SCANA, former officers accused by SEC of fraud in VC Summer nuclear debacle
The federal Securities and Exchange Commission on Thursday filed a lengthy complaint against two former top executives of the now-defunct SCANA Corp. alleging massive security fraud.
”This case arises out of a historic securities fraud perpetrated by senior executives at SCANA Corporation and its subsidiary South Carolina Electric & Gas Company,” the lawsuit said.
“SCANA and its senior executives repeatedly deceived investors, regulators, and the public over several years about the status of a $10 billion nuclear project. When the truth was revealed, it resulted in hundreds of millions of dollars in losses to SCANA’s investors and to South Carolinians.”
The lawsuit, technically called a civil enforcement action, was filed Thursday in U.S. District Court in South Carolina.
The lawsuit is not criminal and does not seek prison time. Instead, it seeks a finding that SCANA and its former two top executives, Kevin Marsh, 64, and Stephen Byrne, 59, “disgorge all ill-gotten gains.” It also seeks various civil penalties under federal securities law.
Dominion Energy South Carolina, which acquired SCANA last year, is also as a named defendant.
The lawsuit says that “SCANA’s senior management, including defendants Kevin B. Marsh and Stephen A. Byrne, were at the center of this fraud.” Marsh was SCANA’s CEO and chairman of the SCANA board of directors, and Byrne was SCANA’s executive vice president.
“Byrne’s responsibilities included overseeing all nuclear operations for SCANA, including construction of new nuclear units at V.C. Summer,” the construction site in Jenkinsville, which is in Fairfield County.
The lawsuit’s allegations center on “the failed expansion of the V.C. Summer Nuclear Station in Jenkinsville ... The planned expansion at V.C. Summer was one of the largest and most expensive construction projects in S.C. history,” the lawsuit says.
The lawsuit accused Marsh and Byrne of making “false and misleading statements” about the project’s progress to news media and stock analysts.
The commission wants the court to find that the defendants committed the alleged violations and ordered the defendants to “disgorge all ill-gotten gains” from their alleged “illegal conduct.” The commision also wants to prohibit Marsh and Byrne from ever acting as an officer or director for any publicly traded company in the future.
SCANA and state-owned utility Santee Cooper spent $9 billion over a decade building two nuclear reactors in Fairfield County, then walked away from the project in 2017, saying it had become too expensive. That incensed lawmakers, upset ratepayers and sparked an array of criminal and legislative investigations, as well as a raft of lawsuits.
The project’s shutdown left more than 5,000 people out of work and customers upset that they had been charged more than $2 billion by SCANA’s SCE&G subsidiary and Santee Cooper for the work. The project was canceled after chief contractor Westinghouse filed for bankruptcy.
In the aftermath of the project’s failure, both Byrne and Marsh stepped down from SCANA in January 2018.
In late 2017, the U.S. Securities and Exchange Commission subpoenaed the utility for documents as part of an investigation into the failed project.
Generally, violations that can spark SEC investigations include misrepresenting or withholding information that is significant to investors in a company’s stock or debt, and sales of stock by corporate executives with “insider” knowledge, according to the agency’s website.
SCANA’s executives, and Marsh and Byrne in particular, came under fire in S.C. House and Senate hearings into the project’s demise.
Lawmakers fumed that the executives refused to accept blame for the project’s failures.
In 2016, as the V.C. Summer project hurtled toward abandonment, Marsh was paid $6.1 million, including around $1.4 million in performance-based bonus pay awarded in part because of his “oversight and support of our nuclear construction activities,” according to the utility’s SEC filings.
The same year, Byrne received a $620,000 bonus for “his continuing oversight of various aspects of our new nuclear construction activities,” among other nuclear-related efforts listed in the same SEC filings.
In total, top SCANA executives at the time were paid roughly $3 million in bonuses tied to their performance on the doomed project.
The abandonment of the nuclear project sent SCANA into a downward spiral. After almost a century as an independent, South Carolina-based company, SCANA was acquired by Virginia-based Dominion Energy last year.
Various civil lawsuits allege corporate fraud and charge that SCANA executives knew the project was a disaster but kept making positive public statements about it to keep their salaries and bonuses. One ongoing lawsuit alleges SCANA executives knew “as early as 2013” that cost overruns at the site imperiled the project.
Former SCANA shareholders have pursued a federal civil fraud lawsuit of their own against Marsh, Byrne and Jimmy Addison, the utility’s former chief financial officer who became its chief executive after Marsh stepped down in 2018. The lawsuit alleges that the former executives deliberately concealed the shaky status of the doomed project from investors.
And just last week in a separate civil case in state court, Byrne pleaded the Fifth Amendment during a deposition, declining to answer questions in order to protect himself from self-incrimination, according to court filings. Byrne cited an ongoing FBI investigation into alleged criminal wrongdoing in the V.C. Summer case.
Lawyers “taking Mr. Byrne’s deposition repeatedly asked questions that go directly to the core of the Department of Justice’s ongoing criminal investigation into the construction and abandonment of V.C. Summer (nuclear) units 2 and 3 or that provide a potential link in the chain of inculpatory evidence the government seeks,” Byrne’s lawyers wrote in the filing.
Both Marsh and Addison have both also previously taken the Fifth during questioning under oath.
This story was originally published February 27, 2020 at 6:27 PM.