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www.DukeEmployees.com - Duke Energy Employee Advocate

Duke Energy - Page 11

"The minute you settle for less than you deserve, you get even less than you settled for." - Maureen Dowd, NYT

2012 Employee Opinion Survey

Employee Advocate - www.DukeEmployees.com - October 24, 2012

All Duke Energy Employees should have received 2012 Employee Opinion Survey forms. As usual, the bulk of the questions will be irrelevant to the concerns of most employees. But there are three blocks available to write in comments.

The completion deadline is November 2.

Below are comments written in the three open fields for 2012:


Various affirmations are listed as "Mission, Values and Priorities."

"Safety: The safety of our teammates and the public is our highest priority."

Safety actually comes somewhere below the generation of profits on the priority list.

One cannot pack hundreds of people into a limited space, doing dangerous work for 12 or more hours a day, 6-days a week, constantly swapping from day to night shift, and expect anything resembling safety.

Yet, management seems totally shocked when accidents occur. The solution is always more posters, meetings, and verbal beatings. Management can never see a determent to safety that costs more than the price of a safety poster to fix.

From Duke Energy's "Strategic Priorities":

"Achieve zero injuries and a healthy workforce."

Duke Energy executives have been babbling about zero injuries for decades. It is a myth. It is a hoax. It is unachievable. Those who lack the mental toughness to accept reality are unfit to run a major corporation.

Values and integrity

A Duke Energy "Mission, Values and Priorities" affirmation:

"Integrity: We behave ethically, and trust is at the core of our relationships."

Really? How ethical is it to continually scheme to reduce employee benefits? Benefits that were part of the total compensation package have been known to evaporate just before employees were eligible for them.

Employees who have been hoodwinked out of their benefits after decades of work have zero trust in the management of Duke Energy.

Another "Mission, Values and Priorities" affirmation:

"Accountability: We do what we say and own what we do."

Baloney! Only someone who just floated in from Mars might believe this one.

Another "Mission, Values and Priorities" affirmation:

"Respect: When we respect each other, we actively listen to each person's opinion and intentionally leverage each person's strengths."

Running endless bait-and-switch scams on employees shows the level of respect that management has for them. But rest assured, the feeling is mutual.

Another "Mission, Values and Priorities" affirmation:

"Communication: We communicate clearly, openly and frequently, and work hard to ensure that every voice is heard."

Duke Energy communicated with employees for decades on exactly what retirement benefits to expect. Duke communicated, communicated, communicated, but did not deliver.

Pay, incentive plans and recognition

From Duke Energy's "Strategic Priorities":

"Achieve top-quartile performance at all of our nuclear plants."

One thing that has never been mentioned is "top-quartile compensation" for employees. The true goal is apparently "top-quartile performance and bottom-quartile compensation." Duke expects the world for the price of a tee shirt.

A Duke Energy "Mission, Values and Priorities" affirmation:

"Teamwork: We collaborate effectively as one team."

There are two teams. One is composed of a few bloated executives. The other is composed of everyone else.

From Duke Energy's "Strategic Priorities":

"Achieve constructive regulatory and legislative outcomes."

This is one area that Duke excels in - stacking the deck by any means necessary.

2011 Employee Opinion Survey

Welcome to 2012

Employee Advocate - www.DukeEmployees.com - January 6, 2012

Over 14 years after the cash balance plan conversion, almost 12 years after the EEOC age discrimination charge was filed and over 5 years after the lawsuit was filed – it was settled. The employee class action pension lawsuit against Duke Energy was settled in May. If it had not been for the cash balance plan pension loses and health benefits loses, the Employee Advocate would not exists.

Now that the lawsuit has been settled, does that mean that the Employee Advocate will go away?

No. It does not work that way. The genie can be let out of the bottle, but he can never be put back in!

Duke Energy Pension Class Action Overview

What will 2012 look like at Duke Energy?

It’s sad to say, but 2012 could be the worst year ever!

When Paul Anderson and Jim Rogers became Duke CEO’s they were not encumbered by decades of Duke indoctrination. They were able to see Duke as it truly was. They both found Duke to be drowning in redundant, cumbersome, hackneyed, and ineffective processes.

Jim Rogers even asked employees to send email to the corporate human resources VP, identifying cumbersome processes. Jim Rogers also wanted a copy. It was a huge effort in the right direction. But the numerous process creators have relentlessly undermined all streamlining progress. Duke Energy is at its lowest point in process entanglement.

As 2012 starts, the processes are more stifling than ever. Some who spend their days rushing to meetings and nodding their heads to everything said, have no deep knowledge of how work actually gets done. Some do, but many do not. They have no grasp of the work that they are overseeing. It always seems to be those with no clue of what is going on that are always creating more process to “help” others be more effective. They try to fix what is not broken by making it worse. Their total contribution is taking credit for the work of others and impeding the very work that they take credit for. Work is not accomplished because of them, but in spite of them.

Processes alone do not make the plants operate. Each day someone steps outside the processes to avert a calamity. Sometimes the avoided calamity is small; sometimes it is huge. If each employee only mindlessly followed the processes, the plants would not operate for very long.

2012 is shaping up to be the year of brain dead employees. So many questionable processes are being shoved down our throats that some employees may just give up independent thought altogether. If management knows everything and is burdening us with more and more processes, why should we even think about what we are doing? Some may just follow the processes and let the chips fall where they may. Remember, this is what Duke is asking for!

Is there any hope?

Yes. If the merger with Progress happens, incoming CEO Bill Johnson could turn things around. He could see the same process mania that Paul Anderson and Jim Rogers saw. He could eliminate useless programs and processes and free employees of the burdens.

On the other hand, Mr. Johnson may love processes and want even more. If that is the case, all is lost. His fate and Duke’s will be sealed.

At the January 2011 Open Forum, Mr. Johnson said that he believes in "truth telling and trust" and that "openness builds credibility and trust."

Open Forum - January 2011

There was a 2011 Employee Opinion Survey. The results were given in the usual percentages of answers. But the percentages given did not represent the total number of answers. The given percentages were taken from a sample of the total answers! As if yet another way was needed to spin the results.

2011 Employee Opinion Survey

After years of promoting deregulation, Duke actually wanted Ohio to be regulated again!

Duke Energy Goes Full Circle on Deregulation

The Indiana ethics scandal is still raging on. Jim Rogers, Jim Turner and many other have testified at the hearing.

Duke Energy's Undue Influence of Regulators?

Happy New Year!

Welcome to 2011

Duke Energy Pension Class Action Overview

Employee Advocate - www.DukeEmployees.com – December 31, 2011

Final court approval of the $30 million settlement for the pension class action lawsuit against Duke Energy was granted on May 16, 2011. In the final approval Order, United States District Judge J. Michelle Childs found the settlement to be “fair, reasonable, and adequate.”

The settlement would not have been possible without the excellent work of attorney Mona Lisa Wallace. She had been investigating the Duke cash balance case since at least as early as 1999 at the request of many Duke employees. She traveled thousands of miles to meet with other attorneys and develop a legal strategy. She consulted with Employment Retirement Income Security Act (ERISA) attorneys in North Carolina and nationally to investigate the case. Since the lawsuit was filed in South Carolina, Ms. Wallace and the plaintiffs retained an ERISA law firm there to help represent the employees in court. No one involved suffered from the illusion that the case would be a cake walk.

Ms. Wallace took a keen interest in the case, attending hearings and actively participating in mediation talks. One mediation meeting that she attended in the summer ran well into the night. The air conditioning was programmed to cut off at a certain time and the room became stifling hot. Ms. Wallace became ill from the heat but persevered to the end for the best possible settlement.

The largest potential settlement would have been from the age discrimination charge, but this was ruled in favor of Duke by a court order dated June 2, 2008. The problem was that many other courts had ruled in favor of the companies on similar claims in other states. Therefore, our Judge did the same. Most employees were left in the “interest rate” class. The class only covered a dispute regarding the interest paid for a two-year period and had to do with small variations in the interest rates. So, any way you slice it, it could not have been a staggering sum of money. In the last mediation negotiations, Ms. Wallace demanded, and received, a 100% settlement for the interest rate class. One cannot possibly do better than a 100% settlement.

The “whipsaw class” did not receive a 100% settlement based on its lower probability of prevailing had the case gone to trial. This “whipsaw” claim had large damages if the plaintiffs won but many problems existed in this claim. In fact in the June 2, 2008 Order, the Judge said that “Duke makes some strong arguments for dismissal” of the claim. However, due in large part to Ms. Wallace’s tenacity, the claim remained in the case and though its weaknesses were known, the plaintiffs were able to get extra settlement consideration for the claim. There was also another “interest rate” claim that was related to the whipsaw claim that the plaintiffs were able to settle as well. All of this added up to the $30 million settlement.

Accepting the settlement was in the best interest of all class members. Otherwise, the case could have gone on for more years, with no guarantee of any settlement or of a victory at the end, given the many pitfalls in the ERISA law. Employees, former employees and retirees received every dime possible considering the merits of the case.

