"SERVING ALL OF FLORIDA"
FPC to Refund Millions?
By LARRY LIPMAN
Sentinel Star Staff
TALLAHASSEE - Special investigator Russell Troutman recommended to the Public Service Commission Thursday that Florida Power Corp. refund to its customers almost $8.5 million for overcharges caused by an oil price-hiking scheme during 1973 and 1974.
Divided among the St. Petersburg firm's 659,000 customers, the refunds would amount to about $5.50 per residential customer, said Richard Tudor, PSC rate director.
In his report, Troutman said Florida Power should have known immediately it was being cheated, but corporate officials ignored federal warnings about its fuel supplier, and failed to protect its interest:
Public Service Commission Chairman Paula Hawkins said the commission will decide Monday whether to accept Troutman's recommendation to order the corporation to show why it should -not make the refund.
It will be up to the commission to decide how to handle refunds to former Florida Power customers who no longer live in the company's 32 county service area that includes portions of Orange, Osceola, Seminole, Volusia, Polk, Highlands and Marion counties.
Florida Power spokesman Brock Lucas said the corporation has not reviewed Troutman's report and would make no commitment concerning the size of refund it would agree to make.
"Florida Power Corporation has worked, from the time it first became aware of possible overcharges to develop the facts necessary to make appropriate refunds to its customers," Lucas said from a prepared statement.
However, Mrs. Hawkins said it may take months for the PSC to complete hearings that would be necessary if Florida Power contests a PSC order requiring it to make the refunds.
Troutman said the company should pay because it "failed to use reasonable care" in buying fuel oil and "must therefore bear the responsibility as a corporation" for the overcharges.
Troutman, a former Florida Bar president of Winter Park, charged that the company should have known "from the very first transaction" in June 1973 that it was the victim of a series of oil sales at inflated prices.
The public was victimized by "imprudent agreements" and practices that were "not good management," Troutman said.
In his 72-page report, the first since his appointment by the PSC in April, Troutman said mismanagement in Florida Power led to "a near panic atmosphere" in the corporation's executive office.
His sharpest criticism was of former Chairman Angel P. Perez, President Andrew H. Hines Jr., Senior Vice President Richard E. Raymond and Stanley Brandimore, general counsel.
Perez was among seven persons indicted by a federal grand jury in Tampa in September for conspiring to illegally escalate fuel oil prices. He also is the target of a civil suit by Florida Power Corp.
Based on evidence compiled by the federal Department of Energy, Troutman said, Florida Power was overcharged by $7,498,326.94 in 50 transactions with several oil companies during 1973 and 1974.
Troutman arrived at the recommended refund of $8.5 million after making two adjustments to the $7.5 million total overcharge calculated by the Department of Energy.
Troutman reduced that figure by 8.2 percent, which he calculated was the amount absorbed by the company. He then added 6 percent interest to that figure, $6.88 million, since November 1974 to reach the recommended refund.
Commercial customers also would receive Florida Power rebates, but PSC staffers couldn't say how much.
The overcharges represent the difference between the price Florida Power paid for oil and the oil's initial purchase price.
Authorities have charged that several oil companies reaped windfall profits by artificially inflating prices in a series of paper transactions sometimes called a daisy chain.
Troutman said the oil often changed hands and its price increased while it sat in a barge chartered by Florida Power.
Troutman sharply criticized the company's top officials for hiring self-styled oil consultant Ray Granlund of Houston as a fuel buyer.
While accepting salaries of $1,000 to $1,750 per month from Florida Power between 1971 and 1975, Granlund also was receiving commissions from the oil suppliers.
Granlund's commissions from the oil companies totaled $2.339 million, said William Grimm, Troutman's associate, The report shows that Granlund paid Perez $81,919 at the end of 1973, but "we're not able to tell just what role Mr. Perez played in earning his compensation," Troutman said.
The report characterized the Florida Power's agreement with Granlund as a "carte blanche to write his own conditions and exploit the situation to whatever extent possible."
Granlund was indicted on 12 counts of mail fraud and conspiring to commit fraud by the federal grand jury and also been sued by Florida Power.
Company officials cited by Troutman were "unquestionably imprudent" for hiring Granlund, knowing he was receiving money from both the buyer and seller, but they compounded their error by hiding the arrangement from Florida Power's fuel department, Troutman said.
Other criticisms of Florida Power include:
- Failure to check oil shipping documents which "could have nipped the daisy chain in the bud."
- Failure to investigate its purchases after being contacted by the Federal Energy Administration in the fall of 1974 about questionable activities by the company's supplier, Larcon Petroleum Co. of Houston.
- Delegation of spot oil purchases to Larcon, "a paper company which neither takes oil out of the ground nor refines it," rather than assigning that purchasing job to a FPC employee.
- Violating Florida Power's purchasing procedures that require the company president to be notified of fuel purchases in excess of $500,000.
- Failure to take timely action in filing suits against the companies and individuals Florida Power believed were involved in the swindle.
Troutman said the report completes his investigation, but he would report back if he received more information.
Troutman also urged the PSC to seek legislation enabling the PSC to investigate without granting immunity to those subpoenaed to testify.
A major stumbling block in the commission's investigation of the scandal is a law that grants immunity from criminal prosecution to anyone subpoenaed to testify before the commission.
Mrs. Hawkins said she would ask Florida {xxx} witnesses who testify during the refund {xxx} agree to waive any immunity from {xxx}
Note: {xxx} refers to a damaged portion of the original document this text was taken from.
From:
Sentinel Star
Fri., October 27, 1978
Troutman, Williams, Irvin, Green, Helms & Polich, P.A.
311 W. Fairbanks Avenue - Winter Park, Florida 32789 - Phone: (407) 647-2277