Questioned pact threatens merger, ONEOK chief says

Thursday, Oct. 14, 1999 | 11:45 a.m.

ONEOK Inc. fired a volley at the Oklahoma Corporation Commission Wednesday, saying that a "constant stream of rumors, false allegations and innuendo" regarding a 1993 gas purchase contract is jeopardizing its plans to merge with Southwest Gas Corp.

"These stories have grown so outrageous and so ugly and so untruthful that they must be challenged," said ONEOK Chairman and CEO Larry Brummett. "For the sake of the decent men and women who work for our company, for those who believe in our future and invest with us, and for the sake of the business climate in the state we're proud to call home, the myth must die."

ONEOK issued a new release referring to the renewed attention being devoted to a 1993 gas purchase contract between a ONEOK subsidiary and Dynamic Energy Resources, a Tulsa, Okla.-based company owned by Democratic fundraisers Eugene and Nora Lum. The Lums later pleaded guilty to campaign finance violations.

The contract awarded to Dynamic was contingent on Dynamic's purchase of Gage Corp., a company that had been pursuing a lawsuit against ONEOK, and the dropping of this lawsuit.

"Unsupported allegations charge the Lums were merely acting as a straw buyer for (ONEOK), providing (ONEOK) a way to eliminate the lawsuit without admitting responsibility," a 1993 FBI report stated. The report is in a file maintained by OCC Chairman Bob Anthony.

The Arizona Corporation Commission has requested all documents relating to the Dynamic contract. Arizona regulators must approve the merger between Southwest and ONEOK. In 1996, an investigation by the OCC's staff found no evidence of wrongdoing.

"It is no secret that (the Southwest) merger -- a $1.8 billion transaction -- may be jeopardized by the continuing campaign to distort the Dynamic contract," Brummett said Wednesday. "It is my hope that this Commission will do everything within its authority to bring resolution to these unfounded accusations, and bring this shameful campaign to an end."

Brummett also issued a thinly veiled warning that continued talk about the Dynamic contract could eventually spell the end of an independent ONEOK.

"We can't continue to grow if this campaign of deceit is allowed to succeed," Brummett said. "We can't guarantee this will always be an Oklahoma company that provides jobs and millions of dollars for the economy of this state. This is not intended in any way as a threat: it is simply the harsh reality."

ONEOK spokesman Don Sherry clarified Brummett's statement, saying that if ONEOK could not grow through acquisition, "that could threaten the future viability of ONEOK" and force it to merge with an out-of-state company.