Ken Paxton

Friday, July 28, 2006

Attorney General Abbott Wins Guilty Verdict Following Trial Against Former Ercot Manager

GEORGETOWN - Texas Attorney General Greg Abbott hailed a guilty verdict handed down by a Williamson County jury tonight against a former manager of the Electric Reliability Council of Texas (ERCOT), the state’s electricity grid system located in Taylor.

Carlos Luquis, 38, of Austin, was found guilty on two counts of engaging in organized criminal activity for theft and misapplication of fiduciary property for his role as part of a six-man crime ring hatched within ERCOT. The Attorney General’s investigators uncovered the illegal security-contract scheme in mid-2004, which included several companies, including one operated by Luquis and two other defendants. He is the first among the six defendants to face a jury.

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Carlos Luquis

The punishment phase of the trial begins Monday at 9:30 a.m. before 395th District Judge Michael Jergins, and Luquis possibly faces up to 99 years in prison.

We have relentlessly pursued this case on behalf of the people of Texas and with valuable assistance from the Texas Department of Public Safety’s Criminal Intelligence Service and the State Auditor’s Office. They put hundreds of hours of hard work into this entire investigation, said Attorney General Abbott. Those who use their positions of power to bilk Texans will be punished to the fullest extent of the law.

State Auditor John Keel concurred, saying, The investigation of fraud in state government programs will be prosecuted vigorously, and our office will seek criminal indictments in all cases of fraud.

The DPS unit initiated the lengthy investigation, which broadened to include the Attorney General as prosecutor, resulting in 23 grand jury indictments against the six men in January 2005.

All codefendants involved in this scheme previously pleaded guilty to first-degree felonies, and two testified for the state against Luquis. In addition, former ERCOT Human Resources Director Gary Stroud and former Chief Executive Officer Tom Noel testified for the state. Both men said that at the time Luquis came aboard, they were in disbelief that he, a special agent at the time with the FBI, would accept his position at ERCOT just for the salary they offered.

The two testifying codefendants, Christopher Douglas and Chris Uranga, gave elaborate details about how the crime ring conspired to use a shell company to bill ERCOT exorbitantly for security services and products that were acquired at no cost to themselves and never delivered to ERCOT.

Douglas, a chief financial officer for ECT Global Services, the fraudulent security operation that is the subject of this trial, pleaded guilty in April to theft and to engaging in organized criminal activity for misapplication of fiduciary property, both first-degree felonies. He agreed to repay ERCOT over $500,000 in illegal profits he obtained.

He formed the company with codefendants Luquis and Uranga, the latter of whom also testified at the trial. Uranga pleaded guilty last August to misapplication of funds, admitting he also owes ERCOT $500,000 in illegally obtained profits.

Using their positions inside ERCOT, the men admitted to funneling contracts to their own company and took in more than $1.2 million illegally. While they did actually provide ERCOT with some legitimate contractors, Douglas and Uranga admitted the three pocketed significant amounts of money for work never done or services not provided within the security department at ERCOT.

The schemes enabled the defendants to steer contracts to their own private company in such a way as to violate their ethical and fiduciary responsibilities to ERCOT, all without the knowledge and approval of its legal and accounting departments.

Only one defendant now awaits trial in the coming months. Steve Wallace, program development director, has two indictments pending against him in Williamson County for $800,000 in misappropriated funds, and also three counts in a Travis County indictment for first-degree felony theft.

Two other indicted defendants have pleaded guilty and are awaiting sentencing:

  • Former chief information officer Kenneth Shoquist pleaded guilty in March to engaging in organized criminal activity for commercial bribery and acknowledged receiving $120,000 in bribes from Wallace. He will repay the money prior to his sentencing.

  • John Cavazos, a nonemployee contractor and a shell company security director (one indictment, $8,700 misappropriated), will receive four years probation or deferred adjudication, and has already paid $8,700 in restitution to ERCOT. He is expected to testify at the punishment phase of this trial.

The remaining ERCOT defendants will be sentenced on August 11 in Georgetown.

The State Auditor’s Office and its Special Investigations Unit provided an in-depth analysis of personal and business financial records of the former ERCOT employees. The unit also conducted computer forensic examinations of 17 personal computers belonging to the defendants to identify financial records and communications among them.