An investor in the former owner of South Carolina Electric & Gas is suing the utility’s auditors, saying they let the company stay quiet about problems that swamped its effort to build a pair of nuclear reactors near Columbia.
Attorneys for the investor allege the accounting firm Deloitte LLP knew about a damning audit that raised alarms about the nuclear project’s prospects but agreed to sign off on financial statements that did not disclose it.
What’s more, according to the lawsuit filed Friday, Deloitte’s auditors looked into the nuclear project’s ballooning costs and schedule in 2015 at a time when SCE&G was concerned about the slow pace of construction.
Lawyers for the investor, Samuel R. Floyd III, are seeking class-action status for shareholders in SCE&G’s former owner SCANA Corp.
SCANA’s stock price tanked after the nuclear project finally succumbed to its spiraling costs in 2017, and the company was ultimately sold to Virginia-based Dominion Energy, locking in investors’ losses.
Shareholders had previously accused SCANA and its executives of releasing misleading information about the company’s effort to build two new reactors at the V.C. Summer Nuclear Generating Station. Their case is pending in federal court.
The U.S. Securities and Exchange Commission has asked SCANA and its partner in the project, the state-owned utility Santee Cooper, to provide documents showing how they decided what to disclose to investors, though federal authorities have not filed charges.
In the swirl of legal action since the nuclear project was called off two years ago, the Floyd case is the first to target the utilities’ advisers and auditors, alleging that Deloitte “knowingly or recklessly abdicated its responsibilities” in four years of auditing the company. The lawsuit, which was filed in U.S. District Court in Columbia, seeks unspecified damages.
A Deloitte spokeswoman did not respond to requests for comment, and a spokesman for Dominion Energy, which took control of SCANA earlier this year, declined to comment.
The lawsuit alleges Deloitte would have known about the project's problems when it audited its schedule, but it's unclear what the schedule audit found. Deloitte's findings have not been made public, and the state's utility watchdog, the Office of Regulatory Staff, has not seen Deloitte's report, according to agency spokesman Ron Aiken.
The suit also alleges Deloitte was aware of an outside study that scrutinized why the reactors were falling years behind schedule and billions of dollars over budget.
Internal emails released last year suggest that SCANA acknowledged to Deloitte that it had commissioned the engineering and construction firm Bechtel Corp. to undertake the study.
The emails show SCANA’s top accountants expected Deloitte to ask them about whether they’d tell investors about the study. SCANA executives, who said the Bechtel study was too limited to acknowledge, decided not to, saying they “didn’t want to volunteer anything about it.”
Bechtel eventually produced an expansive report that found the project was imperiled because it was based on an unfinished design and an incomplete construction schedule, and it was being slowed by inefficient work on site. SCANA and Santee Cooper kept the report private for more than a year, until they were forced to release it.
The V.C. Summer project ultimately cost $9 billion, most of which is expected to be paid by the utility’s ratepayers.