Kevin B. Marsh, former CEO of SCANA Corp., was sentenced to two years in federal prison after pleading guilty to conspiracy to commit mail and wire fraud related to the V.C. Summer nuclear expansion project.
Marsh is the first defendant in the case to be sentenced as a result of the investigation. However, the U.S. Attorney’s Office has obtained felony guilty pleas from Stephen Byrne, former executive vice president of SCANA and former COO of South Carolina Electric & Gas Co. (SCE&G), and Carl Churchman, former vice president with Westinghouse Electric Corp. and the project director of the V.C. Summer nuclear project. It has also charged Jeffrey Benjamin, former senior vice president with Westinghouse, in a 16-count felony criminal indictment. Benjamin maintains his innocence, however, and Acting U.S. Attorney for the District of South Carolina M. Rhett DeHart has said all charges against him are merely accusations—the defendant is presumed innocent until and unless proven guilty.
In the case of Marsh, however, the evidence presented in court “showed that he intentionally defrauded ratepayers while overseeing and managing SCANA’s operations—including the construction of two reactors at the V.C. Summer Nuclear Station—so the company could obtain and retain rate increases imposed on its rate-paying customers and qualify for up to $2.2 billion in tax credits,” the U.S. Attorney’s Office reported. In late 2016, confronted with information that the project was delayed and that the tax credits were at risk, Marsh and others withheld that information from regulators in an effort to keep the project going. “Marsh’s false and materially misleading statements, as well as other false and materially misleading statements made by his coconspirators, allowed SCANA to obtain and retain rate increases imposed on SCANA’s rate-paying customers,” the U.S. Attorney’s Office said.
The V.C. Summer Mess
The Virgil C. Summer Nuclear Station is located in Fairfield County, South Carolina, near Jenkinsville. Unit 1—commissioned in 1984—is a three-loop Westinghouse pressurized water reactor with a net summer capability of 978 MW. SCE&G (a SCANA subsidiary) owned two-thirds of the unit and operated the plant, while South Carolina Public Service Authority (a state-owned electric and water utility known as Santee Cooper) owns the remaining third. Dominion Energy acquired SCANA in 2019 and now owns that share of the plant.
In 2008, SCE&G and Santee Cooper filed an application to build two new Westinghouse AP1000 reactors at the site. The reactors—Units 2 and 3—were originally planned to be brought online in 2016 and 2019, respectively, with SCE&G owning 55% of the units and Santee Cooper owning the remaining 45%. The cost of the project was expected to be about $10.5 billion.
The project quickly fell behind schedule, however, and costs ballooned. Westinghouse, which was also supplying two AP1000 units for the Vogtle nuclear expansion in Georgia, which was also troubled by schedule delays and cost overruns, was crippled financially due to the projects. In March 2017, Westinghouse filed for Chapter 11 bankruptcy as a result. With more than $10.4 billion in construction and interest reportedly spent by the owners on the V.C. Summer project, and analysis indicating that the project would not be finished until 2024 at a total cost of more than $25 billion, SCANA and Santee Cooper decided to abandon the project on July 31, 2017.
Executive Knew of Trouble but Covered It Up
Following the projects demise, an “exhaustive and multi-year joint investigation” was conducted by the U.S. Attorney’s Office, the Federal Bureau of Investigation, the U.S. Securities and Exchange Commission, the South Carolina Attorney General’s Office, and the South Carolina Law Enforcement Division. Marsh’s sentencing is the result of that investigation.
“Kevin Marsh deceived regulators and customers to financially benefit SCANA,” Susan Ferensic, special agent in charge of the FBI Columbia Field Office, said in a statement. “Unfortunately, Marsh’s and other executive’s actions resulted in South Carolinians bearing the financial brunt of the failed Summer Nuclear Station.”
“Due to this fraud, an $11 billion nuclear ghost town, paid for by SCANA investors and customers, now sits vacant in Jenkinsville, S.C.,” DeHart said.
U.S. District Judge Mary Lewis sentenced Marsh to 24 months in federal prison, to be followed by a three-year term of court-ordered supervision. There is no parole in the federal system. Judge Lewis also imposed a fine of $200,000. Under the terms of his plea agreement, Marsh paid $5 million in federal forfeiture prior to his sentencing. The U.S. Attorney’s Office has also executed cooperation agreements with Dominion Energy and Westinghouse, which together provide more than $4 billion in ratepayer relief.
“This sentence should serve as a reminder to any corporation and their executives that there is a price to pay for those who conspire to commit fraud,” said Ferensic.
—Aaron Larson is POWER’s executive editor (@AaronL_Power, @POWERmagazine).