Powerbrokers or Bone Breakers?
Public Service Commission Hears Bizarre Allegations
It was an awkward moment.
Susanne Brogan of the Maryland Public Service Commission asked attorney Todd R. Chason of Gordon Feinblatt whether his client is a convicted felon.
"With respect to the 1987 charge," Chason replied, "I just don't know the details."
The exchange came toward the end of an extraordinary May 7 hearing, during which four former employees of NCG Energy Solutions told the commissioners that the company cheated customers and employees, and is owned and operated by criminals who have stalked, threatened, and even beaten former employees.
The hearing, which was initially closed to the press and public but then reopened, shined a light on an obscure industry. Although they have existed since power deregulation began in the mid-1990s, electricity brokers are little known to the public because they do not sell their services to homeowners. Brokers claim they find the best deal on electricity and sometimes help businesses "aggregate," creating a larger power customer eligible for discounts on multiyear contracts. For their services, they take a commission on every kilowatt used by their customers. The fee is folded into the monthly electric bill. NCG, founded in 2003 and based in Perth Amboy, N.J., is one of more than 250 companies licensed to "broker" electric service for businesses and institutions in Maryland. When advocates of the deregulated market in electricity talk about their model's "success," they are talking about companies like NCG.
But according to some former employees, including a key executive, NCG is not like other brokers.
Company founder and president Christopher J. Kent, 42, was convicted of bank fraud in 1988 after stealing more than $250,000 from Old Borough Savings and Loan, in Trenton, N.J., where he worked as a teller. According to news accounts, Kent placed the cash in his briefcase, abruptly quit his job, and drove his leased IROC-Z Camaro to the airport, where he caught a flight to London. He then spent 10 months as an international fugitive before returning to New Jersey to face charges and receive treatment for alcoholism and cocaine addiction.
Kent served more than a year in federal prison, according to Francis X. Smollon, NCG's former senior vice president of sales.
In its initial application for a state license, dated Feb. 12, 2008, NCG did not disclose Kent's felony record as required. Kent signed the application under penalty of perjury.
The license application itself is years late. NCG has fielded a sales force here for about two years. Last week the commission asked NCG to suspend its Maryland operations pending the company's reapplication for a license. The amended application will be expected to divulge the criminal histories of the company's principals.
NCG has sold hundreds of power contracts to businesses large and small in Maryland, according to sales director Edward Jones. It also sells in Massachusetts, New York, New Jersey, Illinois, and--until recently at least--Washington, D.C. Chason, NCG's lawyer, told the PSC that the company has a license application pending in Delaware. Some states do not license power marketers and brokers, and even the ones that do, like Maryland, do not closely monitor the industry for unlicensed operators.
Chason, who appears regularly before the PSC, says he has never taken a broker in for a license application before, and that NCG retained him just a few weeks before the May 7 hearing. The company's failure to list Kent's felony was an oversight, he says, born of inexperience in legal matters. "You can see it's a handwritten application--this is not something that has been vetted by lawyer after lawyer," he says.
Asked why a company with more than 100 employees and more than $1.3 million in monthly receipts didn't legally analyze its application, Chason says it was an error in judgment: "They figured it was simple enough to do and they did it."
But Smollon, joined by three other former employees, suggests a different motivation.
"These guys are all out of the ghetto in Trenton," says Smollon, a consultant, political operative and former New York Times executive who claims that in two years he built NCG from a 10-person operation to a multistate corporation with 150 employees. (NCG's application lauds Smollon by name as part of its "excellent executive team.")
Smollon, who left NCG last November, says he discovered Kent's past--and the criminal records of several other NCG executives--only recently. He and a brace of other former employees have been sounding the alarm over what they allege are NCG's criminal business practices for several months, shopping the story to newspapers in several states and alerting the Maryland Public Service Commission.
But at the beginning of the May 7 hearing, commission staff recommended that NCG be licensed, saying that they had not been able to substantiate the allegations and that the commission could better monitor NCG if it were licensed.
That prompted Smollon to rise and hand a thick sheaf of documents to the staffer, attorney Annette Garofalo, as well as to the commissioners and Chason. The packet included newspaper reports and court records of Kent's bank robbery, plus criminal complaints and records relating to what Smollon alleges are eight current and former employees of the company, including members of its board of directors.
The documents prompted the commission to "clear the room" of everyone not connected to the case. A City Paper reporter and photographer protested, and after a 10-minute session and 15-minute recess, Douglas R.M. Nazarian, the PSC's counsel, announced that the meeting would be reopened because the material presented by the former employees was not proprietary corporate information that could be protected under the Maryland Public Information Act.
Renee Musicus, who says she worked as a saleswoman for the company for a year in Maryland, Bryan Cicalese, a Manhattan-based salesman, and Jay Valentine, who says he sold electricity contracts for NCG for 10 months before being fired in January 2008, then told the commission that NCG routinely overcharged customers by secretly inflating the commission it took on power sales. By folding part of its fee into the basic electricity price, NCG also cheated its sales staff out of part of their commissions, the former salespeople claimed.
"NCG had us out there lying to the customers without knowing it," Cicalese testified, adding that he discovered the scheme only after another disgruntled employee released a company spreadsheet that showed the hidden charges. In one case, Cicalese said, NCG charged almost three times its stated rate.
Musicus and Valentine said they saw similar problems in Maryland. After the hearing, the two said they had negotiated a contract for Dundalk's Eastpoint Mall, but the electricity supplier, Constellation Energy, rejected the contract and refused further deals with NCG because of the overcharges.
The salespeople's claims are hard to verify. "Our relationships with customers and consultants are confidential," Constellation spokeswoman Jennifer Wood says. Several executives at Eastpoint Mall tell City Paper that the contract in question was negotiated by an operations manager who no longer works for the company, and that the details of the contract are now held by Constellation.
NCG's lawyer sidesteps the issue of overcharging. "The truth of the matter is it doesn't really matter what the underlying numbers are," Chason contends. "The bottom line was the customer was paying what the customer was told they were going to pay."
Cicalese testified that he had been harassed and threatened by company officials and fired because they suspected he was working with a rival company founded by another former NCG executive, Richard Jingoli. He has filed criminal charges against Kent, alleging his former boss illegally obtained his cell-phone records.
"I think the big picture here is there's a lot of criminal activity in this company," Cicalese testified to the PSC. "And it starts with the owner and trickles its way down."
On April 28 Jingoli complained to the Trenton Police Department that several NCG employees, supervised by Kent, beat and kicked him as he left a church on Feb. 15. The complaint, in which Jingoli claims to have suffered "permanent damage to lip and right ear," has resulted in a court summons to Kent and the alleged assailants, Michael Cammiso, James Cardinal, and Russell Payakovich.
Jingoli did not report the assault right away because he was waiting for his assailants to "do the right thing," he says in a telephone interview. "I gave them the opportunity to apologize." He alleges that he was attacked because Kent thought that he had used Cicalese to gain inside information from NCG and steal customers, which he denies doing. He says he worked for NCG for about two and a half years and left the company three years ago. "I left at the time on pretty good terms," Jingoli says. "When an energy contract is done, it's fair game for anybody."
Jingoli neglects to mention that NCG sued his new company, Austere Energy, extracting a $90,000 settlement last fall. NCG has also sued Musicus and Cicalese, alleging they breached the company's noncompete clause and stole business away. Those cases are pending in New Jersey.
At the May 7 hearing, Chason seemed taken aback by the ex-employees' testimony. "Frankly what's happened here this morning can best be characterized as a sandbagging," he protested. "These allegations were not put on the record," even though the complainants were told to do so.
He would say little more at the hearing, and Jones, NCG's sales director who attended the hearing, also declined comment.
Kent declined to be interviewed by phone, but in a series of e-mails he answered the charges. "Mr. Jingoli conveniently filed charges a week before the hearing, alleging that I was involved in an assault on him. That charge is denied in totality. I had nothing to do with any alleged assault, nor did I have any foreknowledge or warning, else I would have acted to stop that from occurring," Kent writes.
"Mr. Smollon is believed to have authored several vicious and widely distributed e-mails attacking me personally and NCG, alleging every crime his imagination could create, and included imaginary grand jury hearings, FBI investigations, attorney general investigations, among many others. After seven e-mails of this nature, NCG contacted the U.S. Secret Service (Internet Crimes) in Newark, N.J., to file a complaint. The e-mails have ceased since they began investigating this matter in February.
"As to their claims about myself and a criminal conviction, I will share with you that when I was 19 years old, I was addicted to alcohol and drugs. My actions were not that of a sober person. In 1989, I entered treatment and began in a 12-step program. I have not had a drink or drug in over 19 years as a result of working a program of recovery."
At the end of the hearing, PSC member Brogan asked the staff if they had "heard anything here that would change your recommendation" that NCG be licensed.
The staff equivocated, saying again that they had not been able to confirm the information provided. But they recommended that the license be held up pending further investigation.
Brogan scolded them: " I would hope that, in the future, if there is a criminal record and it has not been disclosed, that should be the first thing you tell us."
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