SCANA insiders sold $3.4 million in stock before damaging report became public

Current and former officials of the S.C. power company giant SCANA since early 2016 have sold chunks of stock worth more than $3.4 million, months before a damaging report about the company’s nuclear reactor project became public, according to public filings of insider stock trades.

It is illegal for people, called insiders, who are in a position to learn about the inner workings of a publicly traded company such as SCANA, to sell or buy stock shares in that company on the basis of nonpublic information that could affect the company’s stock price. Insiders include board members, corporate executives and other key personnel.

However, insiders buy and sell stock routinely, and it might just be a coincidence that these sales came in the weeks and months after the Bechtel report was given confidentially to top SCANA officials in early February 2015. The report, which painted a disturbing picture of the health of the nuclear construction project, was not released publicly for some 18 months. It was released over SCANA’s objections Sept. 4.

On Friday, SCANA stock closed at $55.22 – its lowest close in almost two years. As recently as late June, two months before Gov. Henry McMaster on Sept. 4 made the Bechtel report public, SCANA was trading in the $71 range.

It is not known whether the four SCANA insiders had knowledge of the confidential report and whether that influenced their decisions to sell SCANA stock.

In a reply Friday to The State newspaper about the sales by four insiders since February 2016, SCANA said, “The decision by an officer or director to purchase or sell SCANA securities is made by the officer or director. SCANA is not in a position to comment on the reasons for or the circumstances involved in a decision by an officer or director to purchase or sell SCANA securities.”

SCANA added, “Officers and directors of SCANA are subject to SCANA’s insider trading policy, which requires that purchases and sales of SCANA securities by officers and directors be made in compliance with securities laws ...”

The four SCANA insider sellers identified in public filings all sold their stock – more than 53,000 shares total – at approximately $65 per share between late February 2016 and May of this year. The largest trade was for $2.7 million in early May, when one insider liquidated all holdings.

The Bechtel report, commissioned by the utilities, was given in confidence to SCANA officials on Feb. 5, 2016. It identified major problems on the over-budget and behind-schedule nuclear power plant construction project in Fairfield County. Those problems included a design that was “not constructible” and numerous flaws that put in doubt “a successful project outcome.”

SCANA was in a joint partnership on the project with power company Santee Cooper, a state agency.

SCANA charged ratepayers an extra $1.7 billion to build the nuclear project during the past decade before walking away from it July 31. Together, the two utilities charged about $2 billion and spent $9 billion.

On Sept. 4, Gov. Henry McMaster – over SCANA’s objections – made the report public. In the weeks before and since McMaster released the report, SCANA and Santee Cooper have been pummeled by ratepayer lawsuits. Other lawsuits have been publicly threatened by national law firms who specialize in investors’ rights.

Meanwhile, the FBI and a federal grand jury operating in secret have been investigating potential criminal wrongdoing by the company in connection with the reactor project, a source told The State newspaper on Thursday.

The four current and former SCANA insider stock sellers identified in Securities and Exchange filings are:

▪ Martin “Marty” Phalen, former senior vice president of administration. He retired Dec. 31, 2016, SCANA said Friday. Public filings show that on May 1, 2017, he sold 42,023 shares at $65.49 per share for approximately $2.7 million. He is listed as an “indirect” owner of those shares. An indirect owner may be one who controls the stock on behalf of someone else or has an interest in a company that has some control over stock owned by the another company.

▪ ▪ Mark Cannon, former SCANA vice president and treasurer, on Feb. 29, 2016, sold 8,000 SCANA shares at $65.11 for approximately $520,000. He is listed as an “indirect” owner and retired on Feb. 28, 2017, SCANA said.

▪ Russell “Rusty” Harris, president of SCE&G Gas Operations and SCANA senior vice president, on Feb. 26, 2016, sold 2,500 SCANA shares at $65.26 for approximately $163,000. He is listed as an “indirect” owner.

▪ James Micali is a former member of SCANA’s board of directors. He is listed as selling 1,000 SCANA shares at $66.10 on Feb. 23, 2016 for approximately $66,100. He is listed as a “direct” owner.

Attempts to reach each of the four were not successful Friday.

Longtime ethics watchdog John Crangle, a lawyer, said Friday that it’s legitimate to question whether those SCANA insiders acted on the basis of information they had that the public didn’t.

“It is suspicious – but not conclusive of any wrongdoing,” Crangle said. More investigation is needed into the full circumstances of the transactions, he said.

This story was originally published September 22, 2017 at 7:52 PM with the headline "SCANA insiders sold $3.4 million in stock before damaging report became public."