The fired president of Allegheny Energy Inc's energy-trading division was dismissed after the company discovered that he held financial interests in a company that did business with the Hagerstown-based utility company and was part owner of real estate that Allegheny had agreed to lease, according to a source close to the company.
The company also found that Daniel L. Gordon had lied about his age and educational background, the source said yesterday.
Allegheny fired Gordon Thursday. It declined to reveal specifics other than to say that he had violated the company's corporate policies.
Gordon came over as head of the energy-trading unit that Allegheny bought from Merrill Lynch last year for $490 million. He could not be reached for comment yesterday.
The Hagerstown company's shares fell $1.49, or 7.7 percent, to $17.69 yesterday. The shares have fallen nearly 60 percent since hitting a 52-week high of $43.53 in April.
Cynthia A. Shoop, Allegheny's vice president of corporate communications, repeated yesterday the company's announcement of the previous day that Gordon's actions had "no material effect" on the company.
Gordon's actions "violated the conflict-of-interest policies of our company, which we take very seriously," Shoop said.
She said Gordon had plans to leave Allegheny's trading operation, which is based in New York, next year as part of the company's "scaling back" of that operation. Those plans were accelerated after the company uncovered the violations as part of a routine internal examination, Shoop said.
She declined to comment on the corporate policies that Golden had violated and said the matter was a private personnel issue.
The source confirmed that Allegheny acted after it discovered that Gordon had an interest in a computer software services company that had a contract with Allegheny Energy Supply, which makes and markets electricity.
Gordon also was said to have held a stake in real estate that Allegheny Energy Supply had agreed to lease. The location and financial terms could not be determined.
The source said Gordon lied about his age and educational background in a sworn deposition taken by the Federal Energy Regulatory Commission.
Shoop wouldn't comment on whether Allegheny had contacted law enforcement authorities as part of its investigation. She said the violations occurred after Gordon came to Allegheny from Merrill Lynch.
A spokesman for the Federal Energy Regulatory Commission declined to comment yesterday.
Allegheny's purchase of Merrill Lynch's energy-trading division in March last year was seen by many then as a chance for the staid Maryland utility to vault into the lucrative field of energy trading. Subsequently, the Enron scandal broke and the energy markets crumbled.
The energy-trading unit accounted for roughly half of Allegheny's total $10.4 billion in revenue last year, Shoop said. But sales and profits at the unit have been off this year, and Allegheny has revised downward its annual profit estimates.
Allegheny announced in July that it was cutting 600 jobs, or 10 percent of its work force, and abandoning plans to build two power plants, in part blaming weakness in the energy markets for the moves. The company lost $32.3 million in the second quarter.
Paul T. Ridzon, a utilities analyst with McDonald Investment in Cleveland, said it appeared that Allegheny bought Merrill Lynch's energy-trading unit while the energy market was at its peak.
"Given what we've seen in the market with all the [energy] trading issues," Ridzon said, "obviously there's a certain level of discomfort with the dismissal of a senior-level trading executive."