The settlement was also good for Duke Energy. The EEOC cash balance plan age discrimination charge and the lawsuit had been hanging over Duke’s head for almost twelve years cumulatively. It was conceivably an impairment to any mergers.

A case of this nature involves a strain on the Court system because so many documents are filed and there are numerous hearings and motions to decide. In this case, the Federal District Court in South Carolina kept control of the case from start to finish. Most hearings were presided over by United States District Judge R. Bryan Harwell.

United States Magistrate Judge William M. Catoe presided over a hearing concerning compelling Duke to produce certain important documents as well as other discovery matters. Judge Childs assumed responsibility over the case in its last months. All of the Judges performed their duties in an exemplary manner as well as the Court clerks and staff.

Judge Harwell said at one of the first hearings that Federal District Judges try to get it right the first time. That was a good indication that he had no intention of issuing a flaky ruling that would be overruled by an appellate court. Plaintiffs in other states had early success attacking cash balance plans. But by the time the Duke case had begun, the climate had changed. Employee victories were being overturned by appellate courts or being dismissed by courts influenced by those appellate courts.

Given this climate, if Duke employees and retirees had won their age discrimination claim in the district court, chances are slim that this victory would have survived an appeal. In the unlikely event that it survived an appeal, Duke would have most certainly tried to appeal it to the United States Supreme Court. The Supreme Court has already indicated that it has no problem with employees losing pension benefits due to cash balance conversions and has been perceived as adverse to worker and consumer interests generally in recent years. IBM employees in the Cooper case at first won their ERISA age discrimination claim in their lawsuit, but it was overturned on appeal. The Supreme Court chose not to review the case. Judge Harwell discussed the Cooper case and other cases in a very long Order, concluding that he had to dismiss the claim. However, he allowed the other (though smaller) claims to continue. The fact that the Judge allowed the other claims to continue was very important especially since Duke had asked the Judge to throw out all of the claims.

Judge Harwell could have taken the easy way out by granting Duke’s requests to move the case to North Carolina, or later, to dismiss all the claims. He instead told Duke’s attorneys that he did not want to shirk his duty. Draw your own conclusions as to why Duke was so adamant that the case be transferred to North Carolina.

At one hearing, when a Duke attorney was trying to explain away everything, Judge Harwell asked him if he could say that with a straight face. It is recognized that Judge Harwell made the correct rulings.

The Employee Advocate, as its readers know, has long been involved in researching and investigating the pension plan. The Employee Advocate in fact contacted Equal Employment Opportunity Commission (EEOC) Chairperson Ida Castro about the cash balance conversion in 1999. She expressed concern about cash balance plan implications and wanted them investigated. At a 1999 EEOC meeting in Charlotte, NC, employees were told that the cash balance plan age discrimination charge was the number one priority of the EEOC Charlotte District. We were also told that the EEOC had waived the statute of limitation for filing an age discrimination charge and also waived the filing age threshold of age 40. Later the EEOC moved the investigation to Washington, DC and began hiring actuarial experts. At that point we were hopeful the government would take meaningful action.

Utility Workers May File Grievance (1999)

In 2000, The Employee Advocate, along with employees of other corporations, met with Treasury and Labor Department officials in Washington. These officials were appalled at the difference between what employees told them versus what the corporate lobbyists had been telling them. They immediately said they would open a cash balance plan public comment period.

"Mr. Smith Goes to Washington" (2000)

The Internal Revenue Service had misgivings about cash balance plans also and placed a moratorium on issuing favorable letters of determination regarding such plans. Cash balance plan promoters were feeling the heat. As a practical matter, the IRS moratorium slowed down the momentum of these plans.

The subsequent change of administration in Washington was as abrupt as hitting a brick wall. Eight years of corporate appeasement weighed heavily on all efforts to correct the pension losses wreaked by cash balance plans. The EEOC and IRS efforts faded and the plaintiffs realized they were effectively “on their own” - a lawsuit was the only option. Later, compromise reform legislation was enacted preventing companies from adopting these kinds of plans in the future without protective measures – but the governmental agencies stopped short of requiring the dismantling of already-adopted plans.

How can corporations deceive, bait-and-switch employees and reduce promised pensions and not have to make full restitution?

The short answer is that ERISA law is a pit of vipers.

The ERISA law governs employee pensions and benefits. When the law was enacted in 1974, corporate lobbyists were right there loading it with loopholes. Over the years, corporate lobbyists have weakened ERISA at every opportunity, for instance by influencing regulatory agencies such as the EEOC and the IRS that are charged with implementing the law. Appellate courts have further weakened ERISA by issuing corporate-friendly rulings, often under pressure by industry advocacy groups.

The Pension Protection Act of 2006 amended ERISA to outlaw cash balance plan “wear-away” and aspects of the “whipsaw” process of calculating lump sums. But this relief came too little, too late for many. For years, these were the very mechanisms that corporations used to transfer employees’ pension funds to the corporate bottom line! Yet the agencies stopped short of holding the existing plans illegal and requiring refunds to workers and retirees. These much needed corrections were only applicable going forward. The only way to challenge prior conversions was in court. In fact, in our case, the group of retirees included in the “whipsaw” claim had to be limited to people who retired before August 17, 2006, because one effect of the legislation was to shield companies from liability after that date.

Our case was blessed with engaged class representatives and many fine attorneys in North and South Carolina. The attorney who spent the most years investigating our case in North Carolina was Ms. Wallace, assisted by other attorneys at her office including John Hughes.

In South Carolina, Cheryl Perkins spent hours researching, writing briefs and pleading our case in court. She took the fight to Duke and was amazing. Other South Carolina law firms also joined in to represent the plaintiffs. Attorney Jim Gilreath who is renowned for his ERISA cases provided strong assistance. If you ever find yourself in a courtroom with Mona Lisa Wallace or these other lawyers, make sure that they are your side.

$30 Million Settlement Ends Duke Energy Class-Action Suit

2011 Employee Opinion Survey

Employee Advocate - www.DukeEmployees.com - May 19, 2011

Some have received Duke Energy Employee Opinion Survey forms this month. If you have received one, you have until May 31 to submit it.

Below are comments submitted this year:

Ethics and Integrity

The limited legal resolution to benefits flimflam in no way assuages the company's guilt of making unethical, deceptive maneuvers. Employees are well aware of the unscrupulous benefits manipulations by senior management to profit at their expense.

The company cannot successfully ignore or spin away the facts. Newer employees know that the same thing can happen to them. So, as older employees leave the company, do not expect a drastic improvement in trust of senior management.

2010 Employee Opinion Survey

$30 Million Settlement Ends Duke Energy Class-Action Suit

Employee Advocate - www.DukeEmployees.com - May 18, 2011

This article was published by The Greenville News on May 16, 2011

$30 million settlement ends Duke class-action suit

By David Dykes

A judge today approved a $30 million settlement to end a class-action lawsuit against Duke Energy Corp. that alleged the company violated federal law when it made changes to its retirement plan.

Attorneys told U.S. District Judge J. Michelle Childs 20,000 class members were involved in the case, which dates back to 2006. The company and actuaries still must calculate how much each will receive as part of the settlement, David Johnson, an attorney for Duke, told the judge at a hearing in U.S. District Court in Greenville.

Duke had denied any wrongdoing.

At today's hearing, part of the final settlement proceedings, Cheryl Perkins, an attorney representing the former and current employees, said the settlement followed "in-depth mediation" and was in the best interest of the class members to avoid a prolonged trial.

Johnson said Duke supported the settlement, and said it involved a "substantial sum of money."

Attorneys urged class members who were in the courtroom for the hearing not to talk to a reporter afterward.

The workers alleged in their lawsuit that Duke violated the Employment Retirement Income Security Act of 1974 in how it administered and calculated benefits under its retirement cash balance plan.

They alleged Duke improperly created and adjusted opening balances and failed to accurately describe the new methodology for establishing those balances.

The lawsuit alleged "older workers lost thousands of dollars in the value of their pensions, after putting in decades of work" for the Charlotte-based company when it converted its traditional pension to a cash balance plan.

In court filings, Duke said it wanted a plan design that, among other things, allowed for a more even growth of benefits and eliminated the prior plan's creditable service cap.

Duke said it wanted to eliminate the incentive to retire early because that was causing talented and productive employees to leave the company.

A cash balance design achieved both goals, Duke said.

While the case began with several different claims, age discrimination was no longer part of the case, both sides said.

The case focused on two classes of interests, according to court records and attorneys for the plaintiffs.

One involved current or former vested Duke employees who were participants in the company's cash balance plan between Jan. 1, 1997, and Dec. 31, 1998, excluding participants who had retired on or before Dec. 31, 1996. That formed the "interest rate class," according to attorneys and court records.

The other involved all former employees of Duke who were participants in Duke's cash balance plan between Jan. 1, 1997, and Dec. 31, 2002, and retired and took lump sum benefits on or before Aug. 17, 2006, before age 65.

In February 2006, six former and current employees, including a Seneca resident, sued Duke in federal court, claiming the company violated pension laws when it made changes to its retirement plan in the 1990s.

The lawsuit asked for a court-ordered overhaul of the company's retirement plan and an independent auditor to review the plan. It also sought unspecified restitution for lost benefits and interest.

