CMS Chief Quits Amid Trading Inquiry
CMS Energy Corp. said Friday that Chief Executive William T. McCormick Jr. resigned after the company disclosed $5.2 billion of 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, the company 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% over two years.
Shares of Dearborn, Mich.-based CMS rose 61 cents to $18.31 on the New York Stock Exchange. The stock is down 38% from a year ago and reached a 14-year low of $13.90 last week.
McCormick, after 17 years of running the company, announced his resignation at the start of Friday’s annual meeting, sparking applause by some shareholders.
At least six lawsuits against the company have been filed since May17.
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. “We’re sorry we did it and aren’t going to do it anymore.”
CMS said it will restate $4.2 billion of trades for 2001 and an additional $1 billion for 2000. An estimated $3.3 billion of last year’s revenue was from round-trip electricity trades, and $900 million more was related to an incomplete round-trip trade in gas, the statement said.
The company had reported $9.6billion in revenue in 2001 and $8.7billion in 2000.
