More than a half-dozen national law firms and investor rights groups are exploring whether to file class action civil lawsuits against South Carolina power company giant SCANA for possibly providing misleading business information to the investing public over its plans to build nuclear reactors in Fairfield County.
One firm, Rosen Law Firm, with offices in New York and Los Angeles, already has posted on its website the draft of an unfiled federal lawsuit with the title “class action complaint for violations of the federal securities laws.”
“We’re in the very early investigative stages regarding potential securities claims,” Rosen institutional investor director Noel Chandonnet told The State newspaper. “There’s really very little we can say at this point.”
Rosen is only one of a half-dozen national law firms or investor groups that have put out press releases this month to business-oriented audiences seeking clients for a possible class action complaint alleging securities violations that have cost investors money.
Until now, the only lawsuits against SCANA for its failure to proceed with plans to build two nuclear reactors in Fairfield County have been filed in state court by ratepayers – as opposed to investors.
Keeping investors in the dark about bad news – if that happened – could protect executives’ bonuses. It also could keep a company’s stock price unfairly elevated.
As recently as mid-June, SCANA was trading at $71 a share. On Thursday, its shares were trading in the $57 range – a drop of about 17 percent.
In the past year, SCANA’s stock price has fared poorly in comparison with other major utilities. Standard & Poor’s utility stock index of various major utilities has gained 9 percent, while SCANA’s stock price has dropped 20 percent. SCANA has 142 million shares outstanding, some 65 percent of which are held by institutions.
A SCANA spokesman, asked about the possible investor lawsuits, said, “We generally do not comment on details pertaining to pending or ongoing litigation.”
For years, SCANA and Santee Cooper, its partner in building the Fairfield County nuclear reactors, have charged hundreds of thousands of customers extra money each month to build the reactors. Santee Cooper is owned by the state of South Carolina.
The two power companies abandoned the plan to build their nuclear reactors on July 31 after collecting about $2 billion so far from ratepayers.
Earlier this month, Gov. Henry McMaster revealed a confidential report done for the utilities that showed that for about 18 months, SCANA and Santee Cooper had known their goal to build the reactors wasn’t feasible.
The report, by Bechtel, said that both Santee Cooper and SCANA had been warned a year and a half earlier that the project, for which planning began in 2009, was suffering major problems. “A detailed engineering design had never been completed” and “the design was often not constructible,” the report said.
McMaster’s office obtained a copy of the report and made it public.
In its draft complaint against SCANA, the Rosen Law Firm cited facts in the Bechtel report as potential evidence that SCANA’s public statements in Securities Exchange Commission filings about the project “were materially false and misleading.”
Ben Means, professor of business law at the University of South Carolina School of Law, said that if there is an adverse business event, combined with a drop in the stock price of a publicly traded firm, it’s not unusual for plaintiffs’ law firms to explore bringing class action lawsuits.
“It sounds like some of the law firms are seeking plaintiffs in order to get in the courthouse door,” Means said.
At this point, “the mere fact that plaintiffs’ law firms have shown interest doesn’t say anything one way or the other about the likely merits of any lawsuit against SCANA,” Means said.
John Crangle, a lawyer who monitors South Carolina consumer issues, said if SCANA was found to be filing false reports with the Securities Exchange Commission to keep its stock price up, that would be ample grounds for a class action lawsuit.