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SCANA CEO's testimony on failed SC nuclear project watched by FBI, federal prosecutor

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COLUMBIA — Federal law enforcement officials watched this week as SCANA’s chief executive testified about its failed nuclear project, the clearest indication yet that the company and its leaders could still face criminal charges for their role in one of the biggest financial messes in state history.

CEO Jimmy Addison took the stand at the S.C. Public Service Commission to explain why SCANA withheld vital information about the troubled $9 billion nuclear project from the public and Wall Street investors. And as he did, representatives of the U.S. Attorney's office and the FBI sat just feet away.

Assistant U.S. Attorney James May sat near the back of the room on Thursday as Addison was pressed about SCANA not sharing its own higher cost estimates for the reactors in 2015.

And on Friday, a FBI agent took notes as Addison sidestepped questions and pleaded ignorance about various aspects of the failed nuclear reactors, including a critical audit conducted by one of the world’s largest construction and engineering firms.

As the law enforcement officials watched, attorneys opposing SCANA pulled Addison into admissions that federal investigators could ultimately use as they continue to probe the project. That included an acknowledgement that SCANA, the parent company of South Carolina Electric & Gas, did not disclose information that could have changed opinions about the project's viability.

"You're aware that anything that is taken down by this very capable court reporter could become evidence in an FBI investigation, and you understand that?" Scott Elliott, an attorney representing industrial electric customers, said to Addison on Friday.

"Certainly," Addison responded.

"And it could become evidence in an SEC, Securities and Exchange Commission, investigation, couldn't it?" Elliott said.

"It could," Addison responded.

Material facts

Addison was testifying at a high-stakes hearing in Columbia, where the utility regulators will decide who pays for the demise of SCANA’s construction project at V.C. Summer Nuclear Station north of the capitol city.

Ratepayers have already kicked in $2 billion for the abandoned reactors and are on the hook for billions more without help from regulators. 

The hearing, expected to last until Thanksgiving, will feature dozens of witnesses discussing when SCANA leaders knew the project was failing and what they shared with the public and regulators.

Addison's testimony was highly anticipated since he was the utility's chief financial officer during the reactor construction before it was canceled in July 2017.

He was asked, in different ways, essentially the same question during his testimony: Did SCANA disclose everything it needed to about its troubled nuclear project?

For more than a year, evidence has slowly emerged that shows SCANA failed to disclose critical information about the reactors' rising estimated cost and their delayed construction schedule — information that could have changed the course of the project. 

That lack of transparency was on full display in 2014 and 2015, well before the project collapsed, company records show. The company’s efforts to build a pair of nuclear reactors was in jeopardy at that point, and a team of SCANA employees was tasked with studying how much money it would ultimately take to finish the project. 

A group of SCANA's accountants and engineers determined the utility's final price tag could increase by roughly $1.2 billion before the reactors produced any power, according to depositions presented at the hearing.

But instead of disclosing that information to regulators, SCANA's executives decided go with a lower number from its contractor, Westinghouse — a company that SCANA had quietly criticized for years, according to depositions.

Westinghouse's estimate was $500 million lower than SCANA's, making the project look more attractive at a key point in the decade-long construction project.

Addison acknowledged Thursday that those numbers and the difference between them were "material facts," a key admission that could play into ongoing civil and criminal investigations.

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The SEC, for instance, can bring a civil lawsuit if it finds a company didn't tell Wall Street about "material" information — facts so important that they could influence someone's decision to invest in the company.

"The cost and schedule estimates that SCE&G presented to the commission ... were material facts, isn't that right?" said attorney Matthew Richardson, who is representing the Office of Regulatory Staff, the state’s utility watchdog agency.

"I would agree with that," Addison said.

“And you would agree the difference between $1.2 billion increase in the budget for SCE&G and a $700 million increase — a $500 million difference — is a material difference as well, right?" Richardson said.

"I would certainly agree with that if both numbers were reliable," Addison said.

As his testimony dragged on, Addison repeatedly apologized to the commission and said he wished the company had shared more information. But he denied that he personally did anything wrong. 

"With the benefit of hindsight, I certainly wish the company had presented the other information," Addison said. "But we didn't and I can't change that."

The U.S. Attorney’s Office for South Carolina didn’t immediately respond to a request for comment Friday. SCANA spokesman Eric Boomhower declined to comment on the investigations, but said the company is cooperating.

Internal doubts

Addison’s testimony appears to leave SCANA with one defense: That it didn’t believe the estimates produced by its own employees.

Addison, who took over the company at the beginning of 2018, began to stake out that position Thursday. He argued that while some employees at SCANA thought Westinghouse's estimates were unrealistic, not everyone did.

"I think a small group of employees may have come to that conclusion. I don't believe the company did," Addison said.

The attorneys opposing SCANA in the utility case believe otherwise. They unveiled a host of emails and internal communications from SCANA that showed more than a few employees doubted the reliability of Westinghouse's numbers. 

One SCANA employee called the contractors’ schedule "a joke," saying they could be manipulated easily. Another former employee said the schedule and cost estimates were so unrealistic that "Ray Charles could see it." And an auditor from a major construction firm said under oath this year that the contractor estimates were completely unrealistic. 

The auditor, Ty Troutman from the engineering-and-construction giant Bechtel Corp., said he didn’t think the reactors’ designer, Westinghouse, could ever meet the timeline it laid out. The level of productivity it was expecting from construction crews would have been unprecedented in the nuclear industry.

His firm also drew up another estimate showing that the official schedule for the project was far too optimistic. But those projections, too, were never made public.

Like many of the documents presented in the utility case, Addison said he never read the damning audit and schedule review that Bechtel delivered to SCANA in 2015. John Coffman, an attorney with AARP, one of the groups opposing power rate hikes tied to the reactor project, asked him if he ever plans to take a look at those documents. 

“I don’t,” Addison said.

“Why is that?” Coffman said.

“Because it’s history,” Addison said.

It appears federal law enforcement will decide if it is. 

Reach Andrew Brown at 843-708-1830 or follow him on Twitter @andy_ed_brown.

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