Mirant Corp. reported Thursday it overstated its net income from 1999 through the first half of this year by $41 million, but it said an independent review of its books found no fraud was committed by the company. The Atlanta-based company also revealed that the Department of Justice is looking into its energy trading practices and certain accounting matters.

The power producer and natural gas marketer said its actual net income for the period in question was approximately $1 billion. It noted the $41 million error was caused by a $10 million understatement during the first six months of 2002 and an overstatement of $51 million from 1999 through 2001. This included a major correction to a natural gas inventory asset and accrued revenues during 2001.

Revisions to Mirant’s reported net income for the first and second quarters of this year were reflected in 10-Q filings submitted to the Securities and Exchange Commission (SEC) Thursday. The company cut its first-quarter loss to $6 million from its previously reported $42 million, and increased its loss for the second quarter to $220 million from an earlier-reported loss of $152 million.

“The company regrets these errors and uncertainty they may have caused our investors, employees and other stakeholders,” said Mirant President and CEO Marce Fuller. “Importantly, the net effect of the errors was modest relative to our overall results and financial condition during the period.”

Mirant said it has asked its independent auditors to re-audit its 2000 and 2001 financial statements to determine precisely when the accounting errors occurred, and to offer an opinion on the financial results for both years. The company noted it expects to restate its financials for either or both 2000 and 2001, and possibly interim periods, following the re-audit. It said it does not believe the re-audit can be completed until it files a 10-K for 2002.

Mirant noted it plans to submit a 10-Q on its third quarter financial statements to the SEC in early December.

The independent review by the law firm of King & Spalding found “no fraudulent conduct associated with the previously disclosed accounting issues,” according to Mirant’s press statement. “The accounting errors have not changed the company’s strong liquidity position, which stood at approximately $1.5 billion as of Nov. 1,” it noted.

Mirant stock tumbled 5.78% to trade at $2.77/share in the wake of the company’s announcement.

In addition to the Justice Department’s inquiry, Mirant’s trading/pricing practices are being investigated by the Federal Energy Regulatory Commission, SEC and Commodity Futures Trading Commission (CFTC). The SEC’s Division of Enforcement “has asked for information and documents relating to various topics such as accounting issues…; energy trading matters (including round trip trades); Mirant’s accounting for transactions involving special purpose entities; and information related to shareholder litigation,” the company said in the 10-Q filings.

The CFTC requested “information about a small number of buy and sell transactions occurring during 2001. The company provided information regarding such trades to the CFTC in mid-August, none of which it considers to be wash trades. The CFTC subsequently requested additional information, including information about all trades conducted on the same day with the same counterparty that were potentially offsetting during the period from Jan. 1, 1999 through June 17, 2002,” Mirant told the SEC.

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