Duke Energy settles whistle-blower lawsuit
Monday, August 18, 2008
Duke Energy Corp. has settled a lawsuit by former employee John Deeds, who claimed he was fired in 2006 after objecting to what he said were the company's illegal payments to large industrial consumers of Duke electricity.
The confidential settlement was reached during the weekend to settle Deeds' lawsuit that would have gone to trial Monday, Aug. 18, in Hamilton County Common Pleas Court in Cincinnati, both sides said. Deeds' lawyer, Randolph Freking, and Duke Energy declined to reveal any terms of the settlement.
Still pending is a related lawsuit in U.S. District Court which accuses Duke Energy of paying kickbacks to its biggest corporate customers in southwest Ohio in exchange for their support of a rate increase. Deeds intends to testify against Duke Energy as a witness in that lawsuit, which could go to trial late next year in Columbus, Freking said Monday.
Duke Energy says the "option payments" were reviewed by the Public Utilities Commission of Ohio and were found not to have an impact on other customers' rates. The commission has reviewed Duke Energy's electric pricing policies, Duke said. The company's service region stretches from the Springboro-Franklin area to the Ohio River.
The federal judge handling the Columbus lawsuit, Edmund A. Sargus Jr., must decide whether to grant the plaintiffs' request to represent 680,000 Duke Energy customers — including residents and small businesses — who could share in any money recovered or refunds, if the lawsuit succeeds. A packaging company, a nonprofit organization and individual consumer, all Duke customers, filed that lawsuit against Duke Energy.
In the Deeds lawsuit that was settled, Deeds contended that the payments by Duke to big customers including Kroger Co., AK Steel, Ford Motor Co., General Motors Corp. and General Electric Co. violate Ohio law, which forbids public utilities to set irregular or discriminatory rates or to provide rebates to some, but not all, of its customers.
Duke, then operating as the predecessor company Cinergy Corp., began negotiating the so-called "option agreements" in December 2004 and did not want them to see the light of day, Deeds contended. Duke senior management brushed aside his objections, Deeds said.
"Deeds simply told his supervisors, in essence, that he did not wish to engage in a crime," his lawsuit claimed. "Deeds reasonably believed that defendants (Duke Energy and Duke Energy Ohio) engaged in illegal behavior that can subject violators to a felony. ... The option agreements about which Deeds complained have resulted in unlawful rebates of over $20 million per year."
Deeds said Cinergy created an unregulated entity, Cinergy Retail
Services, for which he worked. The successor company, Duke Energy Retail Services, is still making the payments to which Deeds objected, he said. Deeds lost his job when Duke absorbed Cinergy in a 2006 merger while other employees were retained, he said.
Duke said in a statement: "Duke Energy Retail Sales signed option agreements with a number of large-volume customers, under which Duke Energy Retail Sales would serve the customers if the market price of electricity dropped. In return for that option to serve them, Duke Energy Retail Services made option payments for that right."
Contact this reporter at (937) 225-2242 or jnolan@DaytonDailyNews.com.
