Cousin sues Aquila execs over handling of family trust

KANSAS CITY, Mo. -- The two top officers of Aquila Inc. have been sued by a cousin over the handling of a family trust whose assets consist entirely of the energy company's stock.

Aquila shares have lost 92 percent of their value this year, reducing the total value of investors' shares to $369 million. Their shares had been worth $5.9 billion at the end of August last year.

Jeffrey Green filed suit Thursday against his cousins, Aquila chairman Richard C. Green Jr. and president and chief executive Robert Green.

The lawsuit alleges that the value of the family trust has plunged from nearly $11 million to $695,000 because Robert and Richard Green, who are brothers, did not diversify its assets.

The legal action comes at a troubled time for Kansas City-based Aquila, which was founded by Lemuel K. Green in 1917 as Green Light and Power Co. and has been run by four generations of the Green family.

Aquila last week reported a second-quarter loss of $810 million, or $5.69 a share, after writing off several soured investments.

Making case to S&P

On Tuesday, Aquila's management team will make presentations to Standard & Poor's Corp., Moody's Investors Service and Fitch Ratings -- agencies that are deciding whether to downgrade the company's credit rating.

Aquila executives have been trying to shore up the company's rating by cutting costs, conserving cash and selling assets. The moves have included hundreds of layoffs and a cut in the dividend to shareholders.

Standard & Poor's currently rates Aquila's debt two notches above junk-bond status but has the company's rating on a credit watch. Moody's and Fitch rate Aquila's debt one step above junk.

Aquila has said that if its rating is cut to junk, it would have to make $484 million in debt payments and additional postings of collateral. It has said it could meet its short-term obligations if one or all three agencies cut its rating.

John Kultgen, who is following Aquila for clients at Perkins, Smart and Boyd Inc. in Fairway, Kan., said he was not seriously concerned about a cut in Aquila's credit rating. The stock price already assumes it will happen, he said.