Judge allows most of Allegheny’s claims to stand against Merrill
NEW YORK (Dow Jones/AP) – In a setback for Merrill Lynch & Co., a federal judge said a majority of Allegheny Energy Inc.’s counterclaims against the investment bank over the sale of Merrill’s energy-trading business could go forward. U.S. District Judge Harold Baer, Jr. in Manhattan also refused Monday to strike Allegheny’s effort to seek punitive damages in the case.
Merrill Lynch and Allegheny sued each other last year over the sale of Global Energy Markets, Merrill’s energy-trading business. Allegheny bought Global Energy Markets for $490 million in cash and an equity stake in Allegheny Supply.
In an opinion issued Monday, Baer said he was unwilling to conclude that Allegheny was unreasonable in relying on representations by Merrill Lynch before it agreed to acquire Global Energy Markets in 2001.
In its lawsuit, Hagerstown, Md.-based Allegheny has charged it was mislead before buying the energy-trading business.
Baer also said it was difficult for him to see how information about alleged “sham” trades conducted for Enron Corp. by Global Energy Markets wouldn’t be an important factor for Allegheny to evaluate the unit’s trading positions and operations, even if those trades were canceled.
In its counterclaim, Allegheny has charged that Merrill Lynch assisted Enron in making several million dollars from sham energy trades in 1999 – trades that were later unwound.
A Merrill Lynch spokesperson couldn’t immediately be reached for comment.
AP-ES-11-25-03 1501EST