Criminal probe launched of deal

David Strow

Friday, July 23, 1999 | 11:32 a.m.

Criminal investigations are under way of the Arizona regulator accused of wrongdoing in Las Vegas-based Southwest Gas Corp.'s ongoing battle with unwanted merger suitor Southern Union Co.

But officials and observers say there's little chance the probe will derail Southwest's merger with ONEOK Inc.

Investigations have been launched by the FBI, U.S. Attorney's office in Arizona and Maricopa County Attorney's Office into charges of racketeering leveled earlier this week by Southern Union against Arizona Corporation Commissioner Jim Irvin.

Irvin was accused by the Austin, Texas, natural gas company of wrongly attempting to influence regulators in Nevada and California to vote for Southwest Gas' merger with ONEOK Inc.

The Arizona Republic reported the FBI is thought to be looking into whether Irvin violated federal laws by crossing state lines to perpetrate a "fraud and racketeering" scheme, as alleged in Southern Union's lawsuit.

Bill FitzGerald, a spokesman for the Maricopa County attorney in Phoenix, confirmed the investigation by his office but declined further comment to the Republic. Neither the FBI nor the U.S. Attorney's Office would comment.

Patrick J. Black, an Irvin aide, confirmed that Irvin has been informed of the investigations but told the Republic he has urged Irvin to refrain from comment because of the probes.

As a result of Southern Union's $750 million lawsuit and the investigations, ONEOK requested Thursday that Arizona hearings on the merger be delayed until Sept. 1.

"We wanted to allow the commission and the staff time to digest the recent developments and make them feel comfortable that we were not pressuring them to make a decision without knowing all the facts," ONEOK attorney Larry Cowger was quoted as saying by the Associated Press.

Southern Union alleges that Irvin, the commission chairman, and former commission secretary Jack D. Rose met with regulators in other states in an effort to gain support for an Oneok-Southwest merger. The lawsuit alleges they violated standards requiring all parties be treated impartially.

The allegations involve a March 8 letter telling regulators and Southwest Gas officials that a Southern Union-Southwest Gas merger would lead to more financial and regulatory hurdles than a merger with ONEOK.

The suit says Rose had resigned and later was retained by ONEOK. The lawsuit claims he led people to believe he was still working for the Arizona agency.

ONEOK and Southwest executives deny the allegations and say the lawsuit has no merit. Lew Phelps, a spokesman for the companies, said today that the investigation wouldn't slow down merger plans. He noted that Southwest and ONEOK were already ahead of schedule in Arizona, so the delay won't put the merger behind schedule.

"It should not have any effect on the outcome or the ultimate timing of the merger," Phelps told the Sun. "We expect the Arizona Corporation Commission will come forward and make a decision based on the merits of this case, and we expect we will receive a decision that will allow us to move forward. There will be no delay because of this."

Eric Witkowski, deputy attorney general with the Nevada Office of Consumer Advocacy, said there are no current plans to reopen investigations into the merger as a result of charges leveled by Southern Union. Both the Nevada Office of Consumer Advocacy and the Public Utilities Commission of Nevada have approved the merger.

"If there's some wrongdoing (by ONEOK employees), hopefully the corporation will take care of it, disclose what's going on," Witkowski told the Sun. "Let's see where the chips fall, and go from there."

Don Soderberg, chairman of the Nevada PUC, said the commission hadn't been contacted yet in connection with the investigations. Soderberg says he hadn't had any contact with Irvin.

"The key point would be approval before the Arizona commission, if it has the effect of stopping them from wanting to consider (the merger)," Soderberg told the Sun. "But I don't see it at this point."

The merger is expected to close in the fourth quarter. Zach Wagner, an analyst with Edward Jones & Co. in St. Louis, doesn't believe the Arizona legal troubles will kill the deal, but he is growing concerned about a delay in closing the deal.

"Southwest Gas makes most of its money in the winter time, and ONEOK clearly wants to close this deal before cold weather arrives," Wagner told the Sun. "If this is delayed, and they don't close until December or January, they would miss a month or two of cold weather, which would impact their earnings. I'd like to see them have it closed by the end of October."