"This Has Wrecked My Career"

Jack Rose was a golden boy, a precocious businessman and political insider. Then he ran into a buzz saw at the Arizona Corporation Commission.

Three days later, on March 19, Rose signed an agreement with Prudential. If Prudential obtained securities business from the Oneok merger, Rose would get up to 35 percent of Prudential's management fees, which, according to Southern Union, could total millions of dollars. (The contract also suggests Rose planned to mine US West for potential Prudential deals.)

There is some question about whether Oneok officials lied to commissioners about whether they knew of the Rose-Prudential contract early on. Oneok officials testified that they learned about Rose's contract with Prudential in July 1999. Yet months before, Rose attended a Prudential-Oneok meeting where he was introduced as a Prudential "consultant." The testimony of the Oneok senior official who allegedly knew early in the game about Rose's deal with Prudential has yet to be made public.

In a letter to the Corporation Commission, Oneok said it "firmly believes that none of its actions were wrongful." The company also says it did not agree to give Prudential any business based on what Rose did or didn't do.

Several days after Rose cut the deal with Prudential, he and Irvin flew to Reno to persuade Nevada regulators to sign the pro-Oneok letter.

Susan Sheldrew, a Nevada commissioner, later testified: "Mr. Irvin said that the way that the letter was written, it was designed -- it was designed to point to [favor] Oneok but that we couldn't say so in so many words because that would be improper.... I believe the letter was intended to be positive for Oneok."

Sheldrew found the letter improper and refused to sign it.

Irvin and Rose next met with Nevada Governor Kenny Guinn, the former president of Southwest Gas. Because of his former position, Southern Union contends, Guinn would have a conflict of interest if he acted to influence the merger.

Guinn's assistant, Pete Ernaut, recalled in an affidavit that at the meeting, "Rose represented Oneok." Ernaut sat in on the meeting for just a few minutes, and testified that "there was no lobbying."

But Jim Fisher, a longtime commission staffer and former aide to Tony West, suggested in an affidavit that Rose and Irvin lobbied the governor.

Michael Maffie, the Southwest Gas CEO, allegedly told Fisher "... that he got the [Irvin-Rose] draft letter from the Governor of Nevada ... that he received a telephone call from Governor Guinn in March 1999 during which the Governor said that Commissioner Irvin ... and Jack Rose had met with the Governor to seek his support to have the draft letter approved by the Nevada Public Utilities."

In the end, of all the regulators in Arizona, California and Nevada, only Jim Irvin sent a letter (on Arizona Corporation Commission letterhead) to the Southwest Board.

Irvin's April 5, 1999, letter hints that Southern Union might not get regulatory approval from the three states.

Irvin did not stop with the letter. Right before the Southwest Board meeting, he phoned the Southwest Gas president.

Board members chose the Oneok offer. Desperate, Southern Union counter-offered even more money -- $33.50 per share -- to buy Southwest Gas, but Southwest stuck with Oneok.


You'd think that once the Oneok-Southwest merger was cinched, things would have gotten easier for Jack Rose. But he couldn't make any Oneok-Prudential deals come together. And Kunasek and Porter were breathing down his neck.

His tailspin began when Prudential got suspicious of just how much help Rose could really offer. Prudential wasn't getting the goods Rose had promised to deliver. Joe Fischera, a high ranking investment banker at Prudential, wrote in a May 24, 1999, e-mail to a colleague that l'affaire Rose was "beginning to gather a stench of hucksterism."

Also in May, after Southern Union had withdrawn its offer to buy Southwest Gas, Jerry Porter contacted Southern Union's lobbyist. He says he told him about the Rose-Irvin trips to California and Nevada. His rationale: The commission could not afford to investigate either Rose or Irvin, but Southern Union's lawyers could.

Rose refined his contract with Prudential in June 1999. Again, it appears from the second contract that Rose stood to reap at least $2 million from any merger-related deals Rose brokered for Prudential. But a source close to the Rose case maintains that unwritten conditions attached to the contract would have made it difficult for Rose to get a single dime.

In July, just two days before the Arizona Corporation Commission was to consider approving the Oneok-Southwest Gas merger, Southern Union filed its lawsuit. It alleged that Irvin, Rose, Oneok, Southwest Gas and various executives committed fraud -- the letters, the lobbying -- to nix the perfectly good Southern Union-Southwest Gas merger.

Southern Union's lawsuit spawned a federal investigation, and insiders say Southern Union's attorneys spoon-fed evidence they had gathered to the FBI.

In November, the FBI raided Jack Rose's apartment. The search warrant says Rose and Irvin are suspected to have committed mail and wire fraud in connection with Oneok and Southwest Gas.

In January, Southwest Gas turned around and filed its own federal lawsuit against Oneok and Southern Union. Southwest Gas contends that Oneok and Rose and Irvin "knowingly engaged in improper conduct intended to increase the chance that Southwest would reject Southern Union's offer and accept Oneok's."

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