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2003
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2002
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2001
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2000
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1999
Noon 1

The Noon Meeting was held in Houston, Texas on September 9, 2002. It was hosted by Rick Priory.

Rick Priory: The fundamentals of the energy market have changed dramatically over the past months, primarily driven by external events.

In a relatively short amount of time, the energy market we operate in has changed very, very rapidly.

There has been a precipitous and persistent decline in spark spreads and volatility, which affects our wholesale business. It doesn’t have as dramatic an effect on the pipeline business or the electric business.

A credit crunch ensued following the collapse of Enron. Credit pressure was exerted on a number of trading and marketing companies that didn’t have the balance sheets to withstand that pressure.

Difficulties at Enron and other companies in our sector prompted credit rating agencies to begin changing their guidelines. Companies that were highly leveraged did not have the flexibility to cope with those credit rating changes, and were cut off from normal capital markets. That left them with the options of accessing capital from the banks or through “fire sales” of their assets in order to restructure their balance sheets.

Employee Advocate: But Mr. Priory has stated repeatedly that the collapse of Enron had no impact on the energy market. Now, everything that happens is blamed on Enron. Some negative events have been external, but many have been internal events. When Mr. Priory selected Enron as the company for Duke to emulate, Duke’s fate was sealed.

Rick Priory: About three months ago, Duke Energy began a series of dialogues with the rating agencies. While their mileposts had changed, we had been fairly conservative in how we managed our diverse businesses. Our franchised electric and pipeline businesses were strong, despite the downturn in the wholesale markets. In the middle of this credit tightening, regulatory investigations into energy trading intensified, and our sector began to experience what's called "headline risk" -- the jittery market reaction to news coverage of a company or industry. Rating agencies are concerned about headline risk, because if your equity is knocked down a couple of points, it could affect your bond spreads and also make it tougher to issue equity to strengthen the balance sheet.

Employee Advocate: The negative headlines came primarily from the attempt to be a little Enron. This fact cannot be escaped.

Rick Priory: As you know, we've had a one-step downgrade in our ratings. It came as no great surprise to us, given the uncertainty in the marketplace. The impact primarily has been to increase the cost of our capital.

Employee Advocate: Mr. Priory’s obsession used to be raising the price of stock. He indicated that investors did not understand and that he was going to keep telling the “Duke story.” As more is revealed, it is apparent that investors are not buying “the story.” The rating agencies are not buying it anymore. Employees who witnessed that the action did not match the rhetoric, never bought it.

Rick Priory: The credit crunch also removed many of our counterparties in the trading and marketing business. When their credit ratings dropped, they had to post too much collateral to be able to efficiently do business with credit-worthy parties such as Duke Energy. That led to a general pullback from the trading and marketing business

Employee Advocate: Again, Mr. Priory stated many times that the failure of Enron had no repercussions on the energy trading market. In the March 2002 Noon Meeting, Mr. Priory said “One of the most impactful lessons from Enron is that the marketplace is strong, responsive and resilient. Enron--a single player involved in one out of every four online energy trades in the country--vanished from the scene and the markets didn’t miss a beat. Hundreds of strong market participants stepped up and filled the void...”

March 2002 Noon Rebuttal

Rick Priory: Then there was government intervention in the Western markets by capping prices, which had several unintended consequences that affected the market.

Employee Advocate: The price caps had one very much intended result: People were no longer paying quadrupled energy prices!

Rick Priory: And, of course, there has been a continued lack of investor confidence in our sector.

Employee Advocate: The vote of no confidence was not the result of a conspiracy against the energy sector or Mr. Priory. Cause and effect was evident. The repeated denials only eroded more credibility.

Rick Priory: I’ve just reviewed the key factors affecting the energy sector, but as you know, corporate America in general has been the subject of great scrutiny and turmoil of late, intensifying the impact we’re experiencing. And so you have what Harvey has referred to as the “perfect storm.” Our job is to navigate through that storm.

Employee Advocate: The perfect storm was not caused by “perfect accident.” It was caused by “perfect blunders.” It was aggravated by “perfect denials.”

Rick Priory: We did just fine when we had all the wind at our back. We grew the company beautifully over the last five years. Now the wind’s in our faces, so the test for us becomes how quickly we can turn the ship. Our job is to keep the ship in good shape —to play to our strengths and minimize the impacts of any weaknesses.

