U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20233 / August 9, 2007

Accounting and Auditing Enforcement Release No. 2666 / August 9, 2007

Securities and Exchange Commission v. Fisher, Halloran, and Behrens, United States District Court for the Northern District of Illinois Eastern Division, Civil Action No. 07C 4483

On August 9, 2007, the Securities and Exchange Commission filed a civil injunctive action against former Chairman, CEO and President Thomas Fisher, former CFO and Executive Vice-President Kathleen Halloran, and former Treasurer and Vice-President George Behrens of Nicor, Inc., a major Chicago-area natural gas distributor, alleging financial fraud lasting from 1999 to 2002.

The complaint alleges that in 1999, Fisher, Halloran, and Behrens participated in devising a method by which Nicor could profit by accessing its low-cost last-in, first-out ("LIFO") layers of gas inventory. As a result, from 1999 through 2002, the former officer defendants engaged in or approved improper transactions, and made material misrepresentations in financial statements and documents filed with the Commission. They also failed to disclose material information regarding Nicor's rigged reductions in gas inventory levels that enabled it to improperly manipulate its earnings and to increase Nicor's revenues under a performance-based utility rate plan. In addition, the former officers materially understated Nicor's expenses during the first and second quarters of 2001 by improperly bundling a weather-insurance contract with an agreement to supply gas to Nicor's insurance provider at below-market prices. Moreover, they caused the losses on the supply agreement with the insurance provider to be improperly charged to Nicor's utility customers. These improper transactions enabled Nicor to understate its expenses and to manipulate its earnings to achieve its earnings targets. As a result of the manipulative scheme, Nicor materially overstated its reported income for the years ending 2000 and 2001, and for each of the quarters within those years and the financial statements filed with those reports.

Additionally, the former officer defendants failed to make disclosures required by GAAP about the effects of LIFO inventory liquidations on Nicor's reported income. Nicor, through Fisher, Halloran, and Behrens, failed to disclose in either its Management's Discussion & Analysis section of its 2000 and 2001 annual and quarterly reports, or in its financial statements filed with those reports, that it had recorded material increases to income resulting from the liquidation of its LIFO inventory, and that the continued liquidation of Nicor's low-cost inventory was not sustainable.

The complaint alleges that by their conduct Fisher, Halloran, and Behrens violated the antifraud provisions of the federal securities laws and aided and abetted Nicor's violations of the reporting provisions of the same laws, including Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder.

Nicor, Inc. previously consented to the entry of a court order enjoining it from violating the antifraud and reporting provisions of the federal securities laws and ordering that it pay a $10 million civil penalty [LR-20060, March 29, 2007].

The Commission's action seeks injunctive relief, disgorgement, civil penalties, and officer and director bars against Fisher, Halloran, and Behrens.

SEC Complaint in this matter