American Electric Power (AEP) reported Monday that two separate shareholder derivative cases against the company and individual members of its board of directors were dismissed Nov. 5. The cases charged that the defendants failed to maintain adequate internal controls over their natural gas trading operations.

AEP said that attorneys for the plaintiffs agreed to dismiss the claims, filed in Franklin County, OH in a common pleas court in November and December 2002, that alleged a breach of fiduciary duty by AEP’s board of directors.

The claims followed AEP’s disclosure in October 2002 that it had discovered that five natural gas traders had reported inaccurate information about natural gas trades to industry publications. As a result of the discovery, AEP discovered the inaccurate data reporting, immediately fired the five natural gas traders, and reported the traders’ activities to the appropriate regulatory agencies.

“We strongly believed that the allegations in these cases were without merit and we were prepared to aggressively defend ourselves in court,” said Michael G. Morris, AEP’s CEO. “We’re pleased that the plaintiffs apparently recognized that their cases were not strong and decided not to pursue them.”

The dismissal of the two cases in state court comes on the heels of a September decision by Judge Algenon L. Marbley of the U.S. District Court for the Southern District of Ohio to dismiss with prejudice all claims brought against AEP and individual defendants in 11 cases related to the reporting of natural gas data that were consolidated in the case of The Albert Fadem Trust v. American Electric Power (see Daily GPI, Sept. 14).

In September, Marbley dismissed 11 securities lawsuits that alleged five gas traders for AEP had filed inaccurate reports about gas trades to price index publications. The court concluded that there were no actionable misstatements or omissions in any of AEP’s filings with the Securities and Exchange Commission or other public disclosures, the Columbus, OH-based energy company said. The court also found in favor of all current and former directors and officers of AEP named as defendants in the lawsuits, dismissing all claims of securities violations against them.

Still pending, however, is a $300 million lawsuit brought by the Commodity Futures Trading Commission (CFTC) against AEP and its subsidiary AEP Energy Services Inc. in the same Ohio district court for false reporting of gas trades to index publishers. The case, which was filed in September 2003, was the first civil case brought by the CFTC against a company charging attempted gas market manipulation through false price and transaction reporting.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.