A former controller of embattled energy company Dynegy Corp. filed a complaint in Texas state court on Friday, charging the company with civil conspiracy, according to both FT.com and The New York Times.
The former controller, Bradley Farnsworth, alleges in his complaint that he was pressured to manipulate the company’s books and then fired when he refused to do so, FT.com reported.
The suit alleges that Farnsworth was pressured by president and chief operating officer, Stephen W. Bergstrom, and chief financial officer, Robert D. Doty Jr., according to The New York Times. Doty left the company in June. The Times reported that it could not reach him for comment.
In March 2000, Bergstrom reportedly became concerned about the company’s natural-gas trading portfolio in Britain. Dynegy apparently had a short position, or a bet that prices would fall. A month later, when gas and power prices rose, the company began suffering “significant” losses that violated the company’s risk policy, the suit alleges.
Farnsworth’s allegations against Doty come at a difficult time for finance managers. In the wake of the Enron, WorldCom and many other accounting scandals, finance executives are being subjected to an unusually harsh degree of scrutiny. And as CFO Magazine noted in its August issue, 17 percent of the finance chiefs responding to a survey reported being pressured to misrepresent their results by their companies’ CEOs during the past five years.
According to The Times, Farnsworth alleges that in August of 2000, he was asked by Bergstrom to shave, or reduce, the forward curve that is used to calculate mark-to-market, or long-term, trading gains and losses. Altering the curve would have artificially reduced the losses on the books. Farnsworth says in the complaint that he had told then-CFO Doty that making the change would violate the company’s standard accounting procedures and would be illegal.
In January 2001, the complaint says, Doty told Farnsworth that he needed a controller who was 110 percent supportive so as to “achieve the company’s aggressive earnings and growth targets.”
In March of 2001, Farnsworth was reassigned and Michael Mott was named controller. Farnsworth was then fired in October of 2001.
A Dynegy spokesman told FT.com that the allegations were “meritless” and that the company was prepared to “vigorously contest” them.
Farnsworth’s lawyer, Philip Hilder, is also representing Sherron Watkins, the Enron whistleblower who tried to warn former chairman Kenneth Lay last year just as the company’s financial condition was on the brink of collapse.