Lawsuit alleges AEP withheld information

Two days after American Electric Power Co. Inc. returned Unit 2 of its Cook nuclear plant to service after a 33-month shutdown, a federal lawsuit was filed on behalf of shareholders alleging that AEP withheld accurate information and distorted the facts about the nuclear plant�s true condition during the outage.


Two days after American Electric Power Co. Inc. returned Unit 2 of its Cook nuclear plant to service after a 33-month shutdown, a federal lawsuit was filed on behalf of shareholders alleging that AEP withheld accurate information and distorted the facts about the nuclear plant�s true condition during the outage.

The complaint, filed June 27 in US District Court for the Eastern District of New York seeks class action status for shareholders who bought stock between July 25, 1997 and June 25, 1999.

�We have not been served as yet with the complaint,� says Pat Hemlepp, AEP spokesman. �But we�re confidant we made appropriate disclosures related to the Cook plant.�

The plant had been shut down for almost 3 years for a series of repairs and steam generator problems. According to the complaint, press releases indicated that �while the defendants were predicting near-term restart dates the company knew or disregarded that the problems affecting D.C. Cook were so severe that the board of directors was considering abandoning the plant entirely.�

Plaintiffs argue that the campaign to distort and withhold information was intended to insure the merger with Central and South West Corp. of Dallas was approved by shareholders.

Specifically, the suit says, �Defendants knew the plant was in substantial violation of its design documentation requirements, having consistently failed to properly memorialize modifications in design and safety, and as result of these reporting compliance failures, it was likely that the Nuclear Regulatory Commission would not allow D.C. Cook reactors to restart from any shutdown until all defects were cured.�

Once the merger approval was secured, the lawsuit alleges that the company released a more accurate picture of the Cook nuclear plant problems June 25, 1999. After that disclosure, AEP�s stock price lost 8% of its value in 1 day and has stayed in the low $30/share range below the $40/share range where it had consistently traded. The plaintiffs are represented by the New York law firm of Milberg Weiss Bershad Hynes & Lerach LLP.

Investors reacted negatively to the news sending the stock value down by 4.43% to close at $31/share Tuesday. �AEP underperformed the group that was also down by 2.5%,� says Paul Freemont, analyst with Jefferies & Co., New York. �It�s hard to say if this lawsuit is having a very negative impact on the stock now.�

Freemont says many things will have to go against AEP at the same time for the lawsuit to have a significant future financial impact on the stock.

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