The Court approved the Settlement after a hearing held on July 14, 2006, and entered an Order and Final Judgment dated July 17, 2006.
According to a press release dated May 18, 2006, pursuant to Rule 23 of the Federal Rules of Civil Procedure and an Order of the Court, that the above-captioned action has been certified as a class action and that a settlement for $15,050,000 has been proposed. A hearing will be held before the Honorable Andre M. Davis in the United States District Court, Garmatz Federal Courthouse, Suite 4415, 101 West Lombard St., Baltimore, MD 21201, at 11:00 a.m., on July 14, 2006 to determine whether the proposed settlement should be approved by the Court as fair, reasonable, and adequate, and to consider the application of Plaintiffs' Counsel for attorneys' fees and reimbursement of expenses.
In a press release dated September 30, 2005, Allegheny Energy Inc. (AYE) has agreed to settle a consolidated securities class action lawsuit pending against the company and certain former officers, according to a regulatory filing Friday. Under the proposed settlement, the action will be dismissed with prejudice in exchange for $15.05 million in cash, which will be made by the utility holding company's insurance carrier. Allegheny also said it will settle related shareholder derivative actions for $450,000, also to be paid by insurance. In addition, the company agreed to adopt certain corporate governance changes.
Several, similar purported class action law suits were also filed in the U.S. District Court for the District of Maryland. On April 22, 2003, class action lawsuits that were filed in the U.S. District Court for the Southern District of New York were Ordered to be transferred to the District of Maryland, managed under Multi-District Litigation.
On March 16, 2001, Allegheny Energy's subsidiary Allegheny Energy Supply Company, LLC ("Allegheny Energy Supply") announced that it completed its acquisition of Global Energy Markets ("G.E.M.") from Merrill Lynch & Co., Inc. ("Merrill Lynch"). The complaint alleges that Allegheny Energy made false and misleading statements during the Class Period in that it omitted to state that its revenues (and revenue guidance) materially depended, on illusory, revenue
creating, "wash transactions" with Enron, and other deceptive energy trading
practices. At no point did Allegheny Energy disclose to the investing public
that: (i) the surge in its revenues was attributable to G.E.M.'s practice of
engaging in deceptive and illusory trades; and (ii) that after the Enron story
broke, Allegheny Energy could no longer engage in these deceptive trading
practices as successfully, and that revenues would drop as a result. On September 25, 2002, the Company sued Merrill Lynch for fraud and breach of
contract related to the G.E.M. acquisition. In that lawsuit, Allegheny Energy
alleged that it overpaid for G.E.M. because the unit's financial reports had
been inflated by sham trades involving Enron. The Company admitted that G.E.M engaged in a significant amount of wash or round trip energy trades with Enron, and perhaps others. The Company further admitted that the effect of those trades was to artificially inflate revenues, trading volumes and growth rate. The Company's September 25, 2002 admissions set a chain of events in motion, which would result in the Company's stock's tumble from a high of $12.85 on September 25, 2002 to $3.80 on October 8, 2002 -- a drop of $9.05, or 70%. On October 1, 2002, Moody's downgraded Allegheny Energy's credit to junk status. The Company, in a press release, reassured investors that this would not trigger any default or prepayment of the firm's debt. A week later, on October 8, 2002, the Company announced that it was in technical default under its credit agreements.