US Blackout 'Culprit' Sued By Shareholders Over Earnings Restatement

by Mike Godfrey, for LawAndTax-News.com, Washington

22 August 2003

It emerged this week that following a restatement of its earnings for 2002 and the first quarter of 2003, FirstEnergy, the electricity company which is being blamed for last week's massive blackout in the United States, is facing lawsuits from shareholders who claim that the firm artificially boosted its share price by overstating its profits.

When FirstEnergy decided to change auditors following the collapse of Enron, moving from disgraced Arthur Andersen to PricewaterhouseCoopers, certain costs associated with the company's 2001 acquisition of GPU Inc were found to have neen wrongly interpreted, which necessitated the restatement.

According to reports, FirstEnergy's profits for 2002 were reduced by $76.5 million to $552.8 million, with its Q1 profits taking a $22.5 million drop.

However, the firm has dismissed the shareholder lawsuits as 'opportunistic'. Speaking to the international media this week, a spokeswoman for FirstEnergy explained that:

'Few of these suits are ever successful. The restatement was not because we weren't reporting properly but because of an interpretation of complex accounting rules.'

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