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Commission schedules July 10th hearing
The N.C. Utilities Commission launched an investigation Friday into the actions of Duke Energy following the July 2 approval of a merger between Duke Energy and Progress Energy.
During merger negotiations, executives told regulators that former Progress Energy CEO William Johnson would be the president and CEO for the combined company. But immediately after the merger was approved, Duke Energy appointed James Rogers as president and chief executive officer of the combined company in a move that was contrary to what applicants said would happen.
“The commission was not informed by the applicants (Duke Energy and Progress Energy) at any time prior to July 3 that Rogers would replace Johnson as president and CEO of Duke,” the order states.
That was enough to prompt the commission to initiate an investigation and to schedule a hearing for July 10 at 2 p.m., requiring James Rogers to appear before the commission in their Raleigh office to answer questions about the timing of the decision to replace Johnson with Rogers, “as well as other related matters.”
The order also directs Duke Energy and Progress Energy officials to take necessary actions to preserve all letters, agreements, notes, minutes, memos, e-mails and other written and recorded documents and records directly or indirectly relating to the merger, the integration of the two companies and the discussions and decision to replace Johnson with Rogers as president and CEO of Duke Energy.
The N.C. Attorney General’s office has also begun a separate investigation, according to a report published Friday in the News & Observer.
Sam Watson, general counsel for the N.C. Utilities Commission, told Carolina Public Press Friday night that the order was issued shortly before 7 p.m. He declined to comment further about the investigation. See the order here:NC Utilities Commission order calling for investigation into Progress Energy, Duke Energy (PDF)
NC Utilities Commission order calling for investigation into Progress Energy, Duke Energy (Text)
According to the order for the investigation, the joint agreement documents submitted to the N.C. Utilities Commission pertaining to the merger indicated that Duke Energy would develop a new three-year employment agreement with Johnson to be the president and CEO effective upon the merger.
When Rogers and Johnson testified before the commission on May 20, 2011, Rogers stated he would be the executive chairman of the board of the combined company and Johnson stated he would be the president and CEO. Both testified under oath on Sept. 20, 21 and 22, 2011, and on June 25, 2012, and reaffirmed the accuracy of the May 20, 2011 testimony, the commission order states.
“Having served as CEO of Duke and its predecessor companies for more than 23 years, Jim Rogers is well-suited to lead the integration effort and to drive our combined businesses forward,” Ann Maynard Gray, lead director of Duke Energy’s board of directors, said in a news release prepared by Duke Energy announcing the successful merger.
“Bill Johnson has been instrumental in helping us close the merger with Progress Energy, and we wish him well in his future endeavors,” she continued.
A former lead director for the Progress Energy board does not share Gray’s outlook for the new leadership.
In a letter to the Wall Street Journal, the former lead director of Progress Energy, John H. Mullin, III, of Brookneal, Va., wrote that the company’s board of directors voted to accept the merger with the explicit agreement that Johnson would become the CEO of the combined company upon consummation of the merger.
“This was a critical element in the merger deliberations of our board, because we had confidence that Bill would successfully lead the combined companies to achieve the potential synergistic benefits of the combination,” Mullin wrote in the letter. “I do not believe that a single director of Progress would have voted for this transaction as structured with the knowledge that the CEO of Duke, Jim Rogers, would remain as the CEO of the combined company.”
Johnson signed his employment contract with Duke on June 27, days before the merger closed. He was CEO of the combined company for about 20 minutes, Mullin said. After the merger closed, Duke’s board went into executive session and voted to request Johnson’s resignation, Mullin wrote. See the entire letter here:John Mullin Letter to Wall Street Journal re: Progress-Duke Energy merger (PDF)
John Mullin Letter to Wall Street Journal re: Progress-Duke Energy merger (Text)
“In my opinion, this is the most blatant example of corporate deceit that I have witnessed during a long career on Wall Street and as a director of ten publicly traded companies and as a former trustee of Putnam’s numerous mutual funds,” he wrote in his letter.
The 58-year-old Johnson will receive a $44.4 million severance package, according to the Wall Street Journal.
The N.C. Utilities Commission wants to find out why they were misled. The Utilities Commission has the power under state law to revisit its approval, and it could “rescind, alter or amend” the merger, according to General Statute 62-80.
Details about the merger between Duke Energy and Progress Energy and its potential impact on Western North Carolina and consumers.