Employee Advocate: And even yet, the denials are not over. Today’s negative events did not happen overnight. They were set in motion over five years ago. If one jumps off a cliff, and it takes him five years to hit the ground, does that mean that he did “just fine” for five years? When he does hit the ground, that is not the most opportune time to realize that the ship needs to turn around!

Rick Priory: Many of you have been with us for five years or more. We all benefited from the up cycle, and it was a great up cycle. Now we are faced with managing through the down cycle. I appreciate your commitment and leadership during this challenging time.

Employee Advocate: Many employees have been here twenty, thirty, or more years. There is no debate that the last five to six years have been the very worst for employees. If the company does not do well, the employees lose. If the company does well, the employees lose.

Rick Priory: Primarily driven by West Coast lawmakers, FERC had undertaken an investigation into potential price manipulation into the western markets. After the discovery of certain Enron memos, FERC took the very unusual step of asking companies to admit or deny that they engaged in similar tactics. Duke Energy responded that we did not engage in those trading tactics. FERC recently finished the first part of their investigation, finding what they called possible violations and naming three or four companies to further investigate.

Employee Advocate: FERC named three or four companies to further investigate? As if Mr. Priory is not exactly sure of how many companies were involved. Will he ask us to believe that he is not exactly sure of the names of those companies?

Rick Priory: We applaud FERC’s efforts to standardize market design and set a single set of rules for the wholesale marketplace. We are providing comments on the proposed rules, and our energy policy and strategy group is busily putting those together with the help of many of you from the businesses. Anything that would finalize things in the wholesale market is likely to work to our advantage at this stage of the game.

Employee Advocate: Now, Mr. Priory is applauding more rules in the marketplace. But, Mr. Priory said in the 2000 shareholders meeting that he favored foreign investments because the U. S. government would "tie his hands." More rules seems like a return to regulated energy markets – the very thing that Mr. Priory was trying to escape!

Rick Priory: Last month we filed our final response to the SEC with regard to round-trip energy transactions. We did find some related to our equity interest in the Intercontinental Exchange and some done at the direction of one trader that were contrary to corporate policy. We took swift and appropriate action to address all issues associated with our trading operations.

I was profoundly disappointed to have found a problem. I can’t think of a circumstance in my history with the company that has caused me greater disappointment. We reported our findings fully to the SEC and to the other government entities investigating trading and marketing. Our credibility and trust have been compromised, our reputation was undoubtedly eroded, but we did what we had to do in reporting these findings.

Employee Advocate: So, now the tactic is to admit what absolutely cannot be denied, and focus on it to the exclusion of all else? If the round-trip trades were the only problem that Duke faced – there would be no problems! The actual trades are not as bad as the repeated denials of any problems.

Rick Priory: Although energy trading is going through a very difficult period, it remains an important part of our strategy going forward. We don’t know where the marketplace is going to go. Right now, we have to wait and watch it settle out and see what kind of new players emerge.

Employee Advocate: Duke has announce that energy traders will be laid off. Duke spokespeople have previously said that there would be no energy trader laid off, because the Enron meltdown caused no energy trading problems.

Question: We projected a 10 to 15 percent long-term earnings growth rate, at a certain level of capital expenditure. Our cap-ex level has been cut pretty significantly and we’ve said that we’re going to continue growing the company, albeit more slowly. What is the Street’s reaction to that?

Rick Priory: Wall Street is fully aware that the dynamics in our industry are changing very rapidly. At the end of the second quarter earnings calls, we told them that we were going to notch down our growth rate from 10 to 15 percent to 5 to 10 percent in this environment. We also told them we were working hard to reduce our capital expenses. We’ve continued to do that…

Employee Advocate: As we have said all along, it is foolish to make grand promises to investors. No one knows what tomorrow brings. Duke did not keep its promises to employees, but immediately made great promises to investors.

Question: A couple of years ago, deregulation was the way to go for this industry. Lately, you don’t hear much about it. Is it still the key to growth for the electric industry?

Rick Priory: You might say the cat’s out of the bag on deregulation.

