A recently filed lawsuit seeks more than $5 million in restitution from defunct accounting firm Arthur Andersen, for creditors of a failed energy company who modeled its business on bankrupt energy giant Enron Corp.
In a lawsuit filed by creditors of Mirant Corp. -- now two years into Chapter 11 bankruptcy -- the group claims Andersen misled both the public and Mirant's management about the company's finances. The suit alleges that Andersen failed to investigate a number of problems and gave Mirant a good fiscal review, despite a number of red flags found in the energy company's own internal reports.
Many of the same allegations included in a $2 billion lawsuit filed in June against its former parent company, Southern Co., are also included in the suit again Andersen. Mirant said it inherited crippling levels of debt based on overpriced acquisitions, and alleges that Southern knew Mirant was essentially insolvent at the time in went public in 2001. Southern has said the lawsuit has no merit and should file its first official reply in August.
The suit against Andersen alleges the accounting firm had Mirant's trading operation overstate revenue and income, had material weaknesses in its accounting controls and kept two sets of books about trades, each containing different figures.
Last week, Andersen agreed to pay $25 million to the shareholders of Global Crossing, a telecommunications company that failed in 2002.
