Dallas-based electric utility TXU Corp. announced that it received a subpoena from the Securities and Exchange Commission to produce documents relating to its European operations, whose difficulties caused TXU to cut its dividend and led to a sharp drop in its share price.
The subpoena covers documents from January 1, 2001, to March 31, 2003. The commission has also requested documents related to a lawsuit brought in April 2003 by a former employee of TXU Portfolio Management Co., William J. Murray, and a number of lawsuits brought by shareholders during late 2002 and January 2003.
TXU stressed that the documents accompanying the subpoena state that the SEC is conducting a fact-finding inquiry and has not concluded that the company or individuals have broken the law. The company also asserted that it believes the Murray lawsuit is meritless.
In January, TXU agreed to sweeping corporate governance changes as part of a class-action settlement, and to pay $150 million to class members.
Shareholders had charged that senior executives failed to disclose significant financial problems between the spring of 2001 and fall of 2002. According to the suit, shareholders were kept in the dark about, among other things, declining earnings, an increasing liquidity risk, growing problems in the company’s European operations, and the failure of a new billing system.
At that time, TXU’s stock plummeted from about $55 to below $11, and the dividend was shaved by about 80 percent
In announcing the settlement, company spokesman Chris Schein told Reuters that while the company denied any wrongdoing, “we settled this to put it behind us and move forward.”
Under the settlement, TXU agreed to replace two board members, create a lead independent director, and reconfigure the current board so 70 percent of its members qualify as independent directors. The company also agreed to create two new positions — chief governance officer and director of corporate governance — and new restrictions on insider trading.
The resolution also requires shareholder approval of executive stock option plans prior to implementation and lays out new policies relating to contracting, executive compensation, and auditing practices.