Dynegy chief resigns amid SEC probe

HOUSTON -- The chief executive of Dynegy Inc. resigned Tuesday, the latest casualty of the turmoil that has spread through the energy trading industry since the Enron scandal broke last fall.

Chuck Watson, who spent 17 years at Dynegy and was one of its co-founders, leaves amid an SEC investigation of the company's trading practices and a nearly 90 percent drop in Dynegy's stock in the past year.

"For 17 years, I have endeavored to build value for all of our stakeholders," he said in a statement. "As a shareholder, I fully support the combination of new and existing leadership at this stage of the company's evolution."

He is the second head of a U.S. energy trader to quit in the past week.

CMS Energy chief William McCormick Jr. stepped down Friday after his company admitted using energy trades to falsely inflate revenue by more than $4.4 billion. Experts say such "round-trip" trades -- simultaneous power swaps by two companies for the same price -- do little but boost trading volume figures.

Testing its system

Earlier this month, Dynegy said the Securities and Exchange Commission is looking into similar trades it made last fall. Dynegy said that it conducted the trades to test its system and that they did not yield any profits for Dynegy or its trading partner.

The SEC is also investigating one of Dynegy's natural gas contracts that provided an $80 million tax benefit last year.

Watson stepped down as both chief executive and chairman of the board. He will be replaced on an interim basis by two board members, according to the company.

"This is not about scandal," said Steve Bergstrom, Dynegy president and chief operating officer. "This is about two guys that are going to come in and help me focus on what I enjoy and do best: make this operation hum."

The company is one of the power industry's giants, producing vast amounts of electricity and natural gas. The company even made a $9 billion bid for Enron but backed off just before Enron's bankruptcy filing in December.