California’s design for deregulation was an absolute disaster. Setting that aside, Massachusetts, New Jersey, Texas, and Illinois are showing real reductions in the cost of energy for the end consumer. In fact, a report published this past weekend shows a 30 percent reduction to Illinois customers. That’s the potential of deregulation!

Employee Advocate: Yes, the cat is out of the bag on deregulation. It turned out to be a big, mean, ugly, mangy, flea infested, rabies infected, typhoid carrying, Nile virus spreading cat, that was not housebroken. Cherry-picking a few examples of reduced energy prices proves nothing. Some customers in California paid quadruple power prices, almost overnight. Some customers in deregulated states received reduced rates for a few years. Many have later paid dearly for the initial come-on rates. Deregulation is the fundamental cause for many of the problems that the industry faces today. Mr. Priory hung his hat on three things: Enron, deregulation, and squeezing employee’s benefits. He is now paying a price for all three.

The cat is out of the bag in a lot of other areas. Mr. Priory wanted Duke to be like Enron. Well, that did not work out. Deregulation was to save mankind; that did not work out. Mr. Priory said that Duke had been vindicated from all wrongdoing in California. That statement proved to be premature. Mr. Priory said that the Enron debacle caused no energy market problems – again, dead wrong. It was said that no Duke energy traders would be laid off – wrong again. Big promises were made to investors. Right now, those promises are looking very shaky. To paraphrase an old saying: Mr. Priory should always make every effort to keep his words kind and sweet, because these are the words he often has to eat.

The Noon Meeting was held August 12, 2002 in Charlotte, North Carolina. It was hosted by Rick Priory.

Rick Priory: We are operating in a dramatically different environment, so let me begin with a little background. We’re all well aware of the California energy crisis, when wholesale power prices took off in late 2000 and early 2001. The California electric restructuring plan was very dysfunctional and will be studied for the next 20 years. We know there wasn’t sufficient energy supply, which led to rising prices. Next the regulators capped prices, which set into motion a whole new set of impacts.

Employee Advocate: Yes, the idea of electric deregulation is dysfunctional. And more than one energy company is dysfunctional. Many think that if it had not been for deregulation, there would have been no energy shortage. The energy prices rose exactly as some companies had planned. The price caps helped break the strangle hold of the energy companies, and brought prices lower.

Rick Priory: Then came the implosion of a couple of major corporations, Enron most notably in our sector. Today, we’re in the midst of an environment indicting all business based on the behavior of a few. Concurrent with that has been a precipitous decline in spark spreads and reduced wholesale market volatility. In the current environment, the market believes there is ample power supply, so prices have dramatically decreased, or the government will step in to keep them low.

Employee Advocate: Few companies are indicted for absolutely no reason. The “few rotten apples” plea does not cut it. There is a basket of rotten apples, with a few decent companies mixed in. The clean companies do not have to take out full-page newspaper ads to proclaim that they are not crooks. The feds are not knocking on their doors and no one is auditing their books. Every convict claims the he was framed and does not like to be in with all of those crooks. There is an ample supply of power now, because the marketing tricks will not work when everyone is watching. When the dealer is caught cheating, it is difficult for him to pull the same stunts in the same game. He will deal straight – just as long as the gun is at his temple. The government was forced to intervene to stop the highway robbery. More skillful crooked dealers would have let the marks win a few hands until everyone was suckered into the deregulation game. But these jokers started cleaning everyone out from the first hand. Now, they seem surprised that the law shut down their game. The officers found some outstanding warrants on some of the crooked dealers, so they had to go “downtown.”

Rick Priory: Energy trading has been dramatically curtailed and liquidity in the market has been reduced as well. We used to have a whole array of credit-worthy counterparties to do business with. Today, there are far fewer, and we won’t do transactions with companies that lack legitimate, solid credit lines.

Employee Advocate: Mr. Priory is now lamenting the reduced wholesale market volatility. But he has previously stated that the energy market did not miss a beat when Enron collapsed. Positive affirmations seldom work when they are diametrically opposed to the truth.

And speaking of credit lines, Duke can still get credit – it just costs more - post Enron.

Rick Priory: The composite of all of this is a deterioration of investor confidence. Of course, we’ve seen this in our sector before. I believe that investor confidence will come back, but it doesn’t come back overnight. So, we have to continue to deliver on what we have pledged, stay focused on our business and create shareholder value in a much more difficult environment.

