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NorthWestern alleges Magten Asset Management abused privileges as committee member
By Jeff Pines
Washington, Aug. 20 - NorthWestern Corp. alleged that Magten Asset Management and its chairman Talton Embry violated their responsibilities as a member of the company's official committee of unsecured creditors and used confidential information in connection with Magten's purchase of more than 100,000 8.45% Quarterly Income Preferred Securities after it joined the committee.
According to NorthWestern, Embry used his position to buy 28,540 Quips and sell 3,800 while on the committee. After leaving the committee on May 4, he bought 95,000 Quips.
The allegation was made in a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.
Members of the committee sign a confidentiality agreement. Embry is the sole owner of Magten and his secretary is the other employee according to the motion.
A securities trading order prohibits committee members from trading NorthWestern's securities unless there is a wall between the trading department and the person on the committee.
In a motion filed with the U.S. trustee on Feb. 5, Magten's counsel asked for an exemption from the securities trading order. Since Embry was a member of the committee and one of two employees, there was no way Magten could trade NorthWestern securities and comply with the order. The motion was never filed with the court and Magten never had an exemption, NorthWestern said.
Magten alleges that NorthWestern fraudulently transferred assets backing the Quips and filed a lawsuit in April. A few weeks later, the U.S. trustee removed Magten from the committee because of a conflict of interest.
The Sioux Falls, S.D.-based utility is seeking damages.
A spokesperson for Magten was not immediately available.
NorthWestern filed for bankruptcy on Sept. 14, 2003. Its Chapter 11 case number is 03-12872.
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