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Southern Caught Up In Mirant Problems

Nov 27, 2002 | Atlanta Journal-Constitution

Southern Co. has become more entangled in the legal troubles of its one-time subsidiary Mirant Corp.

The Atlanta-based utility holding company has been named a co-defendant in a shareholder lawsuit alleging Mirant engaged in "fraudulent practices" in California's distressed electricity markets.

Southern two weeks ago reported it had received a subpoena from a federal grand jury investigating the role Mirant and other electricity suppliers may have played in California's electricity crisis in 2000 and 2001.

Now, a lawsuit in U.S. District Court in Atlanta disclosed by the company Tuesday seeks to hold it liable for Mirant's practices because of its "direct involvement in the day-to-day operations."

Southern spun off Mirant into a separate publicly traded company in April 2001, following an initial public offering of Mirant stock in September 2000.

Todd Terrell, a spokesman for Southern, said the claims in the lawsuit against his company are "completely without merit," and company officials will "defend ourselves vigorously."

"We don't think they have a case against Southern Co.," he said. "At no time did Southern Co. direct or control Mirant's energy-trading activity in California."

The lawsuit, which is before U.S. District Judge Beverly Martin, represents a consolidation of 17 separate shareholder lawsuits that have been filed against Mirant in the federal court. The suit seeks class-action status to represent "thousands" of Mirant shareholders and unspecified damages.

The lawsuit alleges Mirant misled investors, conspired with competitors to manipulate California's electricity markets and used illegal tactics pioneered by Enron Corp.

David Payne, a spokesman for Mirant, said the "bulk of claims" is based on allegations included in pending lawsuits in California and the Federal Energy Regulatory Commission.

"Mirant will vigorously defend its actions and reputation," he said.

It's not clear whether the charges will stick to Southern. Mirant released Southern "from any liabilities occurring on or before" a September 2000 separation agreement.

"While the outcome of the latest investigations remains hard to predict," Merrill Lynch analysts said in a research report last week, "our reading of the separation agreement suggests that the buck ultimately stops with Mirant."

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