Employee Advocate: Confidence will return when real change is witnessed, not merely empty words mouthed. Duke Energy does not have a good track record on delivering what has been pledged – ask any employee! The environment is more difficult solely because super greedy companies made it that way. When the shady dealer has been exposed and every eye in the room is on him, the environment does tend to be more difficult. Creating shareholder value has not been the prime concern over the past six years. Creating value for the CEO has been paramount.

Rick Priory: We meet with the analysts each quarter to help them understand our business and our performance. Key this quarter is building their understanding of the breadth of our corporation and the capabilities we have in our balanced portfolio.

Employee Advocate: Duke meets with analysts to help them understand the corporate spin on everything. That has proven not to be a huge challenge. This whole episode has also exposed what a gullible lot the analysts are.

Rick Priory: You’ve heard me say many times that we need to be able to move as quickly internally as external events require. In reaction to the various issues I described, we quickly adjusted Duke Energy’s business plan. We reduced our planned capital expenditures to $6.8 billion or less for 2002, excluding the Westcoast acquisition. We have dropped the range of capital expenditures to $4 to $6 billion per year in 2003 and 2004 and will continue to work very hard to reduce capital expenses further in the current environment.

Employee Advocate: Some companies attempt to create the illusion that their earnings are stable by cutting expenditures to the bone. This game will not work indefinitely. It is an act of desperation - an attempt to buy time. When a company is already running lean from years of “doing more with less,” just how much more can be cut and the business remain viable?

When the employee’s goodwill bank account is already severely overdrawn, do not expect them to continue to do even more, with even less, for less, to cover for the blunders of others!

Rick Priory: When the growth cycle begins to time out, you turn to getting the most out of existing assets.

Employee Advocate: The cycle did not time out. The clock was smashed with the sledge hammer of greed!

Rick Priory: We recently filed our final response to the SEC’s informal request for information regarding “round-trip” energy transactions. We conducted a thorough review, examining 750,000 trades from 1999 through June 30, 2002, and we hired independent experts to assist with our review and ensure objectivity.

Employee Advocate: Why was this action not taken years ago, instead of arrogantly issuing blanket denials?

New motto suggestion: “We will do the right thing – if the feds are at our door and our backs are against the wall.”

Rick Priory: The round-trip trades we uncovered had no material financial impact on earnings. However, that internal review prompted us to implement organizational changes and additional risk management procedures to improve and strengthen oversight of our trading operations.

Employee Advocate: Some experts have an opposite opinion. When someone screams “It’s not about money” – it is often all about money.

Rick Priory: As is our practice, we disclosed what we found, took action with the individuals involved and strengthened the management structure and the control procedures in trading and marketing.

Employee Advocate: That is not a completely accurate description of Duke’s practice during the California escapade. The practice was:

1. Deny everything.

2. Welcome a compete investigation.

3. Thwart all investigations by keeping the trading data hidden.

4. Attempt a secret settlement for the California dogs to be called off.

5. When the federal government starts to investigate, suddenly find some “items.”

6. Offer some sacrificial employees.

7. Claim that the questionable findings had nothing to do with money!

Rick Priory: And our nuclear colleagues set a new record today, 86 days that all seven of our units have been up and running. Congratulations to the nuclear team for keeping those plants operating. It’s one thing to do it, but it’s another thing to do it when you need it, and we really need the electricity in this region right now.

Employee Advocate: My how the political winds have shifted. When Mr. Priory was enamored with Enron, he absolutely detested the generating arm of the company. He refused to meet with analyst who were interviewing electric utility CEO’s. Energy trading was all the Mr. Priory was interested in. He viewed generation as an embarrassment. But guess what has been paying the bills all along – electric generation.

Mr. Priory’s new little outfits were touted for their big percentages of earnings growth. But a 100% growth in pocket change is still pocket change. The numbers sounded impressive, but electric generation is and always has been the backbone of the company.

Mr. Priory has had his fling with the exotic, perfumed, deregulated energy trading markets. Now he is sick, his head hurts, and he wants to come home to electric generation. Is electric generation waiting with open arms, or a rolling pin?

Question: Can you discuss what kind of exposure we have to all these class action lawsuits?

Rick Priory: There are two groups of lawsuits.