The plaintiffs alleged Duke violated federal law when it converted from a traditional defined benefit plan, which offers workers fixed benefits based on the number of years they worked, to a cash balance plan, in which employees' benefits grow by a percentage of their pay plus interest each year.

Under a cash balance design, benefits grow more evenly and do not spike at age 55 or cease to grow thereafter, Duke said in court filings. The company said it designed the cash balance plan "with an eye toward making early retirement less desirable and generating a larger age 65 normal retirement benefit."

Duke, at the same time, increased its support of the company's 401(k) plan, according to court filings.

Duke's conversion in 1997 to a cash balance plan "made drastic changes" in how benefits were calculated, resulting in reduced balances for participants, the lawsuit said.

In a filing with the Securities and Exchange Commission, Duke officials said the case also raised some plan-administration issues, alleging errors in the application of plan provisions, such as the calculation of interest rate credits in 1997 and 1998 and the calculation of lump-sum distributions.

In summarizing the case in the SEC filing, Duke officials said the plaintiffs sought "a broad array" of remedies, including a retroactive reformation of the Duke Energy retirement cash balance plan and a recalculation of participants' and beneficiaries' benefits under the revised and reformed plan.

At an unsuccessful mediation in September 2008, the plaintiffs quantified their claims as being in excess of $150 million, Duke said in the SEC filing.

After mediation on Sept. 21 of last year, both sides reached an agreement in principle to settle the lawsuit, subject to execution of a definitive settlement agreement, notice to the class members and approval of the settlement by the court, Duke said.

On Feb. 8, the settlement was preliminarily approved by the court, the company said. However, the settlement was still subject to the judge's final approval.

Settlement Near in Duke Energy ERISA Class Action

Duke Energy Goes Full Circle on Deregulation

Employee Advocate - www.DukeEmployees.com - March 7, 2011

For years, Duke Energy promoted electric deregulation as greatest thing ever. Duke was no longer content with the guaranteed rate of return that regulation offered.

Deregulation would offer the opportunity to charge what the traffic would bear. Customers would have to pay through the nose for electricity and the profits for power companies would be unlimited.

The Empty Promise of Deregulation

Through massive lobbying and campaign donations, electric utilities were able to get deregulation implemented in a number of states. It did not take long for the grand deregulation scheme to start collapsing.

The Electric Deregulation Nightmare

Under deregulation, there was little incentive to ensure reliability by making investments in infrastructure. Fly-by-night companies were only interested in turning a quick buck.

Deregulation was a disaster for consumers. The big promise was that deregulation would foster competition and prices would be driven down. There was much competition, but not to see who could sell electricity the cheapest. The competition was all about who could gouge the customers the most.

The ability to price gouge was the deregulation prize that utilities sought. When deregulation provided the ability, companies gouged prices to the maximum extent possible.

This was all part of the Enron craze. There was the belief that no one needed to generate electricity, that everyone could make enormous profits by merely trading it. It was not considered that if no one produced electricity, there would be none to trade. It was not considered that those making huge investments to generate electricity needed the stability of a regulated environment.

No utility ever wanted deregulation so that they could charge less for electricity. Utilities only wanted to charge more and make unlimited profits. Just as a regulated environment provided utilities with a guaranteed rate of return, it also imposed a cap on profits. The fast buck boys could not have this.

State by state, customers found that deregulation only ran up the price of electricity. Duke Energy won the price gouging contest with the all time highest rate of $3,880.00 per megawatt hour in California.

The $3,880 Megawatt-Hour

But now, Duke has figured out that deregulation is not such a great idea for companies either. In Ohio, Duke has lost 60% of its customers to other suppliers because it cannot compete on price.

Duke Settles Price Gouging Lawsuits

In February, the Columbus Dispatch published "Fixing What's Broken in Ohio," by Jim Rogers. Duke Energy now wants electricity regulation in Ohio! He complained that Duke must make infrastructure investments that the competition is not concerned with.

Replenishing the Older Workforce?

Duke Energy's Undue Influence of Regulators?

Employee Advocate - www.DukeEmployees.com - February 24, 2011

This article was published by The Indianapolis Star on Feb. 24, 2011.

Big question: Was there undue influence between Duke execs and IURC?

James Rogers, the chairman and chief executive of Duke Energy Corp., wanted a private meeting last February with Indiana's top utility regulator to talk about soaring construction costs at the company's Edwardsport power plant. So one of his lieutenants -- Duke Vice President James Turner -- sent an e-mail directly to David Lott Hardy, then chairman of the Indiana Utility Regulatory Commission.

"Rogers and I would like to have breakfast with you this coming Thursday if you're available," Turner wrote. The two men juggled their calendars and settled on a time. "Don't tell the [other] utilities I'm being accommodating -- bad for my reputation," Hardy wrote to Turner.

Despite state law that sharply restricts private communication between regulators and company officials on pending cases, Rogers, Turner and another Duke executive met last February for breakfast with Hardy at the Capital Grille, a swanky Downtown restaurant where the menu features eggs Benedict with lobster for $21 and filet mignon hash for $15.

During the meeting, the Duke executives told Hardy that the power plant was facing a $530 million cost overrun -- the second major overrun in less than two years. All told, that would push the price tag up nearly $1 billion more than the IURC originally approved in 2007.

It was an enormously significant bit of news for the utility. Opponents of the project would argue that the cost overruns were Duke's fault and that the company should absorb the loss instead of being allowed to pass it along to customers in the form of a rate hike. If Duke were required to cover the cost, its profits and stock price would almost certainly take a hit.

Part of Turner's job was to help persuade IURC officials to pass those costs along to customers -- or to the contractor on the project. Incentives were built into his bonus, and e-mails from him indicated he took the task very seriously. It was also critical news for Duke's customers. The plant would require a double-digit percentage hike in electricity rates by 2013 for hundreds of thousands of Indiana customers, from households and schools to shopping centers and steel mills.

With such high stakes, experts in utility regulation say, it is imperative that utilities release such news to all stakeholders at the same time during open public hearings.

"Utility regulators decide cases that affect just about everyone's wallet, and they need to make those decisions in a manner that gives the public confidence," said Janice Beecher, director of the Institute for Public Utilities at Michigan State University. "Closed-door meetings or exclusive meetings aren't conducive to that."

The public, however, would not learn of the higher figure for seven weeks. Not until April would Duke make its regulatory filing with the IURC and issue a news release.

The breakfast meeting at the Capital Grille -- and several others like it -- are now raising serious questions about whether Duke's top executives exerted undue influence on utility regulators to pass along steep overruns to ratepayers to bail out a project plagued by rising costs.

Duke officials called the meetings a "courtesy heads-up," not meant to influence the process.

But e-mails obtained by The Indianapolis Star in recent months show that top executives at the utility and IURC had a long, cozy relationship that went beyond simple courtesies.

Hardy and Turner -- who have both left their jobs in recent months as that coziness came to light -- traded frequent e-mails on a wide range of topics, from cars and vacations to Duke's personnel decisions and construction problems at Edwardsport. In one e-mail, Turner invited Hardy and his wife to vacation on his boat in Lake Michigan.

Now, other e-mails indicate that Rogers, the top executive at Duke, was involved in private conversations with regulators at key points during the Edwardsport project.

E-mails also show an awareness among Duke and IURC officials of a desire for secrecy in some of their communications.

Ethics experts, large industrial customers and consumer advocates say the frequent contact and secret meetings ran afoul of Indiana law. They say Duke, at the least, should have disclosed the private meetings as they say the law requires.

Whether the private communications were improper depends on what was discussed.

Duke says the meetings were allowed by law because they were purely informational and did not cross the line into attempting to persuade the commission to approve the cost overruns.

But Duke's critics are reluctant to take the company at its word in the wake of a recent ethics scandal that revealed the commission's then-top attorney was seeking a job at Duke while overseeing some regulation of the company.

It remains unclear how authorities will respond to questions about Duke's private meetings and whether those get-togethers amounted to improper influence.

The IURC says the meetings were brought to its attention only a few weeks ago and it is still looking into the matter. The Marion County prosecutor's office declined to comment. It would be responsible for investigating communications that violate the state's "ex parte" law, which strongly limits what all parties with a stake in matters pending before the IURC can say outside the confines of official commission proceedings.

The state Inspector General and the FBI launched investigations into earlier ethical questions about the cozy relationships between Duke and the IURC but have declined to comment since then.

More private meetings

The breakfast meeting last February between Hardy and Duke executives was only one of many such meetings with government officials that apparently took place that week, according to e-mails.

A day earlier, Jim Stanley, then president of Duke's Indiana operations, sent an e-mail to Hardy, asking if Turner could visit the IURC offices and "do a walk thru and reintroduce himself to folks."

Hardy responded that Turner "cannot roam the halls willy-nilly, but he can see folks."

"Does he have a target or two in mind?" Hardy asked.

Some Duke critics say such meetings, if they occurred, would have been improper. Such a visit probably was "carefully calculated to reinforce with the employees of the commission that Turner has a special personal relationship with Hardy, (and) Duke Energy has a special institutional relationship with the Commission," Michael Mullett, a Columbus lawyer who is a longtime opponent of Duke, said in an e-mail.

