Avista Corp. has agreed to a $9.5 million settlement to end a class action lawsuit filed by investors five years ago who alleged the company and senior executives engaged in fraud and other securities law violations.
The pending settlement, announced this week, needs the approval of U.S. District Judge Fred Van Sickle of Spokane.
Avista denies the core allegations of the lawsuit originally filed in September 2002 that it failed to disclose its role in electricity trades between Enron Corp. and Portland General Electric, an Enron subsidiary at the time.
The lawsuit was filed by several plaintiffs on behalf of all shareholders who purchased stock between Nov. 23, 1999 and Aug. 13, 2002. It was dismissed by a judge, but then re-filed in 2005.
“We did not admit any wrongdoing, but we’re glad to get this over,” said Hugh Imhof, a company spokesman.
The suit followed a tumultuous time when Avista’s utility unit lost more than $100 million on energy trades. Plaintiffs alleged that the actions of executives and the company artificially inflated the company’s stock price. It had traded at $66 a share in January of 2000 but sank to $11 a share that summer.
Insurers will pay all of the settlement costs, legal fees and expenses. Avista is responsible for paying a $1 million deductible. The settlement will have no impact on rates, Imhof said.
The settlement would erase claims against the company as well as against former chairman and CEO Thomas Matthews, the brash Texan hired in 1998 who moved quickly to drastically cut the company’s dividend payments, rename the venerable Washington Water Power as Avista, and guide the company into the deregulated electricity markets.
Gary Ely, chairman and chief executive officer, and Jon Eliassen, a former senior vice president and chief financial officer, also will have their names dropped from the lawsuit.
Settlement negotiations began last fall and the sides made progress with a federal mediator in January.
A second round of mediation in April led to an agreement in principle to settle the suit.
During the time period in question, Matthews, Ely and Eliassen were not trading large amounts of stock, according to court records, a factor that showed the executives did not enrich themselves by cashing in before the stock price tanked.
In a prepared statement, Avista said it agreed with the settlement to avoid the risk of trial and protracted legal costs.
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