CMS Energy CEO Resigns
May. 24, 2002
%mlink(STRY:; PHOTO:; AUDIO:%)
DEARBORN, Mich. (AP) _ William T. McCormick Jr., chairman and chief executive of CMS Energy Corp., announced his resignation Friday, less than two weeks after the company admitted conducting energy trades that artificially inflated its trading volume by more than $4.4 billion.
Kenneth Whipple, 67, a CMS board member and former Ford Motor Co. executive vice president, will succeed McCormick. McCormick, 57, will remain a board member.
CMS also said Friday it will amend its 2001 annual report and financial statements for 2000 and 2001 to eliminate the effects of the questionable trades. Earnings and cash flow for those periods won't be affected, the company said.
The company is also forming a committee of independent directors to investigate the trades.
In midday trading on the New York Stock Exchange, CMS shares jumped 4 percent, or 71 cents a share, to $18.41.
McCormick told the 300 people at the company's annual shareholders meeting that he decided to resign after consulting with the board. He is the second top executive to leave in a week. Tamela W. Pallas stepped down May 16 as president and chief executive officer of CMS' energy marketing unit.
McCormick has said the energy trades were made without the knowledge or consent of the company's senior management.
``These round-trip trades are not consistent with the company's values and high standards of integrity. The company is committed to ensuring that such practices are never repeated,'' he said last week.
The Dearborn-based company's energy marketing unit entered into ``round-trip'' electricity trades between May 2000 and January 2002, when the company concluded it was in its best interest to halt such trades, an internal review found.
The round-trip, or zero-margin, trades involved buying electricity from other energy companies at a set price, then selling it back to them at the same price. In such deals, an energy company can artificially boost its electricity-trading volume in a market and inflate its revenue.
The internal review came on the heels of an informal investigation by the Securities and Exchange Commission into the company's use of such trades, which are not illegal.
Questions about the trading practice surfaced after the Federal Energy Regulatory Commission released documents in its investigation of last year's California energy crisis revealing that the Houston-based Dynegy Inc. had used the transactions there.
CMS has said that it has not participated in any electricity trading in California's energy market and that none of the round-trip trades involved California.
David Littmann, chief economist with Comerica Bank, said McCormick's resignation isn't surprising in light of recent events. ``These changes usually come after bad publicity. It's a way of showing Wall Street they're going in a new direction,'' he said.
On Wednesday, buyers of CMS securities filed a lawsuit in federal court against the company and some of its executives.
Philadelphia law firm Berger & Montague, P.C. said that between Aug. 3, 2000 and May 10, 2002, CMS made false and misleading statements about the company's financial status. The complaint seeks class-action status.
CMS, which has annual sales of $10 billion and assets of $16 billion, owns and operates an electric and natural gas distribution company with 1.7 million electric customers and 1.6 million gas customers.
It is the nation's fourth-largest combination gas and electric utility and Michigan's largest utility.
On the Net:
CMS Energy, http://www.cmsenergy.com