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Mall operator Mills may file for bankruptcy

January 10, 2007|From Bloomberg News

Mills Corp., an owner of 38 U.S. shopping malls, including the Del Amo Fashion Center in Torrance, said Tuesday that it might be forced into bankruptcy after executive misconduct and accounting errors resulted in almost four years of earnings restatements.

Its shares fell 22%, the most since August.

Chevy Chase, Md.-based Mills, which is seeking a buyer, will restate results for 2001 to 2004 and for the first three quarters of 2005 and expects the errors to cost as much as $354 million. The company may seek bankruptcy protection if it can't repay a $1.1-billion loan, Mills said in a regulatory filing.

The company lost more than half of its market value in the last year as its 104-acre Xanadu project in New Jersey's Meadowlands went over budget, and it delayed earnings amid a Securities and Exchange Commission investigation. Chief Executive Mark Ordan, who replaced Laurence Siegel on Oct. 1, said resolution of the investigation was the final hurdle to a sale.

The errors were "caused by possible misconduct by former accounting and asset management personnel of the company," Mills said. The company was "heavily focused on meeting external and internal financial expectations" and didn't have adequate accounting policies and controls, the filing said.

More than a dozen top executives have left Mills in the last two years.

Mills shares dropped $4.12 to $14.82 on Tuesday. They slid 52% in 2006.

Accounting mistakes included a failure to record a foreign currency gain, miscalculations of executive bonuses and a mix-up between Mills revenue and revenue generated by joint ventures, the company said.

Mills also failed to properly account for its Empire Tract property in the Meadowlands, which the company sold to the state of New Jersey as part of winning the bid to develop the Xanadu project, the filing said.

Mistakes were caused by good-faith errors in judgment and possible misconduct by former employees that "reflect a lack of competence and in some instances a failure of communication and inadequate internal controls," Mills said.

Mills properties include the Shops at Riverside in Hackensack, N.J.; Arundel Mills in Baltimore; Franklin Mills in Philadelphia; and Sawgrass Mills in Fort Lauderdale, Fla.

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