PowerGen passes on its report to SFO

PowerGen, the privatised electricity company, has passed a report prepared by its lawyers to the Serious Fraud Office and the Stock Exchange following allegations - strongly denied by the company - of improper share dealing by six directors.

PowerGen ordered the lawyers' investigation last month after allegations that the six netted pounds 3.5m from exercising share options when in possession of price sensitive information, the .

The company is currently suing the Observer newspaper for making allegations over the affair.

"Obviously each of the authorities can come back to us if they require further information," said a source close to the company.

The report by lawyers Freshfield is believed to have addressed the issue about whether a strategy report, prepared under the supervision of Dr Glyn Charlesworth, could be considered to have contained price sensitive information which the directors might have used to their advantage when deciding to exercise their share options.

The company says that Dr. Charlesworth's report was one of several and that its conclusions can not be considered to have been price sensitive, a view believed to be shared by the Stock Exchange's surveillance unit.

At the time of the Observer article Sir Colin Southgate, the company's non-executive chairman, issued a statement strongly rejecting any charges of improper conduct by the directors.

The Serious Fraud Office, while not taking a formal decision on the case, has indicated to witnesses that it is unlikely to take the matter further having been referred the allegations by the Metropolitan Police.

A PowerGen spokesman refused to comment.

However, supporters of Ed Wallis, the company's chief executive, pointed out that he has retained a sizeable holding in the company.

According to the last annual report Mr Wallis has retained a total of 84,000 shares and exercised options on around 280,000 more.