Duke spokeswoman Angeline Protogere said she couldn't confirm whether Turner actually ended up visiting the IURC offices that day.

And there apparently was another meeting that day, the contents of which required some level of secrecy. A few hours after the breakfast meeting at the Capital Grille, Hardy sent Rogers and Turner an e-mail, with the subject line: "terseness." The e-mail said: "Who ever reports on the meeting might consider a one word characterization and a number where you can be reached."

Turner responded: "Got it."

Duke declined to comment on that mysterious exchange. "I don't want to speculate on what Hardy might have been referring to, and I can't find records of much of a response from us," Protogere said.

It was not the first time Duke officials had taken regulators into their confidence, far out of public view, over the rising cost of the Edwardsport plant. Two years earlier, on March 17, 2008, company executives met privately with Hardy.

They told him the plant's cost had risen from an originally approved amount of $1.985 billion to $2.35 billion. They would not share that figure with customers, consumer groups or other interested parties for another two months.

Large industrial customers, who buy millions of dollars worth of Duke's electricity per year, say they have big problems with Duke meeting privately with regulators to discuss Edwardsport.

"At the start of the case back in 2006, Duke elected to have the commission provide ongoing review of the project. From that point on, there should have been no private conversations about the project between anyone at Duke and anyone at the commission," said Tim Stewart, a lawyer at Lewis & Kappes, which represents industrial customers.

He added: "It's especially bad when the heads of Duke and of the commission are having secret meetings, the sole purpose of which can reasonably be assumed to be to ensure that Duke recovers the massive cost overruns from its ratepayers."

He said Duke should bear the costs of the overrun, and not pass it along to ratepayers. He said "a convincing case" could be made that Duke knew or should have known that the original estimate of $1.985 billion was "significantly understated."

A collection of grass-roots consumer groups that oppose the Edwardsport plant want the IURC to start an investigation to determine whether the e-mails and behind-the-scenes meetings amount to undue influence in the agency's regulatory oversight of the Edwardsport plant. Some compare it to pleading a case in private with a judge, far from his chambers, away from the public eye.

"It's like a defense attorney talking to a judge without the jury or prosecutor present. You just can't do it," said Kerwin Olson, program director for Citizens Action Coalition of Indiana, one of the groups that object to the private meetings. The others are Save the Valley, Valley Watch, and the Hoosier chapter of the Sierra Club.

In a recent filing with the IURC, the groups say secret communications, also known as ex parte contacts, "show an ongoing pattern and not simply an isolated incident or two."

The IURC said it is still considering the motion and will examine evidence presented by Citizens Action and other parties.

Duke defends its actions

The legal filing includes responses from Duke Energy, in which the company said it was "aware of two meetings" where the Edwardsport project was discussed: two private meetings with Hardy over the cost increases.

The Capital Grille breakfast lasted approximately an hour, of which "5 -10 minutes was spent on Edwardsport cost estimate update," Duke said in the legal response to the CAC filing.

The company said the other meeting was at a conference in New Mexico that lasted 15 to 20 minutes, of which the Edwardsport cost issues were discussed for 5 to 10 minutes.

Duke officials say they routinely give a "courtesy heads-up" to regulators on cost increases. In November, Rogers, the Duke chairman and chief executive, submitted testimony to the IURC with his views on the matter:

"I have had a practice throughout my 22 years as CEO not to surprise any of the commissions having jurisdiction over our regulated utilities with significant filings or new developments on major projects or initiatives," he testified. "Consistent with that practice, we gave then-Chairman Hardy a courtesy heads-up on each of our project cost increases on the project and our intent to make filings with the commission regarding those cost increases."

None of these contacts would be improper, provided they weren't meant to influence the IURC. And Protogere, the Duke spokeswoman, said the company did not cross that line.

But some open-government advocates aren't buying that explanation -- especially in light of recent stories in The Indianapolis Star that showed that several Duke executives had cozy relationships with Hardy, and traded hundreds of compromising e-mails with him in recent years.

Turner, for one, frequently e-mailed Hardy on a wide range of topics. Turner, Duke's second-highest-paid executive, resigned in December after his relationship with Hardy came to light.

Last July, as he was riding a boat on Lake Michigan, Turner wrote to Hardy: "Would the ethics police have a cow if you and the woman came up some weekend?"

Hardy shot back: "Probably -- we might 'be in the area' some afternoon, but I won't be doing this forever."

A few months later, on May 6, Hardy sent Turner a message: "Is there a number where you would get a fax without the world seeing it?"

Turner replied: "My home fax isn't working, so it could be tricky. How about a scan and e-mail?"

Julia Vaughn, policy director of Common Cause Indiana, said Duke's cozy relationship with the IURC makes it hard to believe the company was not trying to plead its case with Hardy over the cost overruns.

"You can call it education, or you can call it advocacy, but clearly the information (that Duke gave to Hardy) was meant to influence the process," Vaughn said

Duke's need to give a periodic "heads-up" to state regulators shows how much the utility felt it needed a good working relationship with those who would make billion-dollar decisions on its projects, critics say.

In January 2010, Turner confided to his boss, Rogers, in an e-mail that he intended to give plenty of attention to the Edwardsport plant and try to shift costs away from the utility.

"One of my top priorities this year is to reduce the regulatory risk associated with Edwardsport," he wrote.

He said he would do that by "putting pressure" on the company's major contractors, General Electric and Bechtel Corp., "to own up to some of the construction cost issues." He also was interested in "seeking partners" from major industrial customers "to absorb some of the investment."

"I will feel better about overall Indiana strategy when I feel like Edwardsport is in smoother waters," Turner wrote. The Edwardsport plant, for all its cost and construction problems, remained on course until Duke entered an ethics storm in the second half of last year with a series of questionable hiring decisions.

In June, the utility hired Mike Reed as president of its Indiana operations. Reed previously served for about a year as commissioner of the Indiana Department of Transportation, and before that for three years as executive director of the IURC.

In September, Duke hired Scott Storms, the IURC's top attorney and chief administrative law judge, to become a regulatory lawyer in its Plainfield office. Critics charged that the move was a conflict of interest, noting that Storms was overseeing regulation of Duke even as he sought a job with the company.

Within months, Duke fired both Reed and Storms.

Hardy, for his part, was fired as IURC chairman in October by Gov. Mitch Daniels, for overlooking ethical conflicts at the commission.

Months before those conflicts came to light, Hardy and Turner were bantering in e-mails about their future.

In January 2010, a month before the Capital Grille breakfast and three months before Hardy's term as IURC chairman was set to expire unless Daniels reappointed him, Turner sent Hardy an e-mail: "You're not planning to go anywhere in April 2010, are you?"

Hardy responded: "Is that a job offer?"

Turner replied: "Could be. But I was thinking you have miles to go at the IURC before you sleep."

Jim Rogers Says Hiring Storms Was a Mistake

Jim Rogers Says Hiring Storms Was a Mistake

Employee Advocate - www.DukeEmployees.com - January 20, 2011

This article was published by The Indianapolis Star on Jan. 18, 2011.

Duke CEO: Storms' hiring a mistake

Rogers: Lawyer didn't make cut until Reed got involved

Written by John Russell

The man at the center of Duke Energy Corp.'s ethics scandal, Scott Storms, should never have been hired by the utility as a regulatory lawyer and wasn't even on the list of five finalists, the company's chief executive, James Rogers, said in an interview.

Storms had been dropped from consideration in June, after he expressed informal interest in the job, and was notified of that decision, Rogers said.

But Storms, the top lawyer at the Indiana Utility Regulatory Commission who was handling several important Duke cases, managed to survive the cut, get reconsidered and eventually win the job as assistant general counsel in Duke's Plainfield office.

That happened because of the behind-the-scenes work of an influential friend, Michael Reed, who had just joined Duke a few months earlier as president of the company's Indiana operations, Rogers said. Storms and Reed had worked together at the utility commission for three years, from 2006 to 2009, when Reed was executive director and Storms was an administrative law judge.

Their close friendship managed to trump Duke's official hiring process, Rogers said. That happened because Reed pulled strings to get Storms back into consideration for the job, even though he didn't have an official role in the hiring of a regulatory lawyer.

"So what you had was a guy who didn't have the authority to hire him, working on him," Rogers said in a telephone interview last week. "And you had the person who actually had the authority to hire tell him no."

That hiring decision touched off an ethics firestorm that has embroiled Duke for months. The Indiana Inspector General has accused Storms of violating state law by taking a job with Duke while continuing to handle cases involving the utility. Gov. Mitch Daniels fired Storms' old boss, David Lott Hardy, chairman of the IURC, saying he knew about Storms' ethical conflict but did nothing about it.

Duke fired Reed and Storms in November. Another top Duke executive, James Turner, resigned in December after The Indianapolis Star reported that he had sent hundreds of compromising e-mails to state regulators.

"As we come through this period, one of our jobs is to rebuild our credibility and rebuild our reputation," Rogers said in a wide-ranging interview concerning the events of recent months.

