Court deciding if ex-regulator should face charges

Lawyers for Indiana's former top utility regulator told the state Court of Appeals on Monday that he's immune from criminal prosecution despite violating state ethics rules, saying he was covered by changes in state law that came after he was indicted.

The Indiana attorney general's office, which is asking the court to reinstate the felony misconduct charges against former Indiana Utility Regulatory Commission chairman David Lott Hardy, said there's no indication that lawmakers intended the change to be retroactive.

The crux of the argument is whether Hardy, who was fired by then-Gov. Mitch Daniels as part of an ethical scandal that eventually also cost three Duke Energy officials their jobs, should be charged with felony misconduct when he did not commit an actual crime.

Daniels fired Hardy as commission chairman in 2010 for ethical violations following the disclosure of private meetings Hardy had with Duke Energy executives about cost overruns at a coal-gasification power plant that the utility was building in southwestern Indiana. The 618-megawatt plant that went online last summer had an original 2007 cost estimate of $1.9 billion, but that ballooned to about $3.5 billion.

Hardy was indicted by a Marion County grand jury on four felony counts of official misconduct in 2011. A Marion County judge later threw out those charges, saying Hardy couldn't be charged under changes the Legislature made in 2012.

The attorney general's office appealed.

Hardy's attorneys say the Marion County judge did the right thing. Lawyer David Hensel said the revised misconduct law applies only to specific criminal offenses by public officials, not merely to violations of ethical or administrative rules. He said the Indiana General Assembly made those changes in 2012 when the state inspector general sought clarification as a result of the Duke-related scandal.

"There was an ambiguity in the statute," Hensel said. "Once it became aware of it, it acted quickly."

But Deputy Attorney General Ellen Meilaender said the law wasn't vague as applied to Hardy, because it clearly prohibited officials from taking part in private discussions related to decisions in which they were involved.

"But aren't some communications permissible?" asked Judge Paul Mathias.

"Yes, but these weren't," Meilaender said.

Judge Cale Bradford asked Hensel what the state could do about cases like Hardy's if it couldn't bring charges.

"It feels like you ought to be able to do something about somebody who does something like this," Bradford said.

Hensel said the former regulator had already paid a harsh penalty. "Mr. Hardy lost his job," he said.

Duke is Indiana's largest electric utility, with about 800,000 customers in 69 of Indiana's 92 counties. Earlier this month, the Court of Appeals gave the company approval to raise electricity rates to pay for the Edwardsport coal-gasification power plant. Consumer groups had fought the increase.