Judge okays $192 million settlement in SCANA shareholder fraud lawsuit in nuclear venture
- Jul 10, 2020 8:34 am GMT
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Jul. 9--COLUMBIA, S.C. -- A civil fraud class action lawsuit brought by shareholders against SCANA and its former top executives over the failure of its $9 billion nuclear power plant project in Fairfield County was settled Thursday for $192.5 million.
Lawyers for the institutional and individual shareholders included in the class action will split approximately $30 million in legal fees.
Plaintiffs' lawyers hailed the payout as the largest shareholder settlement in South Carolina business history. They said the lawsuit could have potentially paid more that $1 billion if the case had gone to trial, but given the risks and uncertainties of a jury trial, the $192.5 million was a reasonable settlement.
Federal Judge Margaret Seymour approved the settlement after a nearly an hour hearing Thursday morning where most lawyers participated by video conferencing. Under court rules that mandate open courts, news reporters were also allowed to listen in.
The lawsuit was filed in 2017, several months after SCANA and its junior partner in the ill-fated nuclear venture, Santee Cooper, a state-owned utility, announced on July 31 of that year they were abandoning the project that they had been promoting for years as a successful effort on the way to completion. The utilities also had been charging customers in advance for the unfinished nuclear reactors.
However, after the abandonment, facts came to light that showed that some of SCANA's top executives had known for more than a year that the project was likely to fail and kept that information from the public, shareholders and regulatory agencies.
Under securities laws, publicly traded companies such as SCANA are supposed to be open and honest with shareholders so the stock price will reflect any bad as well as good news.
As news of SCANA's fiasco surfaced in newspapers, the company's stock price dropped from more than $60 per share down to around $40 per share.
SCANA is now defunct, having been acquired by Dominion Energy in January 2019. Dominion, as successor company, will pay the settlement money. SCANA's corporate death was directly linked to the failure of its nuclear project.
After the plaintiffs' lawsuit was filed, SCANA announced it would fight the lawsuit in court and sought to have the action dismissed.
But last year, Judge Seymour ruled that the plaintiffs had more than enough information to bring SCANA executives into court and try to convince a jury that the SCANA officials were guilty of fraud and concealing information.
"The bottom line is that they (SCANA executives) lied to everyone, and they did it intentionally," plaintiffs' lawyer John Brown told Seymour in a 2019 hearing.
In an April 2019 ruling that allowed the lawsuit to proceed to trial, Seymour wrote that the shareholders' evidence would be able to show that former SCANA top officials "acted at least recklessly and possibly deliberately" to hide troubles at the nuclear plant.
Once on notice that the allegations would be headed to trial, SCANA entered into serious settlement negotiations, lawyers said.
Last month, Steve Byrne, one of the top former SCANA officials who was a named defendant in the just-settled shareholder civil suit, announced his intention to plead guilty to civil fraud charges in connection with his efforts to deceive shareholders and investors about the true status of the failing nuclear project.
Byrne, 60, was SCANA's number two executive. Among his duties was overseeing the nuclear project at V.C. Summer Nuclear Station. He could face prison. He is scheduled to formally enter a guilty plea later this month.
State Sen. Marlon Kimpson, D-Charleston, one of the plaintiffs' attorneys, said after Thursday's ruling, "We appreciate the court's thoughtful analysis and consideration of the settlement, which is an excellent result for class members and the largest securities class action recovery ever in South Carolina."
(This story will be updated.)
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