Neither Reed nor Storms could be reached for comment.

Rogers said the company recently changed its hiring protocol to ensure that job candidates recuse themselves from legal or regulatory conflicts before starting the interviewing process.

Earlier this month, Duke took out a large advertisement in The Star. In it, Rogers talked about trust and integrity issues that have been raised.

"Over the past few months, issues were raised that have challenged our hard-earned reputation and tested our resilience," Rogers wrote. "We have responded as any company that is dedicated to staying in business for the long-term would: We have changed our policies, our practices and in some cases -- our personnel."

It still remains unclear how long Duke and Storms were talking about a job.

Duke said months ago that it first contacted Storms and several others in April, asking informally whether they were interested in the open position or could recommend a suitable candidate.

But the company has declined for months to say when Storms submitted his resume or otherwise expressed formal interest in the position.

Rogers said that Kelly Karn, Duke's associate general counsel in Plainfield, approached Storms only informally in April.

"She approached along the lines of, we have this opening, get the word out to the commission if anyone is interested. And he kind of raised his hand and said, 'I might be interested,' " Rogers said.

In June, Karn told Storms he was no longer being considered, Rogers said. He did not say why Storms had not survived the cut.

Yet in following weeks, Reed would go to bat for Storms' candidacy, according to e-mails obtained by The Indianapolis Star.

"I'm still working on the 'you' issue with Duke mgt," Reed wrote to Storms in an e-mail on June 27. "Don't sense a concern about making this happen, rather more of an issue of when and how."

Later that day, Reed sent an e-mail to Turner, the second-highest-paid executive at Duke: "Sent SS (Scott Storms) a note re status. Told him to hang in there. Have you heard anything?"

A week later, on July 5, Reed sent an e-mail to Hardy at the IURC: "Kelly (Karn) is readying to interview alternatives, although I can drag that process out. Scott told me he is not interested in going to (a) law firm first; said they either want me or they don't. Can't blame him."

A few weeks later, on July 21, Reed sent another e-mail to Hardy: "Think we're real close to completing the deal re SS. Do not want to lose the momentum."

Tom Williams, a Duke spokesman, said Monday that Storms didn't fill out an online application until August, two months after the company originally told him he was no longer being considered.

On Aug. 13, Reed sent an e-mail to Storms marked "confidential" that read: "When your interviews are scheduled, particularly with Stempien and Manly, give me a call. Glad to provide some pointers if you wish."

Catherine Stempien is Duke's senior vice president of legal services. Marc Manly is Duke's corporate secretary and chief legal officer.

On Aug. 27, Storms sent Reed and Hardy an e-mail: "Kelly called to tell me things are moving." He told her he was planning to ask for a review by the state ethics commission on Sept. 9.

"Our boy is getting excited," Reed wrote to Hardy.

Duke offered Storms the job in late August, pending a favorable ethics review, which he later received. In mid-September, Storms' hiring was announced in a utility trade newsletter. Duke had not made a public announcement.

But when questions about Storms' change of jobs later arose, Duke defended his qualifications.

"Scott is an excellent lawyer with nearly two decades of experience in utility and environmental law," company spokeswoman Angeline Protogere wrote in an e-mail on Sept. 22. "That background made him an excellent candidate for the job."

Only later, when the hiring process and ethics questions arose, did the company begin to backpedal. Duke placed Storms and Reed on leave on Oct. 5.

A month later, on Nov. 8, the company said it had fired the two but declined at the time to say why.

In last week's interview, Rogers said that Reed had had "inappropriate" conversations with Storms during the hiring process. He said Storms was hired only after getting a positive ethics review, and it later appeared Storms had misrepresented his position to the ethics commission.

Asked whether the company had any other land mines that could be exposed in coming months in the case, Rogers paused for a moment.

"I certainly hope not," he said. "But I can't predict the future."

IURC Chief and Duke Exec, Jim Turner, Were Pals

Welcome to 2011

Employee Advocate - www.DukeEmployees.com - January 5, 2011

There were four Duke Energy fatalities in 2010.

Fourth 2010 Duke Energy Fatality

A pension class action settlement agreement has been reached and will be submitted to the Court this month..



The ethics scandal involving Duke Energy and its Indiana regulator is still going strong.

November Open Forum

Happy New Year!

Welcome to 2010

Fourth 2010 Duke Energy Fatality

Employee Advocate - www.DukeEmployees.com - December 28, 2010,

Duke Energy tree-trimming contractor, William E. Kingrey, 44, was killed Dec. 20, according to the Middletown Journal. He was carrying his equipment across a train trestle, on his way to the job site. Before he could get across the trestle, he was struck by a train.

The Occupational Safety and Health Administration is investigating the accident.

Duke Energy Contractor Killed on the Job

Duke Demands Documents Deletion

Employee Advocate - www.DukeEmployees.com - December 27, 2010,

Jim Rogers promised to take action on the Indiana., Jim Turner, ethics scandal. And action was taken.

An immediate action came after the Indianapolis Star published email written by Jim Turner and the Indiana regulators. Duke employees were subjected to even more training, which encouraged deleting email and other documents.

The response sent the message that the apparent ethics violations were no problem at all. The only problem perceived by Duke was that people got caught at it. (If we could have only gotten rid of the evidence.)

Duke started the document deletion mania when the email program Outlook replaced Lotus Notes in 2006. Email could be stored indefinitely in Lotus Notes. Historical email can be a great troubleshooting tool. But when Outlook came in, two-years was the maximum retention period.

Goodbye and Good Riddance to Lotus Notes

Since that time, employees have been bombarded with document deletion training. Duke apparently does not want to get caught in the same position as accounting firm Arthur Andersen over Enron documents. The firm had to rent huge, industrial shredders to get rid of the evidence.

Auditor Admits Destroying Enron Documents

Recently, the two-year email retention period was tighten up. Now all email is automatically deleted after a couple of months.

Those who have nothing to hide want a wide paper trail. They can show the history of any current situation. They can show just how we got here and what events triggered any evolution. The email history speaks for itself.

Shady operators always want zero paper trail. They can always claim that they do not remember or simply rewrite history, if no documents remain to refute them.

When Duke implemented Outlook, it sent the IT group on a road show to sell it to the employees. At such a show, the Employee Advocate mentioned the huge inconvenience of not being able to access historical email. The IT rep responded that he did not like the policy either. He said that the Legal Department was driving it. He said that they were afraid of a lawsuit, and did not want the expense of sorting thorough all the email for potential evidence.

There is zero doubt that the answer is partially correct. The main reason is more likely that Duke is afraid of the actual evidence contained within the email!

Will employees soon see all email automatically deleted after ten minutes? Will a chalk board become the document retention tool of choice?

One employee said that he wonders what information WikiLeaks has on Duke.

October Open Forum

IURC Chief and Duke Exec, Jim Turner, Were Pals

Employee Advocate - www.DukeEmployees.com - November 30, 2010,

This article was published by The Indianapolis Star on 11/28/10.

IURC chief and Duke exec were pals, e-mails show

Regulator, utility power player discussed a lot -- including Duke's hiring process

Written by John Russell

James L. Turner, the second-highest-paid executive at Duke Energy Corp., liked keeping in touch with Indiana regulators, even on a long holiday weekend when he was riding in a boat.

On July 2, Turner sent an e-mail to David Lott Hardy, then chairman of the Indiana Utility Regulatory Commission, telling him he was heading out on a channel to Lake Michigan.

"Would the ethics police have a cow if you and the woman came up some weekend?" he wrote.

Hardy wrote back: "Probably -- we might 'be in the area' some afternoon, but I won't be doing this forever."

A few minutes later, he added that driving to the lake would be a fun outing in a high-performance BMW M5. "It would be a nice run in the M5 and a cheaper [Michigan] journey as usually we only go to [Michigan] so the woman can go to Nieman Marcus."

In dozens of e-mails, obtained by The Indianapolis Star under an open records request, the two men schmoozed and joked over all sorts of personal topics, sometimes trading messages eight or 10 times a day. At one point, Hardy offered advice on what kind of BMW Turner should buy. Another time, they talked about Butler University's basketball championship games. Several times, they had frank discussions on private personnel matters involving

Duke officials and job candidates.

Taken together, the e-mails paint a picture of a cozy relationship that extended far beyond a professional association between a utility executive and a powerful state regulator.

They also show that the friendly relationship between Duke and Indiana regulators, which resulted in the firing of Duke's Indiana president, Mike Reed, in an ethics scandal earlier this month, extended all the way to Duke's headquarters in North Carolina.

Turner is one of Duke Energy's top executives, responsible for the company's regulated business segment, which is Duke's largest, and for legislative and regulatory strategy and rates. He oversees a vast portfolio, with responsibility for power delivery, gas distribution, customer service and several other functions.

Last year, Turner earned a salary of $650,000, plus stock awards, cash incentives and other compensation worth a total of $4.35 million. That made him second in total compensation only to Chairman and CEO James Rogers, whose package was valued at $6.93 million, according to the company's proxy filing.

