A group of Exelon investors have filed suit against the parent company of electrical utility ComEd, asserting the company’s potentially corrupt state lobbying activities in Springfield artificially inflated the company’s stock price, setting investors up for losses when the federal investigation into those activities came to light.
On Dec. 16, attorneys with the firm of Pomerantz LLP, of New York and Chicago, filed suit in Chicago federal court on behalf of potentially thousands of Exelon investors. The lawsuit, brought with named plaintiff Joshua Flynn, accused Exelon Corporation of violating federal securities laws by failing to tell investors of the company’s lobbying activities.
The investors said those lobbying activities “increased the risk of a criminal investigation into Exelon,” and asserted the lobbying made at least some of “ComEd’s revenues … in part the product of unlawful conduct and thus unsustainable.”
Confidants of Illinois House Speaker Michael Madigan are at the heart of a federal investigation into potentially corrupt lobbying practices on behalf of electrical utility ComEd.
The lawsuit follows months of reports in Chicago media and elsewhere concerning ComEd’s efforts to utilize influential Springfield insiders – and particularly those inside a circle close to Illinois House Speaker and president of the Illinois Democratic Party Michael Madigan – to secure beneficial legislation and preferential treatment from Illinois’ state government.
The federal investigation has focused on the activities of lobbyist Mike McClain, considered a confidant and close associate of Speaker Madigan. Specifically, according to a report published by the Better Government Association and WBEZ, McClain was paid at least $361,000 by ComEd for “legal services,” even though McClain had been retired for two years and was no longer licensed to practice law in Illinois.
The FBI had raided McClain’s Springfield home in May, on the same day investigators searched sites associated with three others close to Madigan. ComEd confirmed to the BGA and WBEZ reporters that McClain stopped working at ComEd at the same time as the FBI raids.
ComEd has said those payments to McClain were “mislabeled,” and were actually for “consulting,” according to the BGA/WBEZ report.
However, regardless of the nature of the payments, the investor class action asserts Exelon wrongly withheld information from investors, until news of the federal investigation began to become public, and particularly following the “abrupt departure” of Anne Pramaggiore as Exelon Utilities CEO in October.
“The Company’s statement on Pramaggiore’s retirement offered no reason for her departure, but analysts following the Company came to the conclusion that the criminal subpoenas and Pramaggiore’s abrupt resignation were related,” the lawsuit said.
The lawsuit asserts Exelon’s reticence to be forthright with investors about ComEd’s lobbying activities in Illinois, allowed the company’s stock price to be buoyed by the lobbying activities that are now the subject of federal investigation.
The complaint notes Exelon’s stock price suffered a “precipitous decline” of 2.83% from July, when news of the federal investigation first surfaced.
The lawsuit asserts two counts of violations of the federal Exchange Act and of rules promulgated by the federal Securities and Exchange Commission.
The complaint asserts the lawsuit could be expanded to include “hundreds or thousands” of additional Exelon investors.
The lawsuit requests unspecified damages, plus interest and attorney fees.