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Allegheny to appeal court-ordered payment

July 27, 2005|by DANIEL J. SERNOVITZ

Allegheny Energy Inc. is preparing an appeal to the U.S. Court of Appeals in the Southern District of New York in an effort to overturn a federal judge's ruling the Greensburg, Pa.-based utility company must pay Merrill Lynch & Co. $115 million plus interest for its 2001 purchase of Merrill's energy trading units, company spokesman Allen Staggers said.

"That's not something that's likely to happen imminently but it is likely to be filed within the next couple of months," Staggers said. "We intend to do it, but it hasn't been done yet."

Allegheny initially paid $490 million for Merrill's Global Energy Markets unit, according to court documents available through the Web site of the federal court for the Southern District of New York. In 2002, Merrill sued Allegheny for breach of contract in an effort to collect $115 million the utility company still owed in connection with the sale. Allegheny countersued, claiming Merrill misled Allegheny about the energy trading unit's revenues. In its suit, Allegheny sought to collect the $490 million it paid Merrill for the energy trading unit.

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Following the sale, Global Energy Manager Daniel Gordon pleaded guilty in 2003 to fraud amid allegations he lied about company finances, according to news accounts. Gordon is scheduled to be sentenced in August, according to news accounts.

On July 19, U.S. District Judge Harold Baer sided with Merrill and said Allegheny had ample opportunity to review the unit's revenues during four months of due diligence. Baer dismissed Allegheny's fraud countersuit and ordered the company to pay Merrill the outstanding balance plus interest as part of the sale.

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