Mirant’s Books Investigation. The Securities and Exchange Commission has begun an informal inquiry into possible accounting mistakes at energy trader and marketer Mirant Corp., the latest blow to the troubled energy sector.
The inquiry was prompted by the Atlanta-based company’s disclosure last week that it might have misstated $253 million in assets and liabilities in 2001.
Mirant said Monday that the SEC review was not a surprise.
“When companies report accounting issues, informal inquiries from the SEC usually follow, especially in this day and age,” Doug Miller, senior vice president and general counsel for Mirant, said in a statement.
As part of its inquiry, the SEC has requested additional information about Mirant’s recently disclosed shareholder litigation, any round-trip trades involving the company, and the Federal Energy and Regulatory Commission’s investigation into energy-trading practices in the western United States.
Round-trip trades involve two parties swapping the same amount of power for the same price. It can be used to artificially inflate revenue on a company’s income statement.
trading and accounting practices
Mirant’s rivals — including Dynegy Inc., Duke Energy Corp. and Reliant Resources Inc. — also have come under scrutiny for their trading and accounting practices.
Mike Worms, an analyst from Gerard Klauer Mattison & Co., played down the damage to the sector from such trades.
“Obviously there has been some round-trip trading, but when you consider the amount of transactions, it’s really a very small percentage of the total,” he said. “Most of these companies are quickly rectifying the problem.”
“Other than the accounting issues, what’s really hurting them is extremely depressed energy prices. This is hurting most of the companies in the industry.”
Mirant, which reported a $151 million second-quarter loss last week, lowered its financial targets for next year because of ongoing turmoil in the energy sector.
When Mirant first announced the possible accounting mistakes when it reported second-quarter results July 30, investors shrugged off the news and sent the stock up 34 percent. However, in trading Monday on the New York Stock Exchange, Mirant shares fell 56 cents, or 16 percent, to close at $2.93.
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