, as far as we’re concerned,” said Abby Silverman, co-counsel for Circle K, which eventually took a $33-million writeoff on its Nucorp investment.

That $33-million writeoff evidently made jurors question if Circle K was “part of a sham,” Silverman said. “If a person is going to perpetrate a fraud, they’re not going to perpetrate it on themselves.”

William Lerach, an attorney for the plaintiffs, was quoted by Associated Press as saying that, based upon evidence presented, “it seemed as though we would win. We’ll have to decide what to do next.”

Circle K Chairman and founder Fred Hervey did serve as a Nucorp board member, Silverman said, but “he was an outside director and did not know there was this alleged fraud going on. He certainly did not participate in any wrongdoing.”

Circle K initially acquired Nucorp stock as part of its plan to insulate its stores from energy crunches that disrupted gasoline supplies, Silverman said.

Circle K saw Nucorp as “a complex but secure” source of crude oil that could be refined and later sold at the growing number of Circle K stores that sold gasoline to motorists.

Monday’s verdict did not involve Nucorp, which continues to operate under Chapter 11 protection.

However, in 1986, 14 former officers and directors of Nucorp agreed to pay $41 million to settle scores of claims by former shareholders.

The complicated 1986 agreement involved about 4,000 former Nucorp shareholders. Their lawsuits alleged that Nucorp officers and directors violated of registration and anti-fraud provisions of federal and state securities law in connection with the stock and debt offerings.

Donaldson, Lufkin & Jenrette of New York, a leading underwriter in the sale of Nucorp securities, also was a defendant in the case that ended Monday. However, the firm was not included in Monday’s verdict.

It instead faces a default judgment because its attorney earlier failed to comply with a court order to produce a witness during the trial.