One of the co-owners of a defunct nuclear construction project in South Carolina misled its investors, lying to them about the venture's progress and artificially driving up stock prices, according to the latest lawsuit filed after the scuttling of the multibillion-dollar endeavor.
The lawsuit, filed in federal court late Wednesday, accuses SCANA and some of its chief executives of artificially inflating stock prices by "issuing false and misleading statements to investors" about the status of a now-scuttled nuclear reactor project at V.C. Summer, despite knowing the endeavor was struggling.
Continue Reading Below
SCANA subsidiary South Carolina Electric & Gas Co. and state-owned utility Santee Cooper halted the construction of two new nuclear reactors this summer after chief contractor Westinghouse filed for bankruptcy. Both utilities have faced intense scrutiny since the nearly $10 billion failure, which both state and federal authorities are investigating. State lawmakers also are probing the collapse.
A SCANA spokesman didn't immediately return an email seeking comment on the suit, which joins at least half a dozen others already pending. One, filed by John Crangle of ethics watchdog group Common Cause, demands that SCANA executives return $21 million in bonuses they received as they watched over the reactor construction.
The new lawsuit filed by a SCANA investor seeks class-action status on behalf of anyone who acquired SCANA stock between January 2016, when the company issued a news release touting milestones of the project, and earlier this month. During that time span, according to the lawsuit, the company became aware of — yet kept from the public — a 2015 audit by the Bechtel engineering firm that found serious flaws with the venture, including low morale, high turnover and the lack of a master construction schedule.
Despite the report's criticism, the lawsuit alleges, SCANA CEO Kevin Marsh and other executives told shareholders the company "continued to move forward and make substantial progress" on the reactors. Over the coming months, despite assuring investors and analysts the project was essentially on schedule, company executives privately expressed frustration, with Marsh writing to an executive at Toshiba, Westinghouse's parent company, that he felt SCANA had "been the victim of financial malfeasance " by the companies.
As shareholders began to become aware of the project's struggles, the suit notes, SCANA's stock fell from just over $70 a share in February of this year to about $55 at the end of last week.
The losses suffered by investors because of SCANA executives' "prior misrepresentations and fraudulent omissions" fall under federal securities laws, attorneys wrote.
The lawsuit comes as both SCANA and Santee Cooper and South Carolina's governor move toward trying to recoup some losses from the project. On Wednesday, the boards of both utilities approved the sale of their $2.2 billion, five-year settlement with Toshiba so that they can recover 92 percent of the cash immediately.
Ratepayers have already paid more than $2 billion in interest fees on the project's debt, money the companies have said won't be refunded. SCE&G wants to recover billions more from customers to pay off the debt, though lawmakers want to stop that.
Gov. Henry McMaster this week told The Associated Press that he's still pushing to revive the abandoned reactors — and if he can't, he wants consumers to get their money back.
The Office of Regulatory Staff — the state agency that represents the public interest in utility cases — wants state regulators to force SCE&G to stop billing customers for the failure.
SCE&G wants the request dismissed. Eliminating that 18 percent of customers' bills would reduce the company's revenues by more than $445 million annually, according to SCANA Chief Financial Officer Jimmy Addison.
Just the filing of the request alone made the company's stock drop significantly, Addison said.
The Public Service Commission voted Thursday to appoint a special officer to arrange a hearing on the request — essentially sending the arguments to regulatory court. Objections to the commission's eventual decision could be appealed to the state Supreme Court.
Associated Press writer Seanna Adcox contributed to this report.
Kinnard can be reached at http://twitter.com/MegKinnardAP. Read more of her work at http://bigstory.ap.org/content/meg-kinnard/