Spokane, WA-based Avista Corp announced it has agreed to a $9.5 million settlement to end a class action lawsuit field by investors five years ago alleging that the company and senior executives committed fraud and other securities law violations. The deal still need to be approved by U.S. District Court Judge Fed Van Sickle in Spokane.
The case involves Avista's role during the 2000-2001 energy crisis with units of Enron Corp, including its then-affiliate utility, Portland General Electric (PGE). Avista denies the core allegation of the lawsuit that was filed in September 2002, that Avista failed to disclose its role in electricity trades with Enron and PGE.
The lawsuit was filed by several plaintiffs on behalf of all Avista shareholders who purchased stock between 1999 and 2002. It was dismissed by the judge, but subsequently refiled in 2005. In reaching the settlement, Avista did no admit any wrongdoing, according to a spokesperson.
This legal action came following the unsettling western wholesale energy market meltdown, during which Avista's utility lost more than $100 million on energy trades. Plaintiffs alleged that the action by Avista executives artificially inflated the company's stock price. (It traded at more than $60/share in January 2000 and dropped to $11/share by the summer of that same year.)
Saying the settlement will have no impact on Avista's utility rates, a spokesperson said insurers will pay all of the settlement costs, legal fees and expenses; Avista will pay a $1 million deductible. The settlement would eliminate claims against Avista and against its former CEO Tom Matthews, a Texan hired to change (and rename) the old Washington Water Power Co. and guide its into deregulated electricity markets.
Current Avista CEO Gary Ely and a former CFO, Jon Eliassen, will both have their names removed from the lawsuit if the federal district judge approves the deal as is expected. Settlement negotiations had begun last fall, and a federal mediator entered the picture in January 2007, helping get to this month's settlement.
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