Big Four accounting firm Deloitte & Touche LLP and Reliant Energy Inc. will pay $75 million to settle shareholder class-action lawsuits that alleged that the electric company engaged in illegal trading to boost its stock value during the energy crisis of 2000 and 2001.
The lawsuits said that Reliant participated in a number of "round-trip" trades - arranging for the purchase and sale of stock from the same trader that appeared to boost the volume of trading activity and make it appear that the company had more business. Allegedly, the trades inflated Reliant's revenue and expenses by billions between 1999 and 2002. The company went public in April 2001.
Deloitte, which was also named as a defendant in the suits and audited Reliant's statements to the Securities and Exchange Commission, will pay $7 million. Reliant will pay $68 million in the settlement, which must be approved by a federal court in Texas. The company's director and officer insurance policies cover $61.5 million of the settlement, and Reliant will not admit to any liability on the part of the company or its directors and officers.
In May 2002, an internal review by Reliant revealed that it had likely engaged in round-trip trades, and in March 2003, Reliant's former head of risk management agreed to pay $25,000 as part of a settlement with the SEC.
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