That's what creditors of Atlanta's Mirant Corp. claim in a lawsuit that alleges the all-but-defunct accounting firm helped mislead both the public and Mirant's management about the company's finances.

The lawsuit, filed in Fulton County, claims the firm failed to investigate known problems and gave Mirant, now in Chapter 11 bankruptcy proceedings, a clean bill of health despite "numerous red flags" that included its own internal reports.

The reports were drafted in the months immediately before Atlanta-based Southern Co. spun its former subsidiary off as a publicly traded company in 2001.

The internal reports, among other things, said that Mirant was overly concerned with meeting earnings targets and at "maximum" risk for misstating its financial position, the lawsuit said.

The lawsuit was filed last month by the committee representing Mirant's creditors in the company's now 2-year-old bankruptcy. It was filed, according to the lawsuit, "on Mirant's behalf."

Mirant officials referred comments on the lawsuit to creditors' attorneys, who were unavailable Wednesday.

Much of the creditors' lawsuit follows a script already laid out in June, in a $2 billion lawsuit Mirant filed against its former parent, Southern Co.

That earlier lawsuit says Southern Co. loaded up its former subsidiary with crippling levels of debt based on overpriced acquisitions, before spinning it off in April 2001. It also alleges that Southern knew Mirant was essentially insolvent at the time but nevertheless stripped about $2 billion out of the company.

Southern has called Mirant's lawsuit without merit and is expected to file its first official reply this month.

The Andersen lawsuit reiterates many of the Southern suit's claims, including the allegation that Mirant's business development side overpaid for acquisitions based on unrealistic revenue estimates made despite warnings from in-house energy experts.

"The valuation models used to support and value many of Mirant's acquisitions were based on assumptions ... that were unrealistic and significantly higher than the prices forecast by Mirant's trading and marketing group, based on actual market data," the Andersen lawsuit alleges.

The lawsuit said the differences between Mirant's optimistic forecasts and eventual reality were "stunning."

But while the Andersen lawsuit holds Mirant's traders out as the heroes in Mirant's acquisition woes, it holds them out as goats in other areas.

It says Mirant's trading operation overstated revenue and income, had material weaknesses in accounting controls and kept two sets of books about trades, with different figures.

The lawsuit quotes from a number of Arthur Andersen internal reports in late 2000 and early 2001, as proof that the firm knew Mirant had problems.

The reports said Mirant was "aggressive" in its accounting, "highly optimistic" in its asset valuations and "demonstrated a consistent bias toward overstatement of income in accounting estimates," according to the lawsuit.

The reports also said Mirant's management was financially unskilled and "unable to reliably measure the value of a specific business or any of its significant segments in a strategic context." They said the company made "significant accounting estimates that involved an unusual degree of subjective judgment by management."

The lawsuit says Southern Co. picked Arthur Andersen in the mid-1990s in order to mimic Enron's dazzlingly wealthy energy trading operation and its equally dazzling accounting. It said it hired an Enron trader and Andersen to duplicate Enron's success.

In December 2001, Enron collapsed in an accounting scandal, taking much of Andersen down with it.

The creditors' lawsuit asks for "in excess of $5 million" from Andersen, although the firm is essentially defunct, largely existing to settle lawsuits related to corporate scandals. The company could not be reached for comment.

The latest Andersen settlement: The firm agreed Wednesday to a $25 million settlement with shareholders of Global Crossing, the telecom provider that collapsed in 2002.

-- Margaret Newkirk