THE ELECTRICITY DAILY
April 5, 2001, Thursday
Judge Blasts USEC s 1998 Privatization
A federal judge in Washington late last month labeled the 1998 privatization of the U.S. Enrichment Corp., formerly part of the U.S. Department of Energy, a sweetheart deal for insiders. Gladys Kessler of the U.S. District Court for the District of Columbia said internal documents obtained from USEC and DOE "reveal the ways in which bias, self-interest, and self-dealing can influence the decision-making process, especially when that process is kept entirely secretive."
The former government uranium enrichment monopoly faced three possibilities for privatization in 1998. There were two offers to buy the operation on the table, one by a consortium led by the Carlyle Group, the other by a consortium of Texas Pacific Group and General Atomic. The third path was an initial public stock offering. USEC chose the IPO.
In choosing a stock offering, said Kessler, many of the USEC board members "were forced to rely largely upon information provided by parties with potential conflicts of interest, all of whom strongly, not surprisingly, recommended the IPO." She said that J.P. Morgan was serving as the board s independent financial advisor, "yet it stood to make an additional $7.5 million if the IPO went forward." USEC s outside law firm ended up getting $15 million for services rendered during the privatization. "Most importantly," wrote Kessler, "USEC s CEO, Nick Timbers who dismissed all concerns about the viability of the Avlis technology and strongly pushed the IPO option ended up receiving for the 1999 year a $617,625 bonus and stock options valued at $1.7 million, " quoting an article in U.S. News and World Report.
The case before Kessler was whether to award attorneys fees to the lawyers who represented the Oil, Chemical, and Atomic Workers International Union in a successful Freedom of Information Act suit. OCAW sought board meeting transcripts and other documents related to the privatization. USEC turned over only part of the material and then, once it became a private-sector organization, left DOE with the decision to release the material. DOE settled with the union and released the material in 1998. Kessler agreed to award fees, which will come to more than $100,000, according to her opinion.
Copyright 2001 Elsevier Science THE ELECTRICITY DAILY