That made him far better paid than Hardy, the man he spent hours cajoling by e-mail. Hardy made $109,000 as chairman of the Indiana Utility Regulatory Commission. He was fired in October by Gov. Mitch Daniels in what has become a major ethics scandal for the state, after the IURC's general counsel, Scott Storms, accepted a job to work for Duke as a regulatory lawyer.

Daniels' office said at the time of the firing that an internal review showed Storms continued to preside over Duke Energy matters even as he was discussing taking a job with the company. Hardy, who was Storms' boss, knew of the situation but failed to do anything about it, Daniels said.

The FBI is investigating, according to the IURC, and Daniels has ordered an investigation into all Duke cases that might have been tainted by Storms' activities.

Earlier this month, Duke fired Storms and the president of the company's Indiana division but declined to say why. Now, with the release of hundreds of new e-mails between the company and the IURC, questions are sure to arise about who else was involved in the deception and what relationship other Duke officials had with the ousted Hardy. Turner, once Indiana's utility consumer counselor, did not return a call made to his cell phone Friday to discuss his e-mails or his close relationship with Hardy.

A spokeswoman for Duke Energy Indiana released a brief statement: "Our internal investigation is ongoing. We continue to take this issue very seriously."

The e-mails raise questions about whether Turner had special access to Hardy that was unavailable to utility customers, grass-roots groups and everyday citizens in matters of rate increases and electricity regulation.

"It adds up to a picture of a pretty cozy relationship between the regulator and the regulated," said Kerwin Olson, program director at the Citizens Action Coalition of Indiana, a watchdog group that long has been critical of Duke and the IURC. "There's a lot of schmoozing going on behind the scenes that most people would find distasteful." Turner's relationship with Hardy appears to have been a deeply close one that gave him freedom to crack jokes that might have earned an ordinary citizen a rebuke from a state regulator.

One day in July, Hardy e-mailed Turner and several other people that he was relaxing by a pool and contemplating breakfast: "There is a blue, cloudless sky, punctuated with the brilliant color explosions of the hot air balloons arcing across my field of vision. In front of me is the reflecting pool bubbling away whilst I drink artisanally roasted coffee and try to decide when I should go in for breakfast. Thoughts appreciated. Oh, do any of you know a good breakfast wine."

Turner replied to Hardy and the group: "Does anyone know if a desire to 'bitch slap a chairman' violates any state's hate crime laws?"

In May, Hardy sent an e-mail to Turner, apparently declining a helicopter ride to an unmentioned place. "My purity cannot allow riding in the helicopter, unless, of course, I have a heart attack and you paint LIFEFLIGHT or some such on the side."

Turner joked back: "We could simply boot you out over Indy so no one would ever know how you got there." During Butler University's basketball championship games last spring, Hardy wrote that Turner should come to Indiana to see one of the games. Turner, apparently still in North Carolina, agreed. "I know. Although the pressure of watching it on TV almost killed me. Wow. Hope they get a chance to stomp Duke."

Several times, they traded e-mails about getting together for dinner and drinks. One time, they quoted lines from Monty Python comedy skits. Another time, Turner joked that one of Hardy's written orders on a regulatory matter seemed "surprisingly lucid."

And the two frequently discussed Storms and Reed, as those two went through job interviews and were hired away from the IURC by Duke earlier this year. Hardy wanted constant reports on the hiring process.

"How real is the interest in Mike (Reed)," Hardy asked on March 13. "I think it's a marriage made in heaven. Is this decision yours and I don't need to sell Jim [Rogers, CEO of Duke], or is his buy-in pivotal?"

Reed and Hardy were friends, having worked together for several years at the IURC. Reed held the title of executive director for three years before leaving last year to become commissioner of the Indiana Department of Transportation. About a year into that job, he applied for a job as president of Duke's Indiana division, which had opened up.

Turner replied that Rogers had been in China during the past week, "so all he knows is that Mike's name is in the ring."

Turner added, "I'm supposed to talk with him tomorrow morning. At this point, he's probably leaning toward [another candidate], but I may work on that in the morning. I'll try to let you know before he gets out there whether a sell is necessary."

Whether it was proper for Turner to disclose to an outsider the decision-making process behind a high-level executive hiring remains unclear. But some human-relations experts said the whole discussion raises questions. "This is an ethics question at its core," said Karl Ahlrichs, a human-relations consultant at Gregory & Appel in Indianapolis. "What do Duke's policies and handbooks say about a situation like this? What's appropriate conversation with outside parties? My feeling is that people in leadership posts are supposed to act professionally."

How far the cozy relationships with Duke executives extended into state government is unclear. But the subject of Storms' hiring by Duke was raised with Daniels' chief of staff, Earl Goode, nearly two months before Storms left the IURC.

The Star reported last week that Reed was concerned by comments Goode made to him about Storms during a golf game Aug. 1.

According to e-mails, Reed told Hardy he had run into Goode, who said he would be surprised if the state's ethics panel cleared Storms, because of his role in presiding over Duke's $2.9 billion coal-gasification plant in Edwardsport.

Goode said last week that his comments to Reed meant only that Storms would have to go before the state ethics panel, as would any state administrator considering a private sector job offer. He said he had no opinion on Storms at that time. Only later would Daniels' office issue findings that Storms had a conflict of interest.

Asked why he was golfing with Reed, Goode said they were playing together in an event for GTE workers. He and Reed previously worked for GTE.

Reed apparently was worried about Storms' possible difficulties with the ethics commission. Later that same day, he sent Hardy an e-mail suggesting a way to address those difficulties. He urged Hardy to have the IURC's ethics officer, Loraine Seyfried, "clearly spell out how [Storms] would be walled off from Edwardsport, and therefore meet the test."

A few weeks later, Seyfried sent a three-page memo to Storms, stating her opinion that his prospective employment with Duke would not violate the state ethics code. Storms presented that opinion to the ethics panel Sept. 9, when he asked for approval to take the Duke job. The ethics panel gave him the green light in a ruling that largely mirrored

Seyfried's memo.

Storms and Hardy later joked by e-mail that they were impressed that no one laughed during the ethics hearing. Later, after Storms went to work for Duke, Hardy offered his old job as administrative law judge to Seyfried, presiding over Duke's Edwardsport project.

Daniels' office later found Storms had not walled himself off from Duke cases while discussing career options there. E-mails between Duke and the IURC in recent months span hundreds of pages, many of them between Hardy and Turner.

In February, Turner asked Hardy to breakfast. The two had to juggle schedules to set a date. Hardy wrote: "Don't tell the utilities I'm being accommodating -- bad for my reputation."

"Don't worry," Turner wrote back. "Your reputation in this regard is unalterable."

E-mails show clubby IURC, Duke

Settlement Near in Duke Energy ERISA Class Action

Employee Advocate - www.DukeEmployees.com - October 18, 2010

This article was published by Law360 on 10/13/10.

By Pete Brush

Law360, New York (October 13, 2010) -- Citing news of a settlement, a federal judge has stayed pending motions in a class action lodged by workers who accuse Duke Energy Corp. of shortchanging them on lump sum retirement benefit payments and of chiseling them out of their due interest on retirement account cash balances.

The parties were given 45 days to come up with a final settlement in the Employee Retirement Income Security Act case, according to a text order issued Tuesday by Judge J. Michelle Childs of the U.S. District Court for the District of South Carolina.

Requests for comment from counsel for both sides about the nature of the settlement were not immediately returned Wednesday.

The settlement was reached amid dueling briefs over named defendant the Duke Energy Retirement Cash Balance Plan's motions for summary judgment on class claims.

In September 2009, Judge Bryan Harwell certified the two classes - but denied the plaintiffs' bid for a third class alleging breach of fiduciary duty - ruling that the plaintiffs had met requirements for numerosity and commonality.

In their June 2008 amended complaint, the classes, led by first named plaintiff Kenneth Walton George, claimed the Charlotte, N.C.-based power giant failed to properly calculate participants' lump sum distributions and miscalculated interest credits for the 1997 and 1998 plan years.

During the first half of 2010 the proceedings featured a dispute over claims by the plaintiffs, older workers who started at Duke during the 1960s and 1970s, that the company had improperly contacted hundreds of members of the interest rate class, many of whom still work or worked at Duke, and had offered them a one-time lump sum payment in exchange for a waiver and release.

Those calls triggered hundreds of requests for advice from class members to counsel for the plaintiffs about whether they should accept such an offer, according to court filings.

In June, Judge Harwell found that Duke had improperly communicated with the interest rate class but that the conduct did not rise to the level of civil contempt because the company hadn't violated any specific court bar on such communications.

At the time Judge Harwell barred further communications between Duke and the class and restored as a class member one individual who accepted the so-called Voluntary Opportunity Plan offered by Duke.

Duke is represented by Ogletree Deakins Nash Smoak & Stewart PC and Sidley Austin LLP.

The employees are represented by The Gilreath Law Firm, Whetstone Myers Perkins & Fulda LLC, Wallace & Graham PA, Richardson Patrick Westbrook & Brickman LLC and Wyche Burgess Freeman & Parham PA.

