Kinder Morgan Agrees to $25 Million Civil Settlement for Unauthorized Sales of Customers'...
Kinder Morgan Agrees to $25 Million Civil Settlement for Unauthorized Sales ofCustomers' CoalWASHINGTON, Nov. 28 /PRNewswire-USNewswire/ -- U.S. Attorney for the SouthernDistrict of Illinois, A. Courtney Cox, announced today that the United Stateshas reached a civil settlement with Kinder Morgan Energy Partners, L.P.,Kinder Morgan Operating L.P. "B", and Kinder Morgan Operating L.P. "C"
(collectively Kinder Morgan). Kinder Morgan provides energy transportation anddistribution services, including the handling, unloading, storing, blendingand/or transferring of coal at its terminals, with its Cora terminal locatedin Rockwood, Randolph County, Illinois.The Tennessee Valley Authority (TVA), a government corporation (as well ascertain private companies) contracted with Kinder Morgan to handle coal atKinder Morgan's Cora and Grand Rivers (GRT) terminals. TVA ordered largequantities of coal produced in the western United States. The coal was shippedby rail to Cora and/or GRT where it was offloaded, stored and eventuallyloaded onto barges for delivery to the TVA. On occasion, the coal was directlytransferred from rail to barge, but more often the coal was placed in customerstockpiles to be later shipped out by barge. Coal coming to the terminals wasweighed by certified scales when it was loaded onto the train. However, at theCora terminal, outgoing coal was weighed by barge draft. The barge draftmethod usually weighed two to three percent heavier than the certified scales.Kinder Morgan exploited this weighing differential to show that it shipped outthe same amount of coal as it had received. It claimed the "excess" coaltherefore belonged to it and it had the right to sell the coal and keep theprofit. Kinder Morgan took the differential (unshipped customer coal or excesscoal) and sold it as its own "Red Lightning" coal between 1997 and 2001. Atthe GRT terminal where certified scales were used for both incoming andoutgoing coal, Kinder Morgan simply took coal from the customer stockpiles.Kinder Morgan took and sold approximately 258,725.84 tons of coal attributableto the TVA which amounted to a total loss of $6,599,526 for the TVA. KinderMorgan has agreed to pay back three times this amount to the United States fora total of $19,798,578. In addition Kinder Morgan will reimburse other privatecustomers in the amount of $5,208,383.00, for a total settlement of$25,006,961.00.U.S. Attorney Cox complimented the hard work of all the agents and attorneysinvolved in the investigation which resulted in this out-of court settlement."The United States Attorney's Office and its law enforcement partners arecommitted to protecting the taxpayers of this country by discovering andpreventing conduct which causes improper depletion of public resources. I amalso pleased that private customers will also benefit from this agreement."According to Karen E. Spangenberg, FBI Special Agent in Charge, SpringfieldDivision, "The FBI is proud to have worked side by side with the TennesseeValley Authority (TVA) Office of the Inspector General during this extensivecorporate fraud investigation which impacted customers in several states andoverseas. It is our hope that this civil settlement will emphasize thepublic's expectation for corporate integrity."Richard W. Moore, Inspector General of the TVA, observed, "OIG special agentsand auditors worked closely with the FBI to put this case together, and Ibelieve their efforts in finding and analyzing the evidence led directly toKinder Morgan agreeing to this settlement."This matter was investigated by the Tennessee Valley Authority, Office ofInspector General, and the Federal Bureau of Investigation. The Government wasrepresented by Assistant U.S. Attorneys Gerald M. Burke and Stephen B. Clark.SOURCE U.S. Department of JusticeRandy Massey of the Office of U.S. Attorney A. Courtney Cox, +1-618-628-3700,
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