Ken Paxton

Friday, January 28, 2005

Attorney General Abbott Gets 23 Indictments Against Six In Elaborate Organized Crime Scheme Inside The Electric Reliability Council Of Texas

AUSTIN - Texas Attorney General Greg Abbott today announced 23 indictments from a Williamson County grand jury looking into criminal activities of five former top managers and one associated contractor at the Electric Reliability Council of Texas (ERCOT) in Taylor.

The indictments cap a five-month investigation by the Attorney General’s Office into a complex internal network of shell security and computer contracting companies that billed the organization more than $2 million for work often done by nonexistent or even dead employees. The Texas Department of Public Safety (DPS) Special Crimes Unit and the State Auditor’s Office assisted the Attorney General.

The maze of illicit business dealings going on within ERCOT over a year’s time is simply stunning, said Attorney General Abbott. This is not about electricity. It’s about corruption at top levels of ERCOT and flagrant violations of an agreed-upon ethics policy. We will continue to pursue any information that leads us to possible criminal wrongdoing, as requested by Williamson County District Attorney John Bradley.

The 23 indictments thus far handed down by the grand jury charge the men with engaging in organized criminal activity, including the misapplication of fiduciary property, commercial bribery and theft by receiving stolen property. Most of these are first-degree felonies with a range of punishment between five and 99 years or life in prison.

Kenneth ShoquistSteve WallaceChris Uranga
Chris DouglasCarlos LuquisJohn Cavazos

The investigation into these personal enrichment schemes and complex interrelated business dealings resulted in indictments today against:

Ken Shoquist, chief information officer (two indictments, over $100,000 misappropriated)
Steve Wallace, program development director (two indictments, $800,000 misappropriated)
Chris Uranga, director of information technology operations and corporate security (six indictments, over $300,000 misappropriated)
Chris Douglas, senior manager, Data Warehouse (six indictments, over $300,000 misappropriated)
Carlos Luquis, physical security manager (six indictments, over $100,000 misappropriated)
John Cavazos, a nonemployee contractor and a shell company security director (one indictment, nearly $9,000 misappropriated)

Members of the ERCOT board of directors have not been under investigation and have since conducted a top-to-bottom review of the organization’s security apparatus and its employees.

The indicted managers conspired to set up multiple shell companies with puppet presidents to provide security and computer services to ERCOT. Each of them then billed the state’s non-profit electricity grid administrator hundreds of thousands of dollars on contracts for equipment, time and work, much of which was not provided.

For example, a company known as DSS Group allegedly provided security consulting services to ERCOT. The company sent ERCOT 13 invoices totaling $951,000 for work supposedly performed by four consultants, when only one consultant ever did any work for the organization.

The indicted men established four companies in like manner, some of which billed for employees who did no work for ERCOT, and in one case billed for a man who was deceased. In addition to DSS, the businesses were: ECT Global, Cyberensics Inc. and Tri Force Security. (A list of the shell companies with links to the above-listed managers is attached to this news release.)

While the integrity of the ERCOT grid system statewide was never compromised, the organization paid about $2 million to the managers’ shell companies as a result of illegal billings for nonexistent services. The men often lavished themselves with high-end homes and expensive boats. The Attorney General is working with the DPS and local authorities to seize bank accounts, luxury automobiles, motorcycles and other assets.

The indicted employees all signed ethics agreements with ERCOT upon accepting employment, including promises to never gain personally from an ERCOT business decision and to immediately report any possible conflicts of interest.

According to the Public Utility Commission of Texas, ERCOT is funded through a charge of 42 cents per 1,000 kilowatts. For the average residential customer, this amounts to about 50 cents per month on an electricity bill. The fee generates about $125 million a year for ERCOT. The total ERCOT budget for 2004 of $174 million also includes revenue gathered from membership fees by electricity market participants.