Westinghouse agrees to pay $21.5M after failure of SC’s VC Summer nuclear project

Westinghouse Electric Co. has agreed to pay $21.5 million in connection with its role in the 2017 failure of the now-defunct electric utility SCANA Corp.’s $10 billion construction project to build two new nuclear plants in Fairfield County.

Announcement of the payment, made as part of a “cooperation agreement” between federal authorities and Westinghouse, was made Monday morning by South Carolina’s Acting U.S. Attorney Rhett DeHart.

The payment is the latest development in a four-year federal criminal investigation that originally targeted SCANA but which has since expanded to include Westinghouse.

In its agreement with federal authorities, Westinghouse does not admit any fault.

The company was hired by SCANA in 2008 to build two new nuclear reactors at the V.C. Summer site north of Columbia.

And, in light of the company’s cooperation with prosecutors, federal authorities also have agreed not to press criminal charges against the company. Instead, prosecutors will focus on former Westinghouse employees potentially responsible for any wrongdoing.

Beyond the prosecutors’ agreement not to press criminal charge, the U.S. Attorney’s office did not spell out exactly what led Westinghouse to agree to make the payment.

DeHart said Westinghouse has been helping prosecutors and turning over information.

The five-page agreement also gives reasons why prosecutors are not seeking to file criminal charges against the company as opposed to individuals who worked for Westinghouse.

For instance, Westinghouse has pledged “full and ongoing cooperation” with prosecutors, the company has instituted extensive reforms and prosecutors have decided to target those individuals specifically responsible for corporate wrongdoing.

Moreover, since 2017, Westinghouse has declared bankruptcy, reorganized and is now owned by another company — Brookfield Business Partners, which had no role in the SCANA nuclear project failure.

The agreement makes clear that Westinghouse understands that prosecutors can bring criminal or civil actions against former Westinghouse employees who potentially committed fraud in connection with the V.C. Summer nuclear project.

The South Carolina Attorney General’s Office and Westinghouse have reached a similar cooperation agreement.

But unlike the federal agreement, the attorney general’s agreement contains no separate payment provision to a state program. It does, however, assert that the state of South Carolina will not prosecute Westinghouse but is able to prosecute individual employees if warranted.

“We could not as a matter of law and legal ethics include a financial commitment as a condition to the cooperation agreement,” Attorney General spokesman Robert Kittle said.

South Carolina Deputy Attorney General Donald J. Zelenka, Senior Assistant Deputy S. Creighton Waters, and Assistant Attorney David Fernandez are representing the state.

Criminal charges pending

Since May, federal prosecutors have charged two former Westinghouse officials involved in the SCANA project with criminal offenses in connection with the nuclear project failure.

In June, Carl Churchman, who managed the now-abandoned nuclear project for Westinghouse, pleaded guilty to lying to an FBI agent about matters connected to the project’s failure.

Earlier this month, former Westinghouse senior vice president Jeffrey Benjamin, Churchman’s boss who oversaw all the company’s nuclear plant projects, was indicted on multiple counts of fraud in connection with the project’s failure.

Benjamin is scheduled to be arraigned in federal court in Columbia Tuesday.

Westinghouse has already produced “more than 3 million pages of documents, data, and correspondences to federal investigators; made employee witnesses available for interviews; and provided extensive debriefing sessions on the process and facts developed during the course of the company’s internal investigations related to the project,” DeHart said.

DeHart also said that Westinghouse has since removed and re-trained Westinghouse executives; elected new members to the company board, restructured and implemented new controls in the company’s finance organization, adopted a global ethics code; established a corporate controller position, and implemented a new whistleblower program to allow employees to raise concerns without fear of retaliation.

The agreement further specifies that Westinghouse will contribute an initial $5 million within 30 days to the South Carolina’s energy assistance program for low-income homes to help certain ratepayers affected by the project’s failure. A final payment of more than $16 million to that program would be paid by Westinghouse on or before July 1, 2022, DeHart said.

In addition, Westinghouse — through its former parent company Toshiba — has satisfied more than $2.1 billion in settlement payments related to the V.C. Summer project, including about $1 billion to SCANA, $976 million to Santee Cooper and $160 million to pay various contractor liens, DeHart said.

“Our office continues to seek justice for the victims of the V.C. Summer project failure,” DeHart said. “Westinghouse’s cooperation is vital to our ongoing efforts to hold accountable the individuals most responsible for this debacle. More than $21 million in new low-income ratepayer relief is a strong sign of our commitment to assist those most affected.”

The agreement is the latest development in the ongoing multi-year joint investigation by DeHart’s office, the FBI, the U.S. Securities and Exchange Commission, the South Carolina Attorney General’s Office, and the South Carolina Law Enforcement Division.

Assistant U.S. Attorneys Winston Holliday, Brook Andrews, Emily Limehouse, and Jason Peavy are prosecuting the case, along with Special Assistant U.S.Attorney John O’Halloran.

Different motives

In late July 2017, SCANA and its junior partner in the venture, the publicly-owned Santee Cooper, announced they would abandon the project, and a federal investigation began shortly afterward.

From the beginning of the project, in 2008, Westinghouse was the lead contractor and reported on its progress to SCANA.

Although criminal charges have been brought against executives of Westinghouse and SCANA, the executives in each company acted for different motives, according to evidence in the case and prosecutors’ statements in court.

In SCANA’s case, former CEO Kevin Marsh and former executive vice president Stephen Byrne deliberately hid the worsening conditions at the nuclear plant to cover up major cost overruns and substantial delays in scheduled completion dates in order to deceive state regulators, federal stock regulatory officials and the public, prosecutors said.

Marsh and Byrne pleaded guilty in federal court to fraud charges. Neither has been sentenced.

Westinghouse officials lied about the increasing delays and cost overruns to try to deceive SCANA executives, who knew what was going on anyway, prosecutors have said.

Westinghouse’s and SCANA’s separate lies about costs and delays were a “mutually convenient fiction” that kept the nuclear project alive longer than it should have been, federal prosecutor Holliday told a federal judge in June at Churchman’s guilty plea hearing.

If SCANA and Westinghouse were to have finished both nuclear reactors by Dec. 31, 2020, SCANA would have qualified for a $1.4 billion in federal tax credits, Holliday said.

As a publicly-traded company, SCANA had a duty to truthfully report information that might affect the company stock price, Holliday said.

This story was originally published August 30, 2021 at 8:25 AM.