One batch is focused on our operations in California and they allege market manipulation. Our general conclusion, based on the facts as we know them today, is that these suits will have no material effect on company financials.

Employee Advocate: Zounds! The lawsuits are coming in groups and batches nowadays. Check out the weasel words: general, facts-as-we-know-them, material. This is a big change from the earlier pompous bluster.

Rick Priory: Another group of class action suits came in after the May 17 press release on match trades. At the time, some in our industry had disclosed a large number of round-trip trades to pump up volume or revenues. Based on a high-level review of our information, we identified match trades over a full trading day that amounted to about $1 billion in revenues over three years, or less than one percent of trading revenues over that same time period. Our intent was to differentiate the very small number of same party trades we had done from some of our competitors, but the headlines zeroed in on the $1 billion figure, and attracted attention from some law firms.

Employee Advocate: We freely admit that a billion dollars does not go as far as it used to. But to anyone besides a CEO, it is still a sizeable figure. So, the intention was to show that others had done more, so a billion was not so bad? It seems the press release was about as effective as the weekly Wall Street Journal ads. Hey! What about daily Wall Street Journal ads?

Ad suggestion: “We generate: Sue our pants off.”

Rick Priory: In both cases, we intend to defend ourselves vigorously.

Employee Advocate: Class action lawsuits do not come cheap. No firm, or consortium of firms, will file one frivolously. To finance the suit, there must always be a reasonable chance of victory. They are only filed if there is a strong belief that laws have been broken.

If the defendant has truly done no wrong, he will likely be exonerated with even a lackadaisical defense. If the defendant is guilty, all the “vigorous defending” in the world will not change the spots on the cards. Vigorously defending an untenable position is a lot like vigorously struggling to get out of quick sand – the more one struggles – the deeper they go.

Question: (House question designed to trivialize the seriousness of the situation.) Trivia question: who would like to guess how many class action suits were filed over the past year? According to The New York Times, there were about 10,000 class action suits filed ...

Rick Priory: It’s an industry unto itself, and I’m learning more about it than I ever wanted to know! But when we moved into competitive markets, some of these things came along with the territory. And we all have to learn how to deal with that effectively.

Employee Advocate: This is a new day. Mr. Priory is admitting that there are things that he does not know. The lessons may come dear. The underlying cause is simple. When investors, the public, and employees feel that they have been abused by a giant, overbearing corporation, they will look for ways to even the score.

The Noon Meeting was held in Charlotte, North Carolina, July 15, 2002. It was hosted by Rick Priory.

Rick Priory: I can tell you unequivocally that Duke Energy will not violate the trust of our shareholders, our employees, our customers and our other stakeholders.

Employee Advocate: Oops! Too late! Does Mr. Priory think that chiseling away at employee benefits with every hot-shot scheme that came along did not violate employee’s trust?

Judging by the number of lawsuits, it appears that a number of shareholders and customers feel that their trust in Duke Energy has also been violated.

Perhaps Mr. Priory meant that he is not going to violate trust any more (at least not while the heat is on).

If the fox declares that he will not eat any chickens, does that impress anyone? What if the fox has already eaten 200 chickens? The fox will suffer a credibility problem.

Rick Priory: In terms of our trading practices, which are under intense scrutiny right now:

…We are cooperating fully with all inquiries. We aren’t shying away from the reviews – and are being very forthcoming and open with information. We will be the first to identify – and correct – any problem areas.

Employee Advocate: We will be the first to say that this all sounds very good. The uninitiated may ask what more can Duke do?

But when the words are weighed against Duke’s record in similar situations, they carry very little weight. When the California trading situation first came to light, Duke officials claimed that they welcomed a full investigation. However, Duke would not release data needed to analyze the trades. Then, Mr. Priory offered the California governor an under-the-board deal to drop any investigations. Mr. Priory even claimed, long ago, that Duke had been fully exonerated from any wrongdoing in California.

Does something seem to not add up? Mr. Priory apparently says the first thing to pop into his head, and often does the opposite!

Duke claimed to be cooperating with the audit being conducted by the North and South Carolina utility regulating bodies. But Duke attempted to put a laundry list of restrictions upon the auditors. The auditors could not use company computers, could not make any copies of data, and could not tell anyone the results of the audit! One wonders what an audit would be like if Duke were not fully cooperating?

