SEC announces inquiry into possible Mirant accounting mistake

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Posted 10:35AM on Monday, August 5, 2002

ATLANTA - Energy trader and marketer Mirant Corp. announced Monday that the Securities and Exchange Commission has made an informal inquiry into possible accounting mistakes the company acknowledged last week. When reporting second-quarter earnings, Mirant said it might have overstated the value of certain assets and a liability in 2001. The accounting overstatement related to a debt of $100 million, $85 million in natural gas inventory and $68 million the company expected to collect. Mirant executives said they were investigating the issue and that any restatement related to the accounting error is not expected to affect 2002 earnings. Mirant said the SEC review was not a surprise. "When companies report accounting issues, informal inquiries from the SEC usually follow, especially in this day and age," Doug Miller, senior vice president and general counsel for Mirant, said in a statement. The Atlanta company, which reported a $151 million second-quarter loss last week, lowered its financial targets for next year because of ongoing turmoil in the energy sector. When Mirant first announced the possible accounting mistakes Tuesday, investors shrugged off the news and sent the stock up 34 percent to close at $3.96 on the New York Stock Exchange. Shares were down 35 cents, or about 10 percent, to $3.14 in early trading Monday. As part of its inquiry, the SEC has requested additional information about Mirant's recently disclosed shareholder litigation, any round-trip trades entered into by or on behalf of the company, and the Federal Energy and Regulatory Commission's investigation into energy-trading practices in the western United States.