The U.S. Securities and Exchange Commission (SEC) charged two executives from former crony capitalist utility SCANA this week with “defrauding investors by making false and misleading statements about a nuclear power plant expansion that was ultimately abandoned.”
According to a news release from the agency, its complaint alleged that former SCANA chief executive officer Kevin Marsh and former executive vice president Stephen Byrne “misled investors about a project to build two nuclear units that would qualify the company for more than $1 billion in tax credits.”
You know … NukeGate.
To recap: Spurred on by the S.C. General Assembly, SCANA and its government-run partner, Santee Cooper, spent $10 billion on the construction of a pair of next-generation reactors in Jenkinsville, S.C. that were supposed to have been operational in 2016 and 2017, respectively.
Despite the massive cash outlay, the project was never finished – the two utilities couldn’t afford the estimated $10-16 billion price tag necessary to complete it. On July 31, 2017 Santee Cooper pulled the plug on the reactors. Shortly thereafter, it was revealed executives at both utilities knew the project was doomed for years and didn’t warn the public.
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According to the complaint, the defendants “claimed that the project was on track even though they knew it was far behind schedule, making it unlikely to qualify for the tax credits.” The complaint further alleged that SCANA officers “flew around the country showing the same … construction pictures from different angles and played our fiddles” while the project itself “was going up in flames.”
SEC officials claimed the false statements and omissions “enabled SCANA to boost its stock price, sell more than $1 billion in bonds, and obtain regulatory approval to raise customers’ rates to finance the project.”
“When making statements to the public, executives cannot provide false information or half-truths,” said Richard R. Best, director of the SEC’s regional office in Atlanta, Georgia. “This case demonstrates the SEC’s commitment to holding companies and individuals at the highest corporate levels responsible when they mislead investors and fail to provide them with full and fair information.”
More from the SEC release …
The SEC’s complaint, filed in federal court in South Carolina, charges SCANA, SCE&G, Marsh, and Byrne with violations of the antifraud provisions of the federal securities laws, and charges SCANA, SCE&G, and Marsh with reporting violations. The complaint seeks a permanent injunction, return of allegedly ill-gotten gains along with prejudgment interest, and financial penalties from all defendants, and an officer and director bar against Marsh and Byrne.
The SEC’s investigation was conducted by John O’Halloran and supervised by Natalie Brunson and Justin Jeffries of the Atlanta Regional Office. The litigation will be led by Graham Loomis and H.B. Roback. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of South Carolina and the Federal Bureau of Investigation in this matter.
Dominion issued a statement late Thursday in response to the SEC announcement.
“This is a disappointing development related to a long-standing investigation by the SEC regarding pre-merger activities,” the statement noted. “Dominion Energy has been fully cooperating with the SEC in this investigation. That cooperation began prior to completion of our merger. We are taking this matter very seriously, and are reviewing the complaint to determine our next steps.”
“In December 2019, we executed a settlement agreement with former SCANA shareholders for $192.5 million, which was preliminarily approved by the federal district court in South Carolina earlier this month,” the statement continued. “We believe that our cooperation and extensive remediation efforts to date will be a factor in the resolution of this matter.”
Marsh and Byrne might not be the only ones in trouble with the feds. As we reported in the late spring of 2018, investigators were also looking into representations made in Santee Cooper bond documents in connection with a broader criminal investigation (which is ongoing). In fact, earlier this week we reported on the latest developments in a civil lawsuit filed against the government-run utility in federal court in Charleston, S.C.
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