Mills Corp. Now Target Of Formal SEC Probe

By Kathleen Day
Washington Post Staff Writer
Thursday, March 23, 2006

The Securities and Exchange Commission has upgraded its several-months-long inquiry into Mills Corp.'s accounting problems to a formal investigation, the Arlington-based mall developer disclosed yesterday in government filings.

Officials at the SEC, the federal agency that polices publicly traded companies, informed Mills on Monday of the change in status of the probe, the company said in filings with the agency. A formal investigation means that the SEC has voted to give its staff greater power to collect information from the company, including the use of subpoenas.

The company's stock has dropped by about 20 percent in the past week, hitting a three-year low. Mills' shares closed yesterday at $30.42, down 12 cents. Yesterday's filing was released after the close of financial markets. On Friday, Mills said in a separate disclosure that a probe by the company's independent directors had widened to include possible accounting errors that might have caused the company to overstate profit.

Earlier this year Mills disclosed a narrower set of errors that will cause it to file accounting restatements for the past five years.

The new revelations are potentially more serious, analysts have said, because they raise doubts about the firm's stated operating profits, which investors use to determine the value of Mills' portfolio of 42 malls, including Arundel Mills and Potomac Mills in the Washington area.

A company spokesman could not be reached yesterday evening, but in its SEC filing yesterday Mills said, "The Company has fully cooperated, and intends to continue to fully cooperate, with the SEC."

The company has hired advisers to explore a possible merger and has held preliminary talks with major real estate firms such as Vornado Realty Trust.

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