The case is George et al. v. Duke Energy Retirement Cash Balance Plan et al., case number 06-cv-00373, in the U.S. District Court for the District of South Carolina.

E-Mails Show Clubby IURC, Duke

Employee Advocate - www.DukeEmployees.com - October 14, 2010, 2010

This article was published by The Indianapolis Star on 10/12/10.

Correspondence between energy exec and lawyer for state regulator went on for months

It was late June when the Indiana president of Duke Energy sent a warm, personal e-mail to the top lawyer at the state commission that regulated his business.

"I am still working the 'you' issue with Duke mgt," said the e-mail from Michael W. Reed to Scott Storms, general counsel of the Indiana Utility Regulatory Commission. "Don't sense a concern about making this happen, rather more of an issue of when and how. Call and [I'll be] glad to elaborate."

A month after that e-mail exchange, Storms signed off on matters that helped clear the way for Duke to pass on to customers the cost overruns for a $2.9 billion coal gasification plant.

In September, he was hired by Duke.

A series of e-mails, obtained by The Indianapolis Star under a public-records request, offer a peek behind the scenes of a looming ethics controversy that began last month with Storms' hiring by Duke and erupted last week with Gov. Mitch Daniels' firing of IURC Chairman David Lott Hardy. They also show the close relationships between Duke and state regulators and how dismissive state regulators were of a state ethics review.

For months, Duke Energy had been looking for a lawyer to fill an opening in its regulatory group in Indiana, preferably someone with a utility regulatory background. Storms, who had worked at the IURC for a decade, seemed to be a good fit. And he appeared interested, despite a state ethics law that prohibited regulators from moving to industry without a one-year cooling-off period.

The e-mails suggest Storms and Reed had been in deep discussions and casual banter over how to get Storms hired at Duke, even as Storms continued to preside over Duke cases.

Also joining in the banter was Storms' boss, Hardy, then-chairman of the IURC, whose job was to oversee regulation of electric, gas, water and telecommunications on behalf of taxpayers.

In early September, Hardy and Storms joked about the State Ethics Commission's review of Storms' plan to accept a job with Duke. "It was impressive that you did not laugh during the Ethics hearing," Storms wrote in an e-mail to Reed and Hardy.

The same day, Storms asked Hardy and Reed whether they would serve as references for a company background check conducted by Duke Energy Indiana's parent, Duke Energy Corp., based in Charlotte, N.C.

"I added both of you," he wrote in the Sept. 10 e-mail. "I hope this is OK."

Reed shot back: "Absolutely not." Storms replied: "Uh oh. . . " and Reed quickly made it clear he was joking. "Well ok. :)" he wrote.

His light manner revealed his close working relationship with Storms. The two had worked together for three years at the IURC, when Reed was executive director of the state commission and Storms was a lawyer. Reed had left the commission to oversee the state Department of Transportation. Four months ago, he became president of Duke Energy Indiana.

Hardy, for his part, fired an e-mail back to Storms: "Attending the Ethics hearing and not laughing is more credit than is in your account."

Storms survived the ethics review. The panel ruled he was not covered by the one-year cooling-off period because he had never made a regulatory or licensing decision on behalf of the state affecting Duke.

A few days later, he accepted a job as assistant general counsel with Duke Energy Indiana, leaving the state commission's Downtown offices for Duke's state offices in Plainfield. But soon consumer watchdog groups began crying foul over the revolving-door move and demanding an explanation.

Last week, in a flurry of activity, Daniels fired Hardy, the man he had appointed to chair the IURC in 2005, citing conflict-of-interest concerns. Later that day, Duke Energy put Reed and Storms on administrative leave, pending the results of an investigation.

On Monday, a Star reporter shared some of the e-mail contents with the company. Duke declined to respond to them specifically but said it would investigate thoroughly. It has hired an outside firm to probe the hiring process.

"Many of these e-mails are very concerning to Duke Energy, and they will be considered as part of a larger, more comprehensive review," James E. Rogers, Duke Energy chairman and chief executive, said in a statement.

Still, Duke executives in North Carolina had joked about Storms' hiring process along the way. On Sept. 17, as they were awaiting the results of Storms' company drug test, James Turner, a group executive and president of Duke's U.S. Franchised Electric & Gas division, wrote: "I'm still waiting on mine. There is concern about a history of delusion-inducing substances."

Julia Vaughn, policy director of the government watchdog group Common Cause/Indiana, said she was "appalled" that state regulators and utility executives were joking in e-mails about revolving-door issues and ethics procedures. "It's very disturbing to hear that key members of state agencies seem to laugh at the idea of ethics, and to make a mockery of a law we've worked hard to support," she said. "We hope this attitude isn't pervasive in state agencies." Daniels' office has declined to disclose the contents of a state review of the hiring of Storms by Duke, saying it was an oral report, not a document.

On Monday, Daniels spokeswoman Jane Jankowski again declined to provide additional details about the Storms matter.

She said the governor takes ethics issues seriously. "The governor isn't going to tolerate suggestions of impropriety, and I think that's why you saw the very clear and direct action he took last week," Jankowski said.

Daniels had said that an internal review of Storms' negotiations with Duke found that Storms didn't remove himself from IURC regulatory matters involving Duke while he was talking to the utility about working there. The review also concluded that Hardy was aware but took no action.

Daniels also ordered that regulatory and administrative opinions over which Storms presided should be reopened and reviewed to ensure no undue influence was exerted.

It remains unclear how long Duke and Storms were talking about a job. The Indianapolis Star's public records requested covered just three months, from June 23 to Sept 23, in an effort to obtain state documents quickly.

Angeline Protogere, a spokeswoman for Duke Energy Indiana, said Monday that the company first contacted Storms and several others in April, asking informally whether they were interested in the open position or could recommend a suitable candidate.

She declined to say when Storms submitted his resume or otherwise expressed formal interest in the position. The governor's office also declined to provide this information, saying it was under internal review.

According to the June 27 e-mail between Hardy and Storms, talks apparently had been under way for a while, judging from Hardy's comment that he was "still working the 'you' issue" with his superiors. The subject line of that e-mail simply read "Update."

In the meantime, Storms would continue to work on Duke cases. On July 28, Storms signed an IURC order that proposes that Duke recover billions of dollars in costs for construction of the Edwardsport plant from customers and earn incentives.

The plant, which is still under construction, has seen its construction costs climb sharply, which will result in higher electrical rates for customers. Storms also acted as an administrative law judge in the case, taking testimony and evidence and overseeing numerous proceedings about the Edwardsport plant.

On Monday, Citizens Action Coalition, an Indianapolis watchdog group that often fights utility rate increases on behalf of customers, sent a three-page letter to Daniels, demanding more answers about the IURC conduct, saying the issue goes well beyond bad judgment of a few people.

"This problem is absolutely systemic," Kerwin Olson, the group's program director, said in an interview.

Duke, IURC Email Published by The Indianapolis Star

Crescent Resources Creditors Fault Duke

Employee Advocate - www.DukeEmployees.com - September 10, 2010

This article was published by The Charlotte Observer on 9/10/10.

Trust sues the energy company, says it caused developer's economic collapse.

By Bruce Henderson

Creditors of Charlotte developer Crescent Resources, newly emerged from bankruptcy protection, claim in a lawsuit that former owner Duke Energy caused the real estate company's meltdown.

A trust representing creditors filed the suit last Friday in the federal bankruptcy court in Austin, Texas, that approved Crescent's reorganization in May. The creditors seek nearly $1.2 billion from Duke, several subsidiaries and current and former managers.

The lawsuit alleges that Duke made Crescent borrow $1.5 billion in 2006, then transferred nearly $1.2 billion to Duke. It says Duke inflated the value of Crescent's holdings to make the transaction despite signs of falling real estate sales.

"In total, well over 1,000 innocent creditors of Crescent Resources and its debtor subsidiaries filed claims for debts that were incurred prior to or within a reasonable time after the 2006 (loan)," the suit said. "These creditors were the victims of Duke's greed and its improper, ill-conceived and grossly over-leveraged distribution scheme."

Duke spokesman Tom Williams responded: "We think the case is without merit and will vigorously defend ourselves."

Under the exit plan, Crescent's secured creditors, mostly banks, will be paid 38 cents on the dollar and take over ownership of the company. The restructured company will be worth about $650 million, compared to the $2.2 billion in assets it listed in its bankruptcy petition.

Unsecured creditors stand to lose between $350 million and $450 million. They will get an interest in an insolvent trust fund, and vowed in May to pursue other legal claims.

The lawsuit said Duke dominated Crescent, its real estate arm first created in 1969. The 2006 loan, it said, guaranteed that Crescent would be rendered insolvent by the transaction.

A three-year budget prepared by Crescent before the transaction projected that real estate sales would fall 35 percent from 2006 to 2008, the lawsuit said. Crescent filed for bankruptcy protection in June 2009.

Duke reported $265 million in charges and equity earnings losses from its former Crescent stake in 2008 and 2009. Duke sold a 49 percent interest in Crescent to Morgan Stanly real estate funds in 2006.