When the story keeps changing, how is one to know which version is the truth, if any? It is important to remember that Mr. Priory did not get in this predicament by accident. He most definitely is not an innocent bystander. He evidently felt that he knew all the angles and could stay one step ahead of everyone.

Not too long ago, Mr. Priory admonished employees to make Duke Energy more like Enron. He envied their price-to-earnings ratio. His goal was to double the price of Duke stock. He made unnecessary performance promises to investors. Mr. Priory built himself a cage. He was then under self-imposed pressure to “make the numbers.”

He now finds that it is difficult to dance gracefully with one foot caught in a bear trap. It has been said that one should be careful what one wishes for. Mr. Priory wished to be like Enron. His wish was granted. Now he does not even want to hear the name “Enron.”

All of these events transpired after the employee pension fund was raided and health benefits reduced or eliminated. Trying to build a mighty empire on questionably obtained gains can sometimes lead to disaster. Who will place a damp cloth to Mr. Priory’s forehead and say “You poor, poor dear”?

Rick Priory: Last week we received subpoenas for information from the Commodities Futures Trading Commission and the U.S. Attorney in Houston. Many other energy companies had already been subpoenaed. The reality is that these companies are our trading counterparties. For anybody to ascertain what happened in a marketplace where tens of millions of transactions took place, they’d have to be able to see both sides (buy and sell) of the trade. We are cooperating fully with these inquiries, as we always have and always will.

Employee Advocate: If refusing to release data and refusing to allow auditors to tell anyone their findings are examples of fully cooperating, Mr. Priory may be right. To properly translate these statements one must understand “Duke speak.” A “Duke Decoder Ring” will be necessary. A few examples are: “up” means “down.” “Hot” means “cold.” “Big” means “little.” “Trustworthy” means “diabolical.”

Have you noticed that each new “discovery” is explained away as a distraction? The decoder ring translates “distraction” as “getting caught.”

Rick Priory: I’ll emphasize again: if we have any clear indication of wrongdoing, we will be the first to admit it and then take prompt steps to correct it.

Employee Advocate: The statement would have been much more credible if it had been made at the beginning of debacle. But no, we had to endure the predictable range of laments: outrage, denial, stonewalling, claiming exoneration. When none of them worked, we get to “well, maybe.”

Even now, the statement was not without a weasel word. Will there be months of debate about the definition of “clear”?

Rick Priory: It’s hard to manage the events that are going on in the market right now.

Employee Advocate: “Manage the events”? Does this mean to make them disappear? Does it mean to spin them away? Those who are clean do not have to manage events. They do not have to buy full page ads proclaiming, essentially, that they are not crooks. They do not have to stage diversions, in an attempt to distract the public.

Perhaps this is an example of managing events: In the March 2002 Noon Meeting, Mr. Priory said: “Enron--a single player involved in one out of every four online energy trades in the country--vanished from the scene and the markets didn’t miss a beat.”

That statement may have been intended to explain away (manage) the Enron impact, but it could not have been more off the mark. The Enron fraud is now credited with triggering the present financial meltdown.

Duke Trading Slump Denial

Rick Priory: You may have heard about a trader in our Houston office who was placed on leave as our trading reviews continue. That action was taken not as a punitive measure, but as a means to ensure an unimpeded, objective investigation that protects both the individual and the company.

Employee Advocate: When we ran this statement through the Duke Decoder Ring it came out “scapegoat.” Maybe the ring is malfunctioning – maybe not.

The California Independent System Operator fined Duke $4.45 million and docked $14.35 million, according to The San Francisco Chronicle.

Duke Facing California Penalties

Rick Priory: Yucca Mountain, NV, was approved by the U.S. Senate as the country’s high-level waste repository…Our company’s opinion has been that centralized, long-term storage is a wise, responsible move for the country.

Employee Advocate: Oh, yes, it was very wise. Except that it is in an earthquake zone, has the potential to contaminate ground water, will not hold all of the waste, and will necessitate the shuttling of nuclear waste all across America.

Question: Rick, the stock was under $20 a share this morning. I would imagine if you looked only at the earnings from the regulated electric company you would end up with a P/E of 12 or 13 to support that stock price and a dividend of 5½ percent. How can the buyers and traders on Wall Street rationalize that price?

