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Judge slams privatization proceedings

A federal judge ruled last week that the closed-door policy used to privatize the government's uranium enrichment industry violated the public trust. U.S. District Judge Gladys Kessler wrote in her decision that the process used to sell the U.S. Enrichment Corp. was "a model of what not to do when considering various options for privatizing a federal entity." In her March 16 ruling, Kessler ordered the Energy Department to pay the legal fees of labor union lawyers. The lawyers, representing the Oil, Chemical and Atomic Workers union, sued under the Freedom of Information Act to gain access to minutes from secret board meetings held during USEC's privatization. The government sold USEC through an initial public offering in 1998, netting $1.9 billion. During the process, USEC's board of directors met on three separate occasions to determine whether to hold a public offering or sell the government corporation through a merger and acquisition. The meetings were closed to the public. It was eventually determined that an IPO would net the greatest return for the government. Kessler, citing various news accounts of the privatization, noted that USEC's outside lawyers made about $15 million, a financial advisor would earn up to $7.5 million if the board approved a public stock offering, and USEC Chief Executive William Timbers got a $617,625 bonus. She said the transcripts of the closed board meetings "reveal the ways in which bias, self-interest and self-dealing can influence the decision-making process, especially when that process is kept entirely secretive." From a business standpoint, the meetings had to be closed, said a former Clinton administration official involved in the process. It was the only way to ensure that the government got the highest price. Secrecy, he said, is the most valued commodity on Wall Street. "If the judge had the material or heard the other side of the story, we are convinced she would have had a different opinion," said USEC spokesman Charles Yulish, adding that Kessler relied primarily on documents submitted by the union's attorney, Dan Guttman. That's because USEC did not submit a brief in the case and the Energy Department mounted a "lackluster" defense, according to the former Clinton administration official. USEC was removed from the original suit to gain access to the documents in 1998 and substituted with the Energy Department. In 1999, the union and the Energy Department settled the dispute. The remaining question before Kessler was whether the government had to pay for the union's legal fees.