According to the Company’s FORM 10-Q For The Quarterly Period Ended September 30, 2004, the Court appointed a lead plaintiff who filed a Consolidated Amended Complaint. The Company filed a Motion to Dismiss the Consolidated Amended Complaint. Also, in the first quarter of 2003, a lawsuit making essentially the same allegations and demands was filed in state Common Pleas Court, Columbus, Ohio against AEP, certain executives, members of the Board of Directors and the Company’s independent auditor. The Company removed this case to federal District Court in Columbus and the Court denied plaintiff's motion to remand the case to state court. In September 2004, the U.S. District Court Judge dismissed the cases and expressly denied the plaintiffs' request for an opportunity to file amended complaints with new or revised allegations. Plaintiffs did not appeal this decision.

The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between April 24, 2001 and October 9, 2002, thereby artificially inflating the price of AEP securities. Throughout the Class Period, as alleged in the complaint, AEP issued materially false and misleading statements regarding its increasing energy trading revenues and earnings. As alleged in the complaint, these statements were materially false and misleading because they failed to disclose, among other things, that: (i) the Company failed to implement appropriate risk management procedures regarding information provided to trade publications; (ii) as a result of this failure to implement appropriate risk management procedures, the Company was manipulating price indices used throughout the industry; (iii) as a result of this manipulation, the Company gained revenue and profits that it could not maintain absent manipulation; (iv) without improper manipulation, the Company could not successfully maintain its energy trading business; and (v) as a result, the energy trading business was not the business opportunity that the Company presented throughout the Class Period. On October 9, 2002, the last day of the Class Period, AEP announced that it had fired five of its thirty natural-gas traders, who AEP stated had given false gas pricing data to index publishers. While AEP acknowledged that its traders had not been engaged in "ethical business practices," it claimed that it did not know whether the false data affected the published indices. In fact, no one at AEP asked any of the fired traders why they engaged in the fraudulent activities. As alleged in the complaint, by making this announcement, AEP was essentially admitting that it had failed to institute appropriate oversight measures to prevent the wrongful activity, and by doing so, was able to make substantial profits from its energy selling activities.