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Secretary of State

Securities Division > News Archive  > 2005 Press Releases > For Immediate Release: October 6, 2005 Statement from Secretary of State Todd Rokita Regarding the AES/IPALCO Investigation

Contact: AJ Freeney-Ruiz

Indianapolis, IN -- "Thank you for being here today. I have a brief statement this morning, after which I will take a few questions. I appreciate your understanding there are certain aspects of this investigation we will not discuss at this point, considering there is ongoing private litigation on the matter.

"In March 2001, AES Incorporated acquired IPALCO Enterprises in a merger involving the exchange of shares of AES stock for shares of IPALCO stock for an equivalent cash value of $25 per share. Immediately prior to the exchange, AES was at $45 to $50 per share and IPALCO was at $11 to $15 per share. Over the eighteen months following the sale, AES dropped to $1.50 per share in October 2002.

"Certain members of the IPALCO management had sold their IPALCO shares before the exchange. After receiving complaints from investors, the securities division of the Secretary of State's office at the beginning of 2003 began investigating the matter to determine whether there were any violations of the Indiana Securities Act during this transaction and the events leading up to the transition.

"The Secretary of State's office, in conjunction with outside counsel hired to investigate the circumstances surrounding the transaction, issued subpoenas to former IPALCO and IPL Board members and management in May 2003. This resulted in over 100,000 documents being produced and subsequently studied. Review of those documents resulted in further subpoenas to several other parties involved in the transaction or events leading up to it, resulting in thousands more documents being produced and reviewed.

"Beginning in October 2003, the office and investigative counsel interviewed twenty individuals to address particular subjects identified as areas of interest. Continuing to narrow the focus of the investigation based on the evidence produced, the Secretary of State's office later issued further interrogatories to twelve individuals.

"The office researched and analyzed over one hundred federal and state cases for applicability to this particular matter, while at the same time continuing to advance the other cases being investigated and concluded by our office. The office and outside investigative counsel spent thousands of hours over the course of 2 ½ years investigating this matter.

"The Secretary of State's office and outside counsel researched every detail of this transaction and the events leading up to it and identified and explored a number of possible theories of legal culpability under the anti-fraud provisions of the Indiana Securities Act over which the office would have jurisdiction. Specifically, the office sought to determine whether any individuals related to either IPALCO or AES had engaged in any form of deception or deceit, or had withheld information in order to deceive others, in relation to a securities transaction.

"As is the case with many investigations initiated by our office, the course of the investigation brought forth a number of further issues beyond those originally considered and upon which the attention of the investigators was focused. Every lead or new theory was followed to ensure thorough completion of the investigation.

"After the most intense, thorough investigation possible, the securities division found no provable violations of the anti-fraud or other provisions of the Indiana Securities Act regarding the sale of IPALCO to AES. Specifically, there is no Securities Act-related basis to challenge the business judgment of the IPALCO Board in approving and recommending to shareholders the share exchange agreement with AES. Further, there is no Securities Act-related basis to challenge the actions of the IPALCO/IPL employees or members of AES management who worked on the AES/IPALCO transaction. Finally, there is no evidence that a scheme to defraud existed in this matter.

"This finding is not intended to be a comment on any other office's or agency's potential investigation or on any private civil actions beyond the scope of our jurisdiction under the Indiana Securities Act. Different burdens and standards could lead to different results. However, the specific jurisdiction of this office under the Indiana Securities Act combined with the absence of evidence sufficient to credibly demonstrate a violation leads us to conclude this investigation."