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Mirant Corp. shareholders have filed 20 federal suits accusing the Atlanta-based firm of manipulating California electricity prices to reap illegal profits and artificially inflate its stock. The suits, all filed since May in Atlanta and California, claim the energy company broke federal antitrust laws to boost California’s electricity prices to record highs in 2000 and 2001 and reaped billions in profits for Mirant and a dozen other companies that marketed electricity there. They also helped boost Mirant stock prices to a high of nearly $50 a share in 2001. The shareholders’ suits began surfacing in federal court in Atlanta less than two months after California’s state attorney general filed the first of three suits against Mirant in U.S. District Court in San Francisco. Those suits all claim that Mirant violated federal antitrust laws by limiting electricity sales in California during periods of high demand in order to drive up prices, sometimes by as much as 100 percent to 200 percent. The suits also accuse Mirant of illegally dominating the electric power market in Northern California through its ownership of the region’s major power plants. Now the company faces demands that it disgorge millions of dollars in profits to the state of California. Mirant has sought to dismiss the attorney general’s litigation, claiming that its entry into the California energy market expanded rather than reduced competition. The market historically had been dominated by Pacific Gas & Electric Co., which had held a monopoly on power generation in the state. Moreover, the company’s California attorneys argue, the California Public Utilities Commission — while deregulating the state’s electric power market — approved Mirant’s power plant purchases in northern California as an “environmentally superior alternative.” In doing so, state regulators “consciously rejected the option of having this portfolio of three generating plants sold piecemeal to separate firms,” Mirant lawyers argue in court briefs. Only the Federal Energy Regulatory Commission, not the state or federal courts, has the authority to determine whether rates Mirant charged for wholesale — as opposed to retail — power were “just and reasonable,” Mirant lawyers say. The California litigation and parallel investigations by the California Public Utilities Commission, the California Senate and the Federal Energy Regulatory Commission have helped to drive down Mirant’s stock prices to less than $4 a share. Mirant’s stock closed at $3.67 on Thursday. ENTRY TO CALIFORNIA Mirant entered the California power market in 1999 as Southern Energy Inc., a subsidiary of the Atlanta-based international power conglomerate Southern Co. Its introduction to California coincided with the state’s ongoing efforts to deregulate its electric power market. Mirant is now, according to court records, the sixth-largest power supplier in California. In September 2000, Mirant became an independent, publicly held company. According to the company Web site, Mirant is the 13th-largest owner of power generation plants in the United States. It also brokers and markets energy and energy-related commodities such as electricity, natural gas, coal and oil. On Tuesday, Mirant reported a net loss of $151 million for the second quarter, compared with net income of $124 million in the year-earlier period. The company attributed the loss to a $284 million after-tax write-down to reflect its revised value in a British utility. The company also reported that it is reviewing its 2001 financial statements, which it concedes overstated assets by $253 million — “a fraction of Mirant’s $22.8 billion balance sheet reported as of year-end 2001.” A company statement quoted Mirant President and Chief Executive Officer S. Marce Fuller as saying, “[A]ny mistakes were made honestly.” ‘QUARTER AFTER QUARTER OF … GROWTH’ The shareholder suits are linked to Mirant’s California business dealings. According to one shareholder suit filed in U.S. District Court in Atlanta, Mirant stockholders claim they were deceived by company executives who “announced quarter after quarter of outstanding growth, and assured investors that problems in the California market had been properly accounted for,” despite the ongoing investigations. In fact, the suit claims, Mirant grossly overstated earnings by failing to disclose to stockholders “that the illegally obtained revenue [from California] was subject to forfeiture and that investigations surrounding the illegally obtained revenue would result in the expenditure of material amounts for legal and professional fees.” Russo v. Mirant, No. 1:02-cv-1991 (N.D. Ga. July 18, 2002). Stockholders are seeking class status. “Suspect transactions” in which Mirant allegedly was involved exceed $2 billion, according to the complaint. The suits also name as defendants Fuller, Mirant Chief Financial Officer Raymond Hill, executive vice president and CEO of Mirant North America, Richard Pershing; and Principal Accounting Officer James A. Ward. On Wednesday, Mirant spokesman David C. Payne called the shareholder claims “completely without merit.” “We intend to vigorously defend our actions and our reputation,” he said. Payne said that Mirant has hired Alston & Bird in Atlanta to defend the company. He said the company has not filed any formal response to the shareholder allegations. Chitwood & Harley partner Martin D. Chitwood, whose firm is representing the shareholders in most of the suits, declined to answer questions about the shareholder litigation, citing federal court rules in California that restrict attorneys from publicly commenting on potential class litigation. Attorney Corey D. Holzer of Atlanta’s Holzer & Holzer, whose firm also has filed several suits on shareholders’ behalf, could not be reached for comment. The shareholder suits allege that executives were aware the antitrust and price-manipulation investigations that began swirling around Mirant in 2000 eventually would find the company had violated antitrust law — a revelation that was likely to jeopardize company stock prices. On March 1, 2001, the California agency that maintained operational control of the state’s power transmission lines alleged in a report that power generators, Mirant among them, had overcharged the state $6.2 billion for electricity sold in California during 2000, according to court records. Several days later, the Federal Energy Regulatory Commission ordered 13 generating companies, including Mirant, to refund $69 million to California utilities or justify prices that had risen as high as $273 per megawatt hour. Less than a month later, Mirant executives Hill, Ward, Fuller and Pershing began selling stock, the shareholder suits allege. Between March 28 and May 1, 2001, the foursome sold stock totaling $8,267,746 for as much as $40.80 a share in multiple transactions, according to one of the suits. CALIFORNIA AG SUITS During that same period, California Attorney General Bill Lockyer had sought — and then subpoenaed — corporate documents from Mirant related to “possibly unlawful or anti-competitive behavior” that might have affected the state’s electricity prices. On May 22, 2001, the company finally agreed to give the state attorney general the documents he had first requested months earlier and, thus, avoided a public hearing regarding their failure to release the requested documents, according to a shareholder suit. Ten months later, Lockyer sued Mirant and three other energy companies then dominating the California energy market and demanded $150 million in penalties for alleged price-fixing and other violations. The case was removed from state court to federal court in April. Lockyer v. Mirant, No. 3:02-cv-1787 (N.D. Calif. April 15, 2002). That same month, Lockyer filed two more suits against Mirant. In one, he asks a federal judge to order Mirant and another energy company to relinquish ownership of their California power plants “to end their illegal control of electricity supplies used to drive up prices in California’s recent energy crisis.” In the other suit, he seeks more than $1 billion in fines from four energy companies, including Mirant Those cases have been also removed to federal court. Lockyer v. Mirant, No. 3:02-cv-2207 (N.D. Calif. May 5, 2002). But Mirant’s Payne insisted, “Wherever we operate, we operate legally. We have not broken any laws and we will defend ourselves and our actions and our reputation.”

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