Report: Mitch Daniels Among 32 Subpoenaed in Securities Probe
Wednesday 07 May 2003
INDIANAPPOLIS - White House budget director Mitch Daniels has been subpoenaed in a lawsuit accusing him and other former IPALCO Enterprises directors of dumping millions of dollars in stock before the utility company was sold.
The Indianapolis Star reported Wednesday that Daniels, who is resigning his White House job to consider a run for governor, was among 32 former IPALCO officials issued subpoenas by Indiana securities regulators.
Indiana Securities Commissioner James Joven declined to elaborate on the investigation, which the state began last year.
The Indiana Securities Division sent the requests for information Friday, after about 2,000 IPALCO employees filed a federal lawsuit alleging company insiders sold $71 million worth of stock after recommending the electric utility's sale to AES Corp. in 2001.
The lawsuit was a revision of an earlier lawsuit filed in March 2002. John Price, an attorney for the employees, said lawyers previously could document only $9 million in shares that had allegedly been sold by IPALCO officials.
IPALCO employees lost thousands of dollars in company thrift plans when AES' shares plummeted following the merger.
When he became budget director in January 2001, Daniels sold millions of dollars worth of stock, including 60,000 shares of IPALCO stock. He made a $552,540 profit on the sale.
Daniels has said he sold the stock because of an ethics agreement common to new administration officials designed to avoid appearances of impropriety.
Other former IPALCO officials have said they sold their shares for various reasons, including to have income after losing their jobs and as a way to boost their severance pay.
AES shares, which traded at $49.60 when the merger closed in March 2001, dropped 90 percent in the first 10 months after the deal and hit a low of 92 cents last October.
Shares closed Tuesday at $6.17, down 30 cents.
The lawsuit claims the directors knew or should have known that AES shares were far more volatile than IPALCO's, and sold their shares after voting in favor of the merger.
The Star reported last December that 14 of the 30 key officers and directors sold more than $22 million of their IPALCO shares between October 2000 -- when shareholders voted to tender their shares -- to February 2001, two weeks before the close of the merger.
Daniels announced his resignation as budget chief on Tuesday. The 54-year-old former Eli Lilly & Co. executive is considered a favorite to win the Republican nomination for governor in 2004.
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