Mirant equity holders seek to discover if conflict of interest allegations have any credence

By Jeff Pines

Washington, March 3 - Allegations that at least one member of Mirant Corp.'s creditors committee has a conflict of interest prompted the official committee of equity holders to file a motion seeking approval for discovery, or fact finding.

Allegedly, Citibank, NA, one of Mirant's largest creditors, bought credit insurance that covered a failure of the pre-petition negotiations or lack of progress in its reorganization effort, according to a March 2 filing with the U.S. Bankruptcy Court for the Northern District of Texas, Fort Worth Division.

The committee notes the Atlanta-based power company plans to investigate the matter and Citibank has agreed to cooperate.

In addition, there are allegations that at least one member of the creditor committee has been abusive to Mirant's senior management and is insisting that at least one member of the company's top management resign, the equity committee said in a court filing.

In a footnote, the committee noted "a recent media report indicates that Citibank's efforts to replace management could be motivated by Citibank's desire to be selected by the debtors to advise and lead its refinancing."

The committee is seeking documents from Citibank and to interview certain Citibank officials and other members of the creditors committee.

Citibank has proposed to provide an affidavit that it does not have any credit insurance for Mirant, or if necessary provide a bank officer for deposition who would prove it has none the alleged credit insurance, the equity committee filing said.

In addition, Citibank proposed to provide an affidavit, or a bank officer available for interview, that would establish that its Salomon Smith Barney unit did trade a small amount of Mirant derivatives before the company filed for Chapter 11, but that the derivatives position was "long" and not predicated on the company going into Chapter 11, the equity committee added.

Citibank did, however, decline to provide any documents over any alleged disputes within the committee.

Before filing the motion, the equity committee also contacted the creditors committee, which has declined to cooperate.

Citigroup Inc., Citibank's parent, declined to comment on the motion. Citigroup expects to file a response shortly, a spokeswoman told Prospect News.

A hearing is scheduled for April 7.

Mirant filed for bankruptcy on July 14. Its Chapter 11 case number is 03-46590.

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