King & Spalding
King & Spalding, the Atlanta law firm hired to conduct an investigation of alleged corruption at Southern Company, likely has a conflict of interest because of its past business relationships with the firm and its affiliates, including Alabama Power. Longtime Alabama attorney Donald Watkins says such a conflict could call the validity of an investigation into question.
Under the title "King & Spalding: Is This Law Firm