Algonquin Power and Utilities Corp. is under investigation by a private law firm in Canada following the announcement it will be late in filing its fourth-quarter financial report.

Algonquin is the parent of Liberty Utilities, the company that wants to buy Mountain Water Co. The proposed purchase is pending before the Montana Public Service Commission.

According to a lawyer, a late earnings report does not necessarily indicate trouble at the company.

However, the news raised alarm among those who are closely following the separate paths the local water company is taking through the Public Service Commission and through a condemnation lawsuit filed by the city of Missoula.

The city wants to force the utility to be under public ownership.

On Monday, Mayor John Engen said he is pleased another party is looking into the company's practices. He also said an Algonquin officer recently was in Missoula trying to buy off the city.

"David Pasieka, Liberty’s president and an Algonquin officer, was in Missoula doing public relations work, asking surrogates to offer me a few million dollars to give up our effort to own the water company," Engen said in an email.

Pasieka responded in a statement provided by Partners Creative in Missoula.

“Liberty Utilities has made no cash settlement offer to the city – not directly and not through any intermediaries,” said Pasieka. “Our company is happy to discuss any option that more expediently results in Liberty becoming a long-term steward of Missoula's water system.”

Earlier, Algonquin spokeswoman Kelly Castledine did not address the reason for the delayed report, but she commented on the investigation.

"The matter is unrelated to Liberty Utilities and its acquisition of Mountain Water," Castledine said.

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Last week, Algonquin announced it would postpone the release of its fourth-quarter and year-end financial results as well as a related conference call. The company rescheduled the release for Thursday, March 26, and the call for the following day.

Subsequently, Siskinds LLP announced it was investigating the accounting practices and disclosures of Algonquin. The Canadian law firm planned to evaluate a possible class-action lawsuit pending the review.

On Monday, Siskinds lawyer Michael Robb said he anticipates the review will take several weeks to a few months. He said the firm may take no action pending the review, and it also could commence litigation.

"In general, what we do are investor class actions for alleged misrepresentations in companies' securities disclosure documents," Robb said.

He could not say how often an investigation by Siskinds led to litigation.

Algonquin is a Canadian corporation. The Ontario Securities Commission declined Monday to comment on whether the late report had prompted a review by the commission or whether the agency had previously investigated the utilities company.

"The OSC does not generally comment on the existence, status or nature of any complaint or investigation," Kate Betts-Wilmott, spokeswoman for the commission, said in an email.

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Samuel Panarella, who teaches at the University of Montana School of Law, said a late earnings report alone isn't automatically an indication of a troubled company.

"It tends to portend something negative, but not necessarily," said Panarella, who teaches business law.

Sometimes, he said, a company has a good reason for being late. On the other hand, he also said some law firms jump on announcements of late reports as a matter of course.

"They need to get a set of plaintiffs, so they will investigate these situations sometimes to see if there's smoke, maybe there's fire," Panarella said.

He said other factors must come to light before it's clear whether a company is in breach of its responsibilities to shareholders.

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The city of Missoula earlier tried to buy Mountain Water from the Carlyle Group. When the global equity firm rejected its offers, the city filed an eminent domain proceeding in Missoula County District Court.

Trial is set for March 18. On Monday, Engen said he's still willing to make a deal with Carlyle.

"We, and lots of others, will be following this carefully. And if Carlyle is looking for a better buyer, we remain willing to talk," Engen said.

He said news Algonquin is under investigation should make the Montana Public Service Commission wary of approving a sale to its subsidiary. The city intervened in the proceeding before state regulators.

"Our concern has always been that the next private owner of the water company would be about profit above all, and this news does little to allay those concerns," Engen said.

Initially, he said Algonquin CEO Ian Robertson "refused to comply" with the subpoena the city served him. However, he said the court has ordered Algonquin to obey Montana law and answer questions.

"Our attorneys look forward to putting them under oath," Engen said. "It appears there will be a lot more to talk about than we previously realized."

Castledine said Algonquin lawyers are evaluating the order that was issued late Friday.

“We are reviewing our options and will decide on a course of action in the near future,” Castledine said.

A letter from Liberty to Mountain employees notes their opportunity to purchase company stock "at a discount and without brokerage fees."

"Unfortunately, that (stock) lost a big chunk of its value over the weekend," Engen said.

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The estimated 9 percent drop in Algonquin stock one day after the announcement of the investigation was worth an estimated $300 million to $400 million, said Karen Knudsen, director of the Clark Fork Coalition. The water watchdog also has intervened in the proposed sale.

The series of anomalies is cause for concern, Knudsen said. The late earnings report, investigation announcement and decline in stock offer a "clouded picture of Algonquin's management credibility."

"These activities definitely set off the alarm bells," Knudsen said. "After all, Algonquin is the parent company. When the parent is struggling or experiencing anomalies, that can't bode well for the subsidiary."

Earlier, the Clark Fork Coalition had asked the Public Service Commission to compel Algonquin to testify at upcoming hearings. In an order, the commission denied the request, but it did "leave the door open" to bringing the company into the proceeding in the future, Knudsen said.

Given the recent news, she said, the Coalition may renew its request that Algonquin participate in the case.

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