Papers outline events stalling Southwest Gas merger

LAS VEGAS - New documents detail a scandal that has paralyzed an Oklahoma natural gas company's $1.8 billion deal to buy Southwest Gas Corp., the Las Vegas Sun reports.

The Sun says the documents bolster allegations of wrongdoing against a former utility regulator in Arizona, where Las Vegas-based Southwest does business.

The chief allegation against the official, Jack Rose, is that he improperly used his position on the Arizona Corporation Commission to help his new career brokering financing for mergers involving companies he once helped to regulate - including Southwest Gas.

Rose's critics say that in trying to win lucrative fees from Wall Street for setting up merger financing, he and an ally at the Arizona agency abused the utility regulatory systems in Arizona and Nevada.

Critics say the alleged abuse helped Southwest's chosen merger partner, ONEOK Inc. of Tulsa, Okla. - while hurting spurned Southwest suitor Southern Union Co. of Austin, Texas.

ONEOK is accused of lying to Arizona authorities about its role in the scandal - charges ONEOK denies.

One of America's most prestigious financial companies - Prudential Securities Inc. - is caught in the crossfire.

ONEOK's application to acquire Southwest stalled in Arizona following the filing of a racketeering lawsuit in federal court July 20. That lawsuit, brought by Southern Union, alleged that Southwest and ONEOK conspired with Arizona Commissioner Jim Irvin and Rose, the former ACC executive secretary, to derail Southern Union's $1.88 billion hostile bid for Southwest Gas.

ACC Chairman Carl Kunasek is now attempting to find out if ONEOK engaged in negotiations with Rose while he was a consultant with Prudential for a role in financing the Southwest acquisition.

Southern Union has alleged that Rose, as part of his efforts to win this financing contract, engaged in efforts to derail the Southern Union bid.

Rose is accused by the Texas company of presenting himself to regulators in Nevada and California as a representative of ACC - well after his resignation from that body - and pushing the ONEOK offer, a deal in which he allegedly had a financial interest.

Irvin is alleged to have cooperated in these efforts, drawing the fire of his political rivals on the Arizona commission.

The Southwest-ONEOK merger was announced Dec. 14, 1998. Rose resigned from the ACC on Dec. 31, 1998.

Documents from Prudential executives indicate the company believed Rose had won a co-managing role for Prudential in an $800 million financing package directly tied to the Southwest deal.

Prudential documents show Rose was awarded a contract by Prudential on March 19. ONEOK said it was unaware of the contract until after July 19, the day it was publicly disclosed in a Southern Union lawsuit.

Starting in mid-June, Prudential's documents indicate that direct talks began between ONEOK and Prudential. The documents indicate that some of these talks included a potential deal involving the Southwest Gas acquisition. That contradicts ONEOK's statements to Arizona regulators.

The talks allegedly culminated on July 13 with a call from ONEOK CFO Jim Kneale inviting Prudential to be a co-manager on a ONEOK financing package.

But ONEOK said it had contracted with PaineWebber as its sole financial advisor on the Southwest deal in October 1998.

Kunasek's office has been enraged that Irvin and Rose claimed to be working on behalf of the ACC, even though the commission had taken no position supporting the ONEOK bid. Kunasek and Irvin have been engaged in a vicious two-year feud at the ACC. Over that time, one of Irvin's closest political allies has been Rose.

Jerry Porter, chief aide to Kunasek, believes the Prudential documents confirm that ONEOK lied to the ACC.

ONEOK believes it has been unwittingly caught in the middle of the Kunasek-Irvin feud.

''This is a very frustrating process here,'' said ONEOK spokesman Weldon Watson. ''It was obviously complicated by the problems that existed at the Arizona Corporation Commission before we got there. We want to move forward.''