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When Montana Power sold it power plants (to PPL) to go into the fiber optic business their stock rose from around 20 to 72 (before they had the stock split). The shareholders had their chance to sell their shares and pocket a handsome profit. Now because it didn't work out and the stock dropped precipitously they want to sue for the money they lost. Of course, no one was filing a lawsuit when the shareholders were tripling their money.

Lawsuit seeks to void sale by MPC
Gazette State Bureau

HELENA — A lawsuit Thursday asked a Butte district court to nullify Montana Power Co.'s 1999 sale of its generating plants to PPL Montana because shareholders didn't get to vote on the deal, which has left the Butte company on the brink of financial ruin and cost shareholders $3 billion in lost stock value.

Six of the state's premier trial lawyers filed the class-action lawsuit on behalf of eight Montana Power shareholders against Montana Power; its top officers; its board of directors; PPL Montana, which bought the generators; and some unnamed consultants that allegedly helped plan the MPC strategy. The lawsuit was filed before District Judge Kurt Kruger of Butte on behalf of MPC shareholders.

It is the latest episode in the long saga since Montana Power Co. led the charge to get the 1997 Legislature to pass a controversial law that restructured and partially deregulated electric utilities in the state.

Montana Power's stock has been in a near free-fall in recent months, the latest drop came after the company announced on Aug. 1 that it had lost nearly $11 million in the second quarter. It has dropped from $35.75 in December 1999 when the PPL sale was consummated and closed Thursday at $7.02 a share.

The lawsuit was filed less than a month before Montana Power's Sept. 14 meeting in which shareholders will be asked to approve the sale of its electricity and natural gas transmission and distribution lines to NorthWestern Corp. of Sioux Falls, S.D., the final piece in MPC's sale of nearly all of its assets. That would allow Montana Power to transform itself into its telecommunications subsidiary, Touch America, and assume its name, while NorthWestern will keep the Montana Power name for its operations in the state.

The complaint charges that Montana Power directors' breach of its financial duty to shareholders has led to a $3 billion loss in stock value and seeks full compensation for shareholders for the loss.

The complaint also seeks reimbursement for the dissenting shareholders' rights of the $3 billion loss of value of Montana Power's stock from the individual members of the utility's board of directors and the unnamed consulting firms that helped advise Montana Power to sell its dams and power plants to PPL Montana in December 1999 without a vote of shareholders.

It also asks the court, if it doesn't nullify the MPC-PPL sale, to establish a trust fund with all of the profits that PPL has illegally made from the former MPC generating assets. That money would go to Montana Power to help pay the obligations sought by the lawsuit. Through the first six months of 2001, PPL Montana reported profits of $100 million.

Spokesmen from both Montana Power nor PPL Montana declined to comment until they have seen the lawsuit.

“We'll study the suit and will defend our corporations vigorously,” Montana Power spokesman Cort Freeman said.

The lawsuit alleges that Montana Power directors violated their financial duty to run the company prudently.

“Defendant Montana Power Co. has risked bankruptcy of the company by creating a situation where it has no generating capacity and will have to purchase its customers' utility needs on the open market paying a price for such product that cannot be passed along to consumers,” the lawsuit says. “Defendants' action violated Montana statutory law and constituted a breach of fiduciary duty.”

Montana Power has been buying power for its 288,000 residential and commercial customers at below-market prices from PPL as a condition of the deal, but that contract ends June 30, 2002. After that, Montana Power must enter the open market to buy power for its customers and won't necessarily have the native supply of electricity to rely on.

The lawsuit said Montana law requires a company selling substantially all of its assets not in the regular course of business to seek stockholder approval for such a transaction. Montana Power — which announced in December 1997 that it was selling most of its generation, selected PPL as the successful bidder in November 1998 and closed the deal in December 1999 — did not seek shareholder approval.

Converting the business from a utility to a telecommunications business without shareholder approval “constituted a breach of fiduciary duty,” the lawsuit charged.

The sale of the generating assets “constituted the first step in an overall plan of defendant Montana Power Co.'s divestiture scheme and put the entire company at risk of financial ruin,” the lawsuit said.

Filing the lawsuit were: Wade Dahood, an Anaconda lawyer and delegate to the 1972 Montana Constitutional Convention; Frank Morrison Jr. of Whitefish, a former Montana Supreme Court justice; Milton Datsopoulos, a prominent Missoula lawyer; and Dale and Allen McGarvey and Roger Sullivan, partners in a Kalispell law firm that won a multimillion dollar settlement for workers of Columbia Falls Aluminum Co. and the attorneys for many former workers for W.R. Grace in Libby who have died or are ill from the effects of asbestos exposure.

Updated: Fri Aug 17 16:57:13 CDT 2001 Central Time
Copyright © The Billings Gazette, a division of Lee Enterprises.

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