Chairman, El Paso Corporation
Born: April 6, 1935, in New York City, New York.
Education: Fordham University, BS, 1957; LLB, 1964.
Family: Married Allison Spencer, 1986; children: seven.
Career: Hughes, Hubbard & Reed, 1964–1968, associate attorney; Allied Artists Pictures, 1968–1970, executive vice president and general counsel; Southern Natural Resources, 1970–1979, vice president and general counsel; Sonat, 1980–1982, vice president and general counsel; 1982–1999, president and chief operating officer; 1983–1999, chief executive officer; 1986–1999, chairman; El Paso Corporation, 1999–, chairman of the board; 2003, interim CEO.
Address: El Paso Corporation, 1001 Louisiana Street, Houston, Texas 77002-5089; http://www.elpaso.com.
■ The well-credentialed Ronald L. Kuehn Jr. was a veteran of the natural gas energy business, having led the transformation of Southern Natural Resources to its new identity as Sonat and on through the merger of Sonat with El Paso Corporation. To his misfortune, he hit a snag at El Paso, a company embroiled in scandal with its shareholders and the Securities Exchange Commission. He willingly stepped in the line of fire to serve as interim chief executive officer of El Paso while the company repositioned itself to meet its debt and resolve its controversies.
The son of a New York police officer, Kuehn was born in Brooklyn in 1935 and raised in Queens. Attending Fordham University on a basketball scholarship (where he played point guard), he began to develop negotiating skills as floor general for his teammates. By nature, Kuehn was soft-spoken—a skill not necessarily in demand on the basketball floor. He compensated by developing a persuasive manner to negotiate plays and positions for the team. Those skills were to become important in later life.
After receiving his bachelor's degree from Fordham in 1957, he left the area to briefly serve as a first lieutenant with the U.S. Army from 1958 to 1959. Upon discharge, he returned to Fordham and earned a law degree in 1964. For the next four years, he worked as an associate attorney with Hughes, Hubbard & Reed in New York City and then served as vice president and general counsel for Allied Artists Pictures, also in New York.
In 1970 Kuehn landed a job in the legal department of Southern Natural Resources of Birmingham, Alabama, a natural gas energy provider. Organized and disciplined, he became a rising star, particularly remembered for his low-key personality and nonthreatening manner in various legal negotiations. In 1981 Southern Natural was renamed Sonat, and within months Kuehn was named vice president and general counsel. The next year he was elected president, a position he held until the 1999 merger of Sonat with El Paso. Along the way, Kuehn also held concurrent positions as chief operating officer, chief executive officer (starting in 1983), and chairman (from 1986).
At Sonat, Kuehn handled the many ups and downs peculiar to the energy business with characteristic reserve. He weathered low natural gas prices by stepping up exploration and production (E&P), which added to the company's reserves and served the company well when gas prices again rose. The company struck out on a few E&P investments but also purchased Zilkha Energy in 1998 in an effort to boost its assets. Selim Zilkha would become both friend and foe to Kuehn in later years.
In 1999 the El Paso Corporation, another energy provider, announced plans to acquire Sonat in a highly negotiated stock-swapping measure intended to benefit both entities. The combined assets would mean control of 25 percent of all natural gas pipelines in the United States, making El Paso the largest natural gas pipeline company in the country. Although Kuehn officially retired at the time of the merger, the deal also established that he would serve as the nonexecutive chairman of El Paso until December 2000. In 2001 Kuehn, then semiretired, stayed on as lead director for El Paso.
With the purchase of Sonat, El Paso had entered the E&P area of the industry, and its E&P holdings were significantly enhanced when it acquired yet another company, Coastal Corporation, in 2001. When Enron crumbled in December 2001 (a company that El Paso had tried to emulate), the tides turned. In 2002 the California Public Utility Commission charged El Paso with intentionally holding back capacity on four pipelines from November 2000 to March 2001, contributing to an energy crisis and artificial rise in electricity prices that cost California residents an extra $3.3 billion. Soon the U.S. Attorney's office in Houston served subpoenas on El Paso and several other energy traders in an investigation of what is known as round-trip trades, swaps between two energy companies (e.g., electricity and natural gas) for the purpose of artificially manipulating price or inflating/deflating volume.
By mid-2003 El Paso's stock had fallen from around $70 a share (in early 2001) to a shocking $9.64 per share. Significant shareholder Zilkha (whose company Kuehn had bought just months before the Sonat–El Paso merger) accused Kuehn and others of mismanagement and started a shareholder uprising in June 2003 to overthrow El Paso's entire board of directors. At that time El Paso's chief executive officer resigned amid controversy, and the company announced that Kuehn would act as its interim chief "to provide strong leadership and stability."
With characteristic coolness and calm, Kuehn was able to diffuse the proxy contest with Zilkha by incorporating several of the recommendations voiced by the dissidents. The power struggle failed, but Kuehn began selling assets, cutting expenses, and paying off debt to maintain shareholder confidence. A permanent CEO, Douglas Foshee, took over in September 2003, but Kuehn remained as lead director on the board.
In February 2004, based on the findings of an independent review, El Paso announced that it had overestimated by 41 percent its gas reserves and would have to revise corporate financial statements from 1999 to 2003. Company stock fell to $7 a share. Although neither Kuehn nor other then-current senior executives were implicated in any wrongdoing, others were. Nonetheless, in April 2004 a class action lawsuit against El Paso was filed in a Texas federal court, naming Kuehn and several others as defendants. On behalf of shareholders, the suit charged (among other things) that Kuehn and others knowingly or recklessly had participated in grossly overstating in the company's oil-and-gas reserves, costing shareholders millions of dollars in lost revenues from falling stock prices.
See also entry on Sonat, Inc. in International Directory of Company Histories .
Carroll, Chris, "El Paso Energy–Sonat Deal Forms Pipeline Giant," Houston Business Journal , March 19, 1999.
Davis, Melissa, "El Paso Takes Aim at Past Abuses," TheStreet.com , May 3, 2004, http://www.thestreet.com/stocks/melissadavid/10157983.html .
"El Paso Corporation Board Names Ronald L. Kuehn, Jr. CEO and Chairman; CEO Search Continues," March 12, 2003, http://www.elpaso.com/press/newsquery.asp?sId=4117 .
Schlegel, Darrin, "Accidental CEO Places Himself in Line of Fire," Houston Chronicle , May 31, 2003.
—Lauri R. Harding