SEC files suit against South Carolina utility that led failed nuclear reactor project
The Securities and Exchange Commission has filed fraud charges against the investor-owned utility that partnered with South Carolina-owned Santee Cooper in the nuclear reactor project the two attempted to build but never completed.
The six-count, 87-page lawsuit names Dominion Energy South Carolina Inc., formerly South Carolina Electric and Gas Co. SCE&G was owned by SCANA Corp.
Former SCANA Chief Executive Officer Kevin Marsh and Stephen Byrne, the utility's president of generation and transmission and chief operating officer, are also defendants in the complaint, which was filed in the Columbia Division of the United States District Court District on Thursday.
"SCANA and its senior executives repeatedly deceived investors, regulators, and the public over several years about the status of a $10 billion nuclear energy project," the complaint said. "When the truth was revealed, it resulted in hundreds of millions of dollars in losses to SCANA’s investors and to South Carolinians."
SCANA, the two former executives, and SCE&G defrauded investors by making false and misleading statements about the V.C. Summer nuclear power plant expansion project that was ultimately abandoned, the SEC said in a release.
Those statements included information claiming the project would qualify the company for more than $1 billion in tax credits, the SEC said.
According to the complaint, the defendants claimed 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 also alleges that false statements and omissions by executives enabled SCANA to boost its stock price, sell more than $1 billion of 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 Atlanta Regional Office. "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."
Santee Cooper, a 45% owner in the reactor project, suspended construction on July 31, 2017 after reports showed substantially rising completion costs and that the reactors would miss target in-service dates. SCE&G, a 55% owner responsible for heading up construction, followed suit shortly thereafter.
Dominion Energy, which acquired SCANA and SCE&G in January 2019, said it was disappointed in the SEC action and that the company had been "fully cooperating" in the investigation before the merger.
"We are taking this matter very seriously, and are reviewing the complaint to determine our next steps," Dominion said in a statement. "We believe that our cooperation and extensive remediation efforts to date will be a factor in the resolution of this matter."
Dominion also said that the company executed a settlement agreement with former SCANA shareholders for $192.5 million in December, and that the agreement has received preliminary approval from the federal district court in South Carolina.
Information from Santee Cooper and its representatives overseeing construction on the project is cited numerous times throughout the SEC complaint, although there is no overt indication in the suit that Santee Cooper was complicit with SCANA and SCE&G.
Santee Cooper, known formally as the South Carolina Public Service Authority, has said that it received and complied with subpoenas from the SEC and the U.S. Department of Justice for information related to the failed reactor project. The controversial project has led the state to consider selling the utility.
The SEC's complaint charges SCANA, SCE&G, Marsh and Byrne with violations of the antifraud provisions of the federal securities laws. SCANA, SCE&G, and Marsh are charged with reporting violations in documents, such as quarterly and annual reports. Marsh was additionally charged with making false certifications in those documents.
The complaint seeks a permanent injunction, return of allegedly ill-gotten gains along with prejudgment interest, and financial penalties from all defendants. It also requests that the court bar Marsh and Byrne from acting as an officer or director of any issuer whose securities are registered with the commission.