A Santee Cooper investor is suing the state-owned power company and its former chief executive, alleging they violated securities laws by not adequately disclosing the financial risks associated with the V.C. Summer nuclear project while selling debt several years ago.
Murray C. Turka is seeking class-action status to include others who purchased as much as $118 million of the utility’s “Mini-Bonds” from 2014 to 2016.
Lonnie Carter, who was Santee Cooper’s CEO at the time, is named a co-defendant in the complaint filed in U.S. District Court in Charleston.
The lawsuit alleges Carter and other key decision-makers knew by mid-2015 that the troubled expansion of the V.C. Summer power plant “was hopelessly behind schedule” based on a largely unfavorable assessment of the project by the engineering firm Bechtel Corp.
Auditors found that the reactors' designs were sometimes impossible to build, that construction wouldn't be finished in time to qualify for critical federal tax breaks and that South Carolina's utilities were either too "inexperienced or reluctant to act" as problems mounted.
“Still, executives disclosed nothing of this to Mini-Bond investors,” according to the complaint.
Turka also pointed to a September 2015 conference call, first reported by The Post and Courier last August based on a Freedom of Information Act request. During that meeting, “an unidentified individual asked a pivotal question — should the status of the nuclear project be disclosed to Mini-Bond holders?”
Handwritten notes from that call, obtained by the newspaper and cited in the lawsuit, asked simply: "DISCLOSE OR NOT."
The Bechtel audit didn't become public for another two years — after the V.C. Summer project had been called off.
“Santee Cooper elected not to disclose material information,” the complaint alleged.
According to the lawsuit, Turka and other investors should have been paid more given the risks looming over the project. The complaint says the bonds yielded artificially depressed interest rates based on upbeat public pronouncements about the project. The complaint seeks unspecified damages.
Santee Cooper abandoned the V.C. Summer expansion in July 2017 after years of delays and skyrocketing construction costs.
The Moncks Corner-based utility owned 45 percent of the Fairfield County project. SCANA Corp., parent of South Carolina Electric & Gas, controlled the rest.
Santee Cooper has sold its tax-free Mini-Bonds for years directly to South Carolinians. The debt, which could be purchased in increments of as little as $200, was part of the roughly $2 billion that the utility borrowed between the 2015 meeting and the collapse of the nuclear project.
A spokeswoman for Santee Cooper said the power provider was in the early stages of reviewing the lawsuit and plans "a full defense."