SCANA, Dominion agree to pay $25 million civil fine in massive nuclear fraud case

SCANA and its successor company, Dominion Energy, have reached an agreement to pay the federal Securities and Exchange Commission a $25 million civil fine in one of the state’s largest civil fraud cases, according to public court records filed Wednesday in U.S. District Court.

Under the proposed settlement, neither SCANA, a now-defunct company, nor Dominion Energy, its successor company, admit any fault in the multi-billion dollar business failure of one of the state’s largest construction projects ever - the effort to build two nuclear power plants in Fairfield County.

However, under the proposal, neither corporation can publicly claim it is innocent of any wrong-doing alleged in the SEC’s 87-page civil complaint, filed last February in U.S. District Court in Columbia.

In its February complaint, the SEC depicted the once-respected SCANA, whose shares had been publicly traded on the New York Stock Exchange, and its two top executives as carrying out a brazen con scheme for nearly three years to prop up the company’s stock and hide the truth about the impending collapse of the nuclear project.

The SEC alleged more than 35 separate instances of alleged lies and cover-ups by former SCANA CEO Kevin Marsh and former SCANA executive vice president Stephen Byrne from the beginning of 2015 to August, 2017, just after SCANA announced it was abandoning the project after a total of $9 billion was spent.

The 35-plus alleged lies and deceptions by the two men fell in five separate categories over some 32 months: untruths to investors and analysts, cover-ups of crucial information, falsehoods to S.C. government oversight bodies, concealment of vital information to the federal SEC and deceitful video and other presentations to lawmakers and the news media, according to an analysis of the complaint by The State newspaper.

Byrne, 60, recently pleaded guilty to criminal fraud in the case and is awaiting sentencing. Marsh, 65, last week agreed to plead guilty to criminal fraud, according to filings in U.S. District Court.

Both Marsh and Byrne are defendants in the SEC’s civil fraud case, and the civil fraud charges against them “remain ongoing,” court records said.

The proposed settlement, which was filed by U.S. Attorney for South Carolina Peter McCoy and signed on Wednesday, still must be approved by a federal judge.

Thursday morning, McCoy released this public statement: “Shareholders were deceived by SCANA and robbed of millions upon millions of dollars. I am hopeful that, along with the criminal charges brought forward by our office, this multi-million dollar civil fine and penalty shows that no person is above the law.”

Last May, news organizations reported that Dominion had agreed in principle to pay a $25 million civil fine to settle the SEC lawsuit. But Wednesday’s filing in U.S. District Court in Columbia contained new details and was the first notice that a formal settlement had actually been reached and a final resolution to the case against those two corporate entities was close.

More than three years ago, in July 2017, SCANA and its junior partner in the nuclear venture, Santee Cooper, a state-owned utility, announced they were abandoning the nuclear project. The announcement stunned the state’s business and political community because up to then, the utilities had made numerous sanguine public pronouncement that the project was going to be successful. Both utilities had even increased their ratepayers’ monthly bills for years to pay for the ongoing project.

Up until the project’s failure, SCANA was a respected gas and electric publicly-traded utility and the only Fortune 500 company in South Carolina. It had 700,000 electric customers and 350,000 natural gas customers. SCANA’s publicly traded stock enjoyed a good reputation as the price of its shares - which gave off healthy dividend streams - steadily rose from the price in the $40 a share range up to $70 or so a share.

More than 4,000 construction workers at the nuclear plant site were thrown out of work without warning when the abandonment of the project was announced.

The project’s failure led to the corporate demise of SCANA, which since then has been absorbed by Dominion Energy, one of the nation’s largest energy companies. The fallout for the state-owned Santee Cooper still continues as state lawmakers debate whether that utility should be sold to another energy company or whether it make reforms.

In U.S. Attorney McCoy’s Wednesday summation of the SEC’s fraud case, contained in court records, he wrote that Marsh and Byrne “misled investors about a project to build two nuclear units... (T)he false statements and omissions enabled the SCANA Defendants to boost its stock price, sell more than $1 billion in bonds, and obtain regulatory approval to raise customers’ rates to finance the project. The SEC alleged that, based on their conduct, the SCANA Defendants violated the antifraud provisions of the federal securities laws and committed certain reporting violations.”

The SEC’s February lawsuit contained a sweeping description of the alleged 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 SEC’s complaint said.

The SEC’s complaint filed in February 2020 alleged a major goal of the fraud was get more than $1 billion in tax credits at a time “when they knew the project was far behind schedule and therefore unlikely to qualify for the tax credits,” according to a Thursday press release by McCoy.

The fraud not only boosted SCANA’s stock price but also enabled it to raise rates on customers and sell more than $1 billion in bonds, McCoy said. Investors lost hundreds of millions of dollars when the truth was revealed.

“The securities laws require public companies and their senior executives to speak truthfully in their statements to investors,” said Justin Jeffries, Associate Director of the SEC’s Atlanta Regional Office, in a press release. “This settlement holds SCANA and SCE&G accountable for their alleged fraud and reinforces that companies must not deceive investors.”

“SCANA and its senior executives repeatedly deceived investors, regulators, and the public over several years about the status of a $10 billion nuclear project,” the lawsuit said. “When the truth was revealed, it resulted in hundreds of millions of dollars in losses to SCANA’s investors and to South Carolinians.”

Assistant U.S. attorneys from South Carolina on the case are James Leventis and Beth Warren.

This story was originally published December 2, 2020 at 5:54 PM.