Exelon, the Chicago-based utility giant had a problem last year. The company's profits came up short -- below the level needed to trigger huge bonuses for its executives. What did management in cahoots with its board of directors do? They fudged the books.

Elliot Blair Smith reports for Bloomberg News:

After Exelon Corp. (EXC) earned less than top executives needed to reach their annual cash bonus target last year, the board of directors provided a way to help bridge the gap: nonexistent profits.

The board tacked on six cents a share -- equal to $85 million -- that the Chicago-based power company never made, augmenting earnings solely for the purpose of calculating bonuses. Exelon said that it would have earned the sum except for a regulatory setback on electricity rates and that the pennies helped thousands of employees avoid smaller payouts.

The six cents helped executives receive their fourth above-target bonus in five years as the company's operating profits and its market value fell by more than half. Amid the slide, the board awarded more than $20 million in cash bonuses to top managers as tax-deductible "performance-based pay."

Exelon has tried to justify this maneuver by stating that the hypothetical (read that "fake") profit the board added to the 2012 bonus calculations this was made to offset unexpected rate decisions made by Illinois legislators that cut earnings by about six cents a share.

So a factor that negatively impacted earnings goes down the "memory hole" in order to enrich executives? Imagine if every business engaged in such fantasy. Retailers often blame bad weather for poor results. Do they cook the books to ignore poor results? Is that legitimate? No, of course not. Every business has to take lumps every now and then-as do workers. It is called "free enterprise".

Exelon also tried to justify this action by saying that managers have quite a load "keeping the lights on, keeping cities illuminated". Isn't that their job?

And they are already well-compensated.

Smith continues:

Former CEO John Rowe's incentive cash bonus grew almost 49 percent to $2.5 million from 2007 to 2011, his last full year in charge. His total annual compensation in 2011 was $11.7 million, 1 percent higher than in 2007. Rowe, who retired in March 2012, didn't respond to requests for comment.

The 68-year-old former executive collected more than $90 million in salary, bonuses and retirement pay through the end of his last five years with the company, filings show.

Sadly, there is nothing illegal about this action, according to IRS regulations. Sometimes what is most offensive is what is legal.

But it is certainly amoral at best and unethical. If Exelon was not filled with cronies and donors to Barack Obama he might be inclined to rail against such "fat cats".

But John Rowe was a major and early investor in the career of Barack Obama-and so were a group of executives and board members of Exelon. They are heavily invested in the destruction of the coal industry in America so that their company can enjoy outside profits from their nuclear powered utility. They would no longer face as much competition from utilities burning cheap coal. Exelon can charge higher prices to consumers (so maybe they won't have to rely on accounting shenanigans anymore).

I wrote about this cozy example of crony capitalism involving Exelon both at American Thinker and very recently for Capital Research, the highly-regarded think tank in Washington that focuses on free enterprise issues.

Hat tip: Peter von Buol