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News Analysis

Fortnightly Magazine - August 1998

on May 28. The lawsuit notes the remaining 8,000 LILCO and Brooklyn Union employees received no payments.

The fact that no Brooklyn Union employees received extra compensation stands out. When LIPA Chairman Richard M. Kessel notified MarketSpan of the LIPA board's actions, he told MarketSpan's president, Robert Catell, the former chairman of Brooklyn Union; he did not inform Catacosinos. Since no Brooklyn Union executives received extra compensation, there have been calls for Catell to take over from Catacosinos.

But the story only gets more complex. The takeover was financed by what is believed to be the nation's largest municipal bond issuance -- $7 billion. At the end of May, the U.S. attorney for the Eastern District of New York launched an investigation into how LIPA chose the underwriters for the sale. Subpoenas were sent to LIPA, Bear Stearns & Co., Salomon Smith Barney, Lehman Brothers Holdings Inc., and Morgan Stanley Dean Witter & Co. Inc. According to The Washington Post, federal and state records show that those companies contributed to political committees and funds that support the reelection of Pataki and Sen. Alphonse D'Amato (R).

This uproar really began in the 1980s. That was when debt from the building of the Shoreham nuclear power plant burdened Long Island ratepayers with some of the highest rates in the United States and yet never operated at full power. The LILCO managers who decided to build Shoreham were ousted in 1984.

Catacosinos, 68, does not plan to quit and plans to complete his six-year term as chairman.

Lori A. Burkhart is a contributing legal editor at Public Utilities Fortnightly.


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