BEHIND THE NEWS IPALCO buyer wins key lawsuit but isn't out of woods:

August 8, 2005

Score one big victory for former executives of AES Corp. and IPALCO Enterprises Inc., but they still face obstacles on other fronts.

Last month, Judge Larry McKinney of U.S. District Court in Indianapolis dismissed the final claims in a shareholder lawsuit stemming from AES' soured $3 billion purchase of the Indianapolis utility five years ago.

McKinney didn't buy plaintiffs' charges that through omissions and misleading statements the companies had failed to disclose to IPALCO shareholders the risks of exchanging their shares for those of Virginia-based AES.

Still alive, however, is a breach-offiduciary-duties lawsuit pending before another Indianapolis federal judge that seeks $100 million on behalf of IPALCO 401(k) plan participants.

And, more mysteriously, the Securities Division of the Indiana Secretary of State's office confirmed last week that it continues to probe circumstances surrounding the IPALCO-AES deal.

Two years ago, it subpoenaed 30 former IPALCO and AES insiders, according to documents filed with the Securities and Exchange Commission. In January 2004, Secretary of State Todd Rokita cleared six former IPALCO board members, including Mitch Daniels, now Indiana's governor.

"The investigation is still ongoing. Thus, we can't really comment," Joseph Feeney-Ruiz, Rokita's communications director, said in an e-mail last week.

What happened after the deal closed in March 2001 is a tragic tale: AES shares slid into a free fall, leaving investors accustomed to IPALCO's slow-andsteady returns with staggering losses.

But as attorneys for AES, IPALCO and their former top executives argued in court filings, just because investors lost money doesn't mean the companies did anything wrong.

In one filing, they called the lawsuit "an ill-conceived attempt to manufacture a securities law claim through hindsight."

McKinney threw out most of the case last November, leaving only a charge that AES should have disclosed it defaulted on an agreement with another energy company in the fall of 2000.

The default, attorneys for shareholders argued, could have had devastating financial consequences for AES. Had IPALCO shareholders known about it, the attorneys argued, they might not have supported the sale.

AES' response: It didn't default, because the other company waived the violation.

In his ruling last month, McKinney suggested it was much ado about nothing. Because the other firm never enforced the default, he wrote, IPALCO shareholders suffered no damage.

"The default could not have caused the stock price to fall after the share exchange because it was a non-event," he wrote.

Finish Line quizzes rival exec

Finish Line Inc.'s year-old lawsuit accusing rival New York-based Foot Locker Inc. of trying to harm its business is a long way from resolution. But the Indianapolis company racked up a significant achievement Aug. 2 when it finally deposed Foot Locker President Richard Mina.

Court papers show attorneys for the two companies have been squabbling about the deposition since June, tangling over both the date and whether it should be in Indianapolis or New York City.

To break the deadlock, attorneys for Finish Line agreed to travel to New York City June 20 for the deposition. At 6:30 that morning, General Counsel Gary Cohen and Barnes & Thornburg partner Donald Knebel began their flight to New York.

But a little before 9, Foot Locker contacted another Barnes & Thornburg attorney in Indianapolis and said Mina had come down with a stomach virus and was canceling the deposition. The news was relayed to Cohen and Knebel, who backtracked but were not able to return to their offices until mid-afternoon.

Then the squabbling began anew, with Finish Line attorneys saying they already had been inconvenienced and the rescheduled deposition should be in Indianapolis. Foot Locker, meanwhile, stuck to New York.

The parties resolved the standoff during a conference with Magistrate Judge William Lawrence. Finish Line agreed to depose Mina in New York, while Foot Locker agreed to pay $2,778 toward Finish Line's attorneys' fees and travel expenses.

Duke Realty shares advance

Duke Realty Corp. executives struck an upbeat tone when they announced second-quarter results in late July. But analysts still see challenges for the office-and-industrial developer, most notably a lackluster office market in the company's key Midwestern and Southeastern markets.

Even so, Duke shares have rallied more than 13 percent, to $33.93, since hitting a 52-week low of $29.28 April 4.

The stock is only at break-even for the year, however, and it is almost 6 percent off its November high of $36.

In a new report on Duke headlined, "All dressed up but no party in sight," Legg Mason analyst David Fick rates the shares "hold." He said the company may struggle to increase funds from operations, a key performance measure for real estate companies.
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