Duke Energy Contractor Killed on the Job

Employee Advocate - www.DukeEmployees.com - August 31, 2010

A 19-year-old contract worker was killed on the job Thursday, according to the Gaston Gazette. Jacob Wayne Reid was hit by a Caterpillar road grader.

The fatality occurred only one week after ground was broken on the Duke Energy training center in Kings Mountain.

2 Duke Energy Contractor Fatalities Within 2 Months

2010 Employee Opinion Survey

Employee Advocate - www.DukeEmployees.com - June 9, 2010

The 2010 Duke Energy Employee Opinion Survey will be available to all workers during the month of June. Duke Energy and the Employee Advocate are always in total agreement on the issue of answering the survey. Each employee is encouraged to complete the survey.

Does it contain a lot of meaningful questions? No.

Does it contain a lot of Mickey Mouse questions? Yes.

Then why bother? Because you can write in your own comments. That and it's the only employee opinion survey in town.

If you complete it on-line, it may take several attempts to submit it. Take whatever time is necessary to get it submitted.

Below are write-in comments submitted under the heading of "Benefits" on the 2010 survey:

Management by Trickery

Duke Energy senior executives once came from engineering backgrounds. They were trained to deal in absolutes, to the limit that man can comprehend absolutes. What one saw was always what one received, with no deception, obscurity, or illusion.

Then senior executives started coming from academic and legal backgrounds. What one saw often bore little resemblance to what one received. Deception, obscurity and illusion were rife. Everything seemed to have a trick, a catch or a hidden agenda embedded into it.

If Duke's nuclear plants had been built and operated under these shaky, nebulous standards, they would have been closed or suffered a worse fate. Nuclear engineering standards mandated that everything be meticulously designed, built, inspected, documented and operated. Everything was clearly spelled out. There was no room for trickery.

Some of the later senior executives, without an engineering perspective, were all about trickery. They plied their trade to employee benefits and the carnage remains. They did not throw away company integrity; they SOLD it. Adding dollars to the bottom line was of more value to them than anything else. They reasoned that the extra profits reaped would outweigh any possible repercussions.

Will Duke be able to maintain a Chinese wall between nuclear matters and employee dealings? Or will management by trickery bleed over from one side to the other? Will regulators also be deceived if the stakes are high enough?

Management by trickery and management by engineering standards are not compatible. One will eventually win out over the other. Once the ethics line has been crossed, it is not possible to jump back and forth across the line to suit the situation.

Paul Anderson came back and turned the company around from its disastrous course. Jim Rogers has continued on that path. But no clean break was ever made from the past management by trickery.

Survey questions always avoid any mention of the ethics of offering specific benefits, but delivering something less decades later.

2009 Employee Opinion Survey

2 Duke Energy Contractor Fatalities Within 2 Months

Employee Advocate - www.DukeEmployees.com - May 30, 2010

A Duke Energy contractor suffered a fatal accident Wednesday, according to the Washington Times-Herald.

The victim was a male painting contractor at the Edwardsport plant, which is under construction.

Last month, Duke Energy natural gas contractor Cody Faul died in an on the job accident.

Burned Duke Energy Worker Air Lifted to Hospital

Meet the Toxic 100 Corporate Air Polluters - "The Toxic 100 Air Polluters ranks corporations based on the chronic human health risk"

Duke Seeks to Dismiss Worker Retirement Suit

Employee Advocate - www.DukeEmployees.com - May 9, 2010

This article was published by The Greenville News

Employees allege changes to pension benefits violated law

By David Dykes - Staff writer - May 9, 2010

In a decision that could have legal implications for other workers and companies, Duke Energy wants a judge to dismiss a suit in which employees allege the company violated federal law when it made changes to its retirement plan.

Duke denies any wrongdoing. A Duke spokesman told The Greenville News the company wouldn't comment on the case since it's still in litigation.

The workers allege in the federal lawsuit that the company violated the Employment Retirement Income Security Act of 1974 in how it administered and calculated benefits under its retirement cash balance plan.

They allege Duke improperly created and adjusted opening balances and failed to accurately describe the new methodology for establishing those balances.

The lawsuit alleges "older workers lost thousands of dollars in the value of their pensions, after putting in decades of work" for the Charlotte-based company when it converted its traditional pension to a cash balance plan.

Carl Muller, a Greenville attorney representing the plaintiffs, said, "It's obviously a hugely important case to thousands of hard-working men and women who've given their lives to Duke Energy. Similar things are going on in other companies elsewhere in the United States and it's important to them, too."

In court filings, Duke said it wanted a plan design that, among other things, allowed for a more even growth of benefits and eliminated the prior plan's creditable service cap.

Duke said it wanted to eliminate the incentive to retire early because that was causing talented and productive employees to leave the company.

A cash balance design achieved both goals, Duke said.

Judge to rule

Attorneys said the Duke case likely will be decided by a judge and not a jury trial, the usual course in pension cases. The court decided the lawsuit could be a class action.

Attorneys said both sides are about to complete their legal briefs for summary judgment.

While the case began with several different claims, age discrimination is no longer part of the case, both sides said.

The case now is focused on two classes of interests, according to court records and attorneys for the plaintiffs.

One involves current or former vested Duke employees who were participants in the company's cash balance plan between Jan. 1, 1997, and Dec. 31, 1998, excluding participants who had retired on or before Dec. 31, 1996. That forms the "interest rate class," according to attorneys and court records.

The other involves all former employees of Duke who were participants in Duke's cash balance plan between Jan. 1, 1997, and Dec. 31, 2002, and retired and took lump sum benefits on or before Aug. 17, 2006, before age 65.

In February 2006, six former and current employees, including a Seneca resident, sued Duke in federal court, claiming the company violated pension laws when it made changes to its retirement plan in the 1990s.

The lawsuit asks for a court-ordered overhaul of the company's retirement plan and an independent auditor to review the plan. It also seeks unspecified restitution for lost benefits and interest.

The plaintiffs include Kenneth Walton George, a Seneca resident who worked at Duke's Oconee Nuclear Station, according to court records. He joined Duke in 1970 and took early retirement in December 2003, court records show.

The plaintiffs allege Duke violated federal law when it converted from a traditional defined benefit plan, which offers workers fixed benefits based on the number of years they worked, to a cash balance plan, in which employees' benefits grow by a percentage of their pay plus interest each year.

Under a cash balance design, benefits grow more evenly and do not spike at age 55 or cease to grow thereafter, Duke said in court filings. The company said it designed the cash balance plan "with an eye toward making early retirement less desirable and generating a larger age 65 normal retirement benefit."

Duke, at the same time, increased its support of the 401(k) plan, according to court filings.

Duke's conversion in 1997 to a cash balance plan "made drastic changes" in how benefits were calculated, resulting in reduced balances for participants, the lawsuit said.

Balance conversions

Under the company's traditional pension plan, according to court filings, substantial amounts of pension benefit accruals were to occur in the latter years of employees' careers as they approached retirement age.

According to the lawsuit, Duke promoted that feature of the old plan to encourage its employees to remain loyal to the company and "not look for job opportunities with other employers."

The conversion, the plaintiffs said, trapped employees in "wear away," in which their cash balances would take years to move ahead of their pension benefits, which were frozen under the old plan.

In one example, a Duke employee from North Carolina had accrued pension benefits of $258,000 under the old plan, according to the lawsuit. It said that under the new plan, his opening account balance was $129,000.

Cash balance conversions "left older workers stranded, too old to start their careers over again, and having to defer plans for early retirement, because their expected lump sum benefit had been slashed," the lawsuit said.

According to court filings, the plaintiffs believed that the language and provisions of Duke's retirement plan documents weren't "readily understandable to lay people."

In descriptive materials, the company sought to characterize the new plan as benefiting workers, the plaintiffs said. Duke, however, misinformed employees as to the effect the plan conversion would have on them, the plaintiffs said.

In court filings, Duke said that the company identified potential benefits from the cash balance approach. The company said the materials also identified ways in which benefits under the cash balance formula would be less generous.

"Duke repeatedly and explicitly informed its employees" that the retirement plan "would not, alone, support early retirement at the levels of the prior plan," according to court filings.

Duke denied any misinformation was provided.

"It used to be the company said, 'you come to work for us, you won't make a lot of money, but when you get old, we'll take care of you," Muller said. "Guess what? People have given their lives to work for major corporations, they've gotten old and when they get old, they find out that many companies have changed the rules of the game."

Court records show Duke adopted the cash balance plan effective Jan. 1, 1997.

Duke said in court filings that under the prior plan, participants received a lifetime annuity based on years of credited service, up to 30 years, and qualifying compensation.

Duke said benefits grew slowly, and then spiked upon satisfaction of early retirement criteria, generally age 55.

In addition, the prior plan capped creditable service after 30 years, according to court filings. Once the early retirement requirements and service caps were met, new benefit growth was substantially reduced, the company said.

"The prior plan design created a very strong incentive for employees to leave the company when they became early-retirement eligible," Duke said in court filings.

The company said "employees who fully availed themselves of the 401(k) benefits could increase their total benefits at age 65 and to offset some of the loss of the early retirement subsidies that had been provided by the prior plan."


Duke Energy - Page 10