Rick Priory: The buyers and traders on Wall Street are simply taking phone calls to sell. The sell orders today may be coming from stockholders or they may be coming from short sellers. The short sellers have had a field day in this market by wagering that stock prices will fall.

If you’re a trader receiving a sell order, you don’t know whether it’s from a short seller or a retail customer or institutional holder, but the very fact that the stock starts heading down exacerbates the problem and the price can drop fast and furious. If it turns out that there’s nothing there, the stock comes back up.

Employee Advocate: Short traders tend to be professionals. There are too many weak companies around for them to risk shorting a strong company. So, if the price drop is dismissed as short selling, that means that the professionals view Duke as being very weak. Being caught in a rally and trying to cover shorts can be brutal. The professional will never take a risk that they do not have to take.

We warned that the promises that Mr. Priory made to the Wall Street types would not save him. He enjoyed swimming with the sharks. But, a bleeding Mr. Priory will only be regarded as a snack. He can try to talk his way out of this one. But it is extremely difficult to reason with sharks when there is blood in the water.

The “feel good” ads in The Wall Street Journal did not exactly save the day. The public is not quite as gullible as Duke seems to think. No one is quite as gullible as Duke seems to think.

Rick Priory: Given what’s going on in our sector, panic selling sets in and the stock is driven well below the fundamental economic value of company assets.

Employee Advocate: The most famous last words on Wall Street are: “It cannot possibly go any lower.”

Question: With all of the talk about CEO accountability, how has your job changed in light of current events, if at all? Do you look at your job differently these days than you did in the past?

Rick Priory: Well, I’m obligated to the same people to deliver the same things that I had been before. I am obligated to shareholders to deliver a well-run company, to employees to deliver good jobs and growth opportunities and to regulators to do it above board and with complete candor and openness and comply with all the regulations and laws. And, frankly, I think we’ve done a pretty good job in all those areas. Maybe not perfect, but pretty darn good!

Employee Advocate: All Mr. Priory has delivered to employees is hardships. The retirement futures of many employees were devastated. Decent retirement health care was eliminated. Does anyone remember a more grueling, scandal ridden five or six years?

Rick Priory: This is not a fun time to be a CEO, but then that goes with the territory. We all have ups and downs in our jobs, and this is a tough period for us all. We’ll get through this!

Employee Advocate: So, this is not a fun time to be a CEO. Golly, that is heart wrenching. Not very long ago, Mr. Priory was boasting that it had been a “fun ride.”

It is true that Mr. Priory will get through this. No matter what becomes of the employees or the company, Mr. Priory will eventually ride off into the sunset with millions of dollars in his saddlebags and a fat retirement check.

Rick Priory's “Fun Ride”

Question: Why are Employee Opinion Survey results never shared with employees? Since the results are not known by employees, they'll never know if the opinion of the consensus is being heard and, if so, if it is falling on deaf ears. No information from the surveys has been shared since 1999. This being the case, why complete the 2002 version?

Answer: A summary of the Enterprise results for 2002 will be posted to the Portal just as it was for 2001. Business unit and human resources leaders will be provided departmental results, key messages and actions for sharing within their business unit. We used this same process to share the results for 2000 and 2001 surveys and will use it again for 2002…

Employee Advocate: Will the summary be like a summary plan description? The SPD is pabulum for the employees about the retirement plans. The real facts are hidden – except for those who seek them out.

If this employee could not find the survey results, that means that they were pretty well hidden. Dirty laundry is usually kept hidden from view. If the surveys were anything to brag about, the results would be force fed to the employees. They would be in full page ads and run up every flagpole.

The surveys do provide vital data to the company. The surveys let them know just how many employees are actually onto their game.

Question: Were executives’ bonuses paid from any type of earnings due to fees related to round-trip trading?

Answer: No. Alleged round-trip trading activity had no direct impact on either the level of executive bonuses or the payment of those bonuses. Executives do not have revenues as an incentive measure.

Employee Advocate: The media has widely reported that Duke has admitted to making round-trip trades. Now, weasel words are creeping in. If Duke has admitted it, it is no longer just an allegation, it is an admitted fact. It’s too late to change the story now!