A lawsuit in federal court in Dallas claims more than $20 million from electricity customers in Texas and 15 other states, including California, has gone to finance "blood diamonds" in Africa.
The lawsuit alleges power retailer Glacial Energy has run a "money laundering operation" which has secretly funneled almost all of its profits to a mining operation in an area of the Congo known for "blood diamonds."
Glacial describes itself on its website as "one of the fastest-growing retail energy marketers in the United States." It sells power to businesses but not residential customers.
The term "blood diamonds" refers to diamonds mined in African war zones and sold around the world to finance warring factions. The 2006 movie "Blood Diamond" starring Leonardo DiCaprio focused attention on the issue.
In a court hearing, company attorneys called the allegations "frivolous" and an attempt to extort money.
Texas utility regulators have launched a formal investigation of Glacial, according to court documents.
The lawsuit was filed by Michael Petras, a former executive of another energy company, Franklin Power, which failed in 2005.
Petras claims he helped Glacial's owner, Gary Mole, form Franklin Power but that Mole and others conspired to destroy Franklin, steal its assets and customers and create Glacial.
The lawsuit accuses Glacial of being a "racketeering enterprise" whose "true business" is to "launder money to fund mining in the Congo."
In 2006 and 2007, the lawsuit alleges Glacial declared only 3.8 percent of its profits, funneling 96.2 percent to pay for the mining operation.
Petras claims the defendants used $13.4 million from Franklin Power to buy the Congolese mining company and later sent another $6.7 million of Glacial's earnings to fund the mine.
"Glacial Energy was not created for a legitimate business purpose," the lawsuit alleges. "All income from the assets of Franklin Power Company went to Gemico, a secret subsidiary of Glacial Energy located in the Congo. Gemico is a mining company in the notorious conflict mineral (blood diamond) province of Kivu, Congo."
The mining operation is "in one of the most conflicted and corruption-ridden mining regions in the world," the lawsuit said.
Gemico was formed in 2006 by a man linked to a rebel group operating in the Democratic Republic of Congo, according to Petras.
The lawsuit claims Glacial spent millions on "consultants," including some in China, "for no apparent business reason."
The lawsuit claims Mole's partners in Glacial included a "disbarred" attorney and an Austrian man who was deported from the United States after he pleaded guilty to a cocaine charge and also admitted owning 62 firearms and 42,459 rounds of ammunition which had been seized by federal agents.
The former attorney, Donald Bernard, and the Austrian, Peter Koeck, could not be reached for comment. Koeck now lives in Argentina, and Bernard lives in Montana and the Congo, according to the lawsuit. Both are named as defendants.
Records show Bernard resigned as a lawyer in 1994 "in lieu of discipline for professional misconduct," said Kim Davey, a spokeswoman for the State Bar of Texas. She said while he was not technically disbarred, his law license was revoked and the result was the same.
The misconduct had to do with mishandling money in a woman's estate, according to a bar document.
Both sides agree to seal records
In a request to seal court records, Glacial's attorneys argued Petras has engaged in a "smear campaign" intended to harm the company and has improperly contacted the company's lenders "to sully Glacial's name."
"[Petras] not only wants to destroy Glacial's funding, but he also wants to destroy Glacial's ability to conduct business as an energy broker," Glacial's attorneys wrote.
They added Petras was angry at Mole because he blamed him for Franklin Power's demise.
A key dispute in the case involves 6,000 pages of the company's financial documents.
Glacial's lawyers said Petras obtained the "private and confidential" records by serving a subpoena on the company's former accountant, who provided the documents "before any party could even move for protection."
On Aug. 1, attorneys for both sides said they had agreed to seal Petras' complaint and also limit the distribution of Glacial's "confidential financial information."
A copy of the lawsuit, included in an attachment stamped "SEALED," was still available on the federal court's online database last week.
The lawsuit includes detailed allegations of Glacial's alleged financial wrongdoing.
For example, a $320,000 transaction in April 2006 was simply labeled "DRC" with no other details, the lawsuit claims.
The company's attorneys did not respond specifically to Petras' allegations about the money laundering and diamond mining operation but called the entire case "frivolous."
Heated courtroom exchanges
Transcripts of court hearings in the case show the legal dispute became heated even in its early stages.
In a hearing May 13 in Dallas County District Court, Glacial attorney Jennifer Keefe pleaded with a judge to order Petras to stop contacting banks that have lent money to Glacial or might in the future.
"We believe strongly this case is frivolous, and that it's an attempt to extort a settlement out of the company," Keefe said.
Petras' attorney Kerry Peterson shot back.
"Glacial Energy is an absolute fraud," Peterson said. "Everyone associated with it is a crook or a conman... Everything we say in that complaint is true, and we can prove it. "
Dallas County District Judge Emily Tobolowsky granted part of Glacial's request to stop contacting certain people, but the case was later moved to federal court.
No comment from company
Calls on Thursday and Friday to Glacial's Dallas attorneys, Patrick Long and Jennifer Keefe, were not returned.
Glacial's website does not list a corporate phone number. The company is based in the U.S. Virgin Islands.
A woman who answered Glacial's customer service line on Friday said she would ask a manager to return the call, but nobody did.
An e-mail sent to Gemico through a website was not returned.
A home telephone listing for Mole in the U.S. Virgin Islands could not be found.
Terry Hadley, a spokesman for the Texas Public Utility Commission, said he could not comment on any investigation or confirm if one was under way.
But in court documents, Glacial's attorneys included a May 2011 letter from PUC investigators asking detailed questions about whether Mole was involved in Franklin, the failed power company.
When he formed Glacial, Mole lied to utility regulators in Texas and other states about his past involvement in Franklin Power, Petras' lawsuit claims.
The Texas electricity market was deregulated in 2002, allowing firms such as Franklin and Glacial to compete for customers.
According to its website, Glacial does business in Texas, California, Connecticut, Delaware, the District of Columbia, Illinois, Maine, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania and Rhode Island.