Allegheny Energy Inc. is suing Merrill Lynch & Co. over the Maryland utility’s purchase last year of Merrill’s energy trading unit, accusing the financial giant of misrepresenting the unit’s trading volume, revenues and growth so it could unload the division.
Allegheny, based in Hagerstown, Md., said Merrill Lynch’s New York-based Global Energy Markets group engaged in “wash” trades with Enron to artificially boost revenues, trading volumes and growth rates.
The suit, filed in New York state court Wednesday, said the trades “allowed Merrill Lynch to fob off its energy trading business to Allegheny Energy for far more than it was worth.”
Allegheny paid about $490 million and gave Merrill Lynch a 2 percent stake in Allegheny Energy Supply LLC, Allegheny’s unregulated power-generating subsidiary.
“Using its Enron trades, Merrill Lynch painted a false portrait of its energy trading business and its ongoing prospects, and has saddled Allegheny Energy with tarnished goods,” said Stanley A. Arkin, Allegheny’s attorney.
Merrill Lynch said in a statement that Allegheny was seeking to revise the deal since the energy trading business has faltered so badly since the sale, Dow Jones News reported.
The lawsuit comes a day after Merrill Lynch sued Allegheny, alleging that the company has failed to pay $115 million still owed from the sale.