‘Key Westinghouse witness’ in SC nuclear scandal told lies to help SCANA fool public

A former Westinghouse executive who oversaw construction on SCANA’s doomed $10 billion nuclear project in Fairfield County admitted lying about the project in an effort to fool people into thinking the doomed project would be a success, a federal prosecutor said Thursday in federal court.

The former Westinghouse official, Carl Churchman, 70, was in court in Columbia before U.S. District Judge Mary Lewis to plead guilty to one count of lying to FBI agent Aaron Hawkins.

Churchman, who now lives in Utah, was the third person so far to plead guilty in an ongoing four-year FBI investigation of criminal acts connected to the 2017 failure of SCANA’s effort to build two nuclear plants at the V.C. Summer facility in Fairfield County, about 25 miles northwest of Columbia.

It was the biggest business failure in S.C. history and threw more than 4,000 people out of work. At first, the July 2017 failure of the nuclear project was attributed to cost overruns and mismanagement, but the FBI investigation established that top SCANA officials engaged in a criminal conspiracy to hide the looming business failure from the public, regulars and investors who owned SCANA stock.

“There is more to come (in the investigation), and Mr. Churchman is a key witness for us,” assistant U.S. Attorney Winston Holliday told Judge Lewis, indicating that more people would face criminal charges.

In 2020 and this year, two former top SCANA executives — Stephen Byrne and Kevin Marsh — pleaded guilty to criminal fraud charges related to their knowing about costly delays to the project, delays they unlawfully kept secret for years from regulators and shareholders. Sentences in those cases are pending.

A plea agreement signed by Churchman with the government commits him to providing information to law enforcement in the ongoing investigation and says the government will move for him to get a lesser sentence if his help is substantial. He faces five years in prison for lying to FBI agent Hawkins.

Acting U.S. Attorney for South Carolina Rhett DeHart declined after court to say how many more people might be arrested but made it clear there would be others.

“This (Churchman’s) guilty plea shows that the investigation into the V.C. Summer nuclear debacle did not end with the former SCANA executives,” DeHart said in a press release. “We are committed to seeing this case through and holding all individual and corporate wrongdoers accountable.”

New details about coverup emerge

In court statements to the judge, Holliday gave new details Thursday about SCANA’s, and now Westinghouse’s, coverup of how bad conditions were at the nuclear construction site.

As project manager, Churchman was aware that Westinghouse executives in early 2017 were making false statements in meetings to top SCANA officials about how construction was going at the nuclear site, Holliday said.

The progress of SCANA, a publicly-traded company whose stock was listed on the New York Stock Exchange, on the nuclear project was being closely watched by investors and regulators. If SCANA finished both nuclear reactors by Dec. 31, 2020, it would qualify for $1.4 billion in tax credits, Holliday said. As a publicly-traded company, SCANA had a duty to truthfully report information that might affect the company stock price, he said.

In early 2017, although Churchman knew the project would not make those dates, he was involved in reporting optimistic and false completion dates to SCANA, Holliday said.

At the same time, SCANA was also aware that the project was woefully behind schedule, and its top officials then deliberately used Westinghouse’s false optimistic completion dates in their reports to regulators, the public and investors, Holliday said.

SCANA “knew very well that the project was off-schedule and failing,” Holliday said. The false Westinghouse dates “provided convenient cover.”

Westinghouse’s false message about the project being on scheduled was “a mutually convenient fiction that kept the project alive, to the financial benefit of both Westinghouse and SCANA, and to the detriment of the ratepaying citizens of South Carolina, among others,” Holliday said.

Shortly after SCANA officials received Westinghouse’s false schedule, SCANA in February 2017 released a required public disclosure statement in an 8K, “echoing the dates given by Westinghouse,” Holliday told the judge.

“The 8K released these dates to the public and gave ratepayers, regulators, and investors the impression that the Project would be completed before January 1, 2021, and that it would still qualify for federal production tax credits that made it financially viable,” Holliday said,

Executives at both SCANA and Westinghouse understood that any public statement that the Dec. 31, 2020, completion date could not be met would be perceived as “the third rail that would kill the project, and efforts to develop a realistic schedule that went beyond that date were shut down by Westinghouse,” Holliday said.

In March 2017, Westinghouse filed for bankruptcy.

Four months later, on July 31, 2017, SCANA and its junior partner in the nuclear venture, Santee Cooper, announced they were abandoning the project.

The announcement stunned South Carolina’s business and political world. The Legislature had given SCANA permission to add special charges on to ratepayers electric bills to pay for the ongoing billions in construction at the nuclear site.

In several court hearings, prosecutors have described the lies told by SCANA executives not as crimes of greed but crimes of hubris and an abuse of public trust — an inability to tell the truth and admit publicly that such a huge project that was supposed to showcase a major commitment to nuclear energy with Westinghouse nuclear reactors had turned into such an abject failure.

At the hearing’s end, Judge Lewis asked Churchman if he was guilty.

“Yes, your honor,” Churchman said.

A sentencing date will be set at some undetermined future time.

Besides Holliday, other federal prosecutors on the case are Jim May, Brook Andrews, Emily Limehouse, and Jason Peavy along with John O’Halloran, a lawyer with the Securities and Exchange Commission. Churchman was represented by Lauren Williams of Charleston.

In 2020, The Securities and Exchange Commission also accused Byrne and Marsh of civil fraud in being at the center of a brazen con scheme that propped up SCANA’s stock price for three years before 2017. Those civil charges are pending.

The failed project spawned some 20 lawsuits by ratepayers and SCANA shareholders, as well as federal criminal and civil fraud charges.

The failure also led to the collapse of SCANA, once one of the state’s crown business jewels with 750,000 electric customers and 350,000 natural gas customers, and its 2019 acquisition by Dominion Energy, a Virginia-based utility giant.

From the conception of the project in 2008, SCANA had hired Westinghouse, a Toshiba-owned company that had experience building nuclear reactors, to oversee construction at the nuclear facility in Fairfield County. Westinghouse was to build two nuclear reactors for a cost estimated at that time to be about $10 billion.

In 2008, SCANA gave an original completion date for one reactor as 2016, with the second one to be finished by 2019. The utility convinced South Carolina regulators to let it add a monthly surcharge to the bills of its hundreds of thousands of electric customers as construction of the project went along.

This story was originally published June 10, 2021 at 2:05 PM.