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Allegheny Energy, Merrill Lynch to split Gordon's assests

| Thursday, June 16, 2005

Allegheny Energy Inc. and Merrill Lynch & Co. said they will split about $22 million from the forfeited assets of Daniel Gordon, the former head of an energy-trading unit that Merrill sold to Allegheny.

Allegheny Energy, based in Greensburg, Westmoreland County, and Merrill Lynch had made competing claims for $43 million that Gordon embezzled from Merrill, the world's largest securities firm. The money Gordon took was supposed to be used to insure the trading unit.

The payment is the result of an agreement the companies reached with federal prosecutors, Allegheny Energy said Wednesday in a statement. Gordon has pleaded guilty to fraud and is awaiting sentencing.

"Happily, he didn't spend all that money, and the government got some of it back," Allegheny Energy CEO Paul Evanson told investors at a conference yesterday in New York. "It's now been split up between the government, Merrill and ourselves."

Merrill spokesman Mark Herr said the securities firm is "pleased that Mr. Gordon will not profit by his illegal acts and at least some portion of the money he stole from Merrill Lynch will be returned to us."

In a related action in Manhattan federal court, Allegheny is seeking hundreds of millions of dollars from Merrill over the 2001 sale of the securities firm's energy trading unit. Allegheny Energy claims in its lawsuit that Merrill lied about revenue at its Global Energy Markets division prior to its sale. Merrill said Allegheny Energy was aware of the unit's finances and wasn't duped.

Allegheny Energy claimed at the trial that Gordon, who helped build Merrill's energy business and later headed the unit after the utility bought it, helped mastermind a fraud. Gordon refused to testify at the trial, citing his Constitutional right against self-incrimination.

Allegheny Energy is seeking $490 million, plus interest, in the case. Testimony at the non-jury trial ended last month. The judge, U.S. District Judge Harold Baer, has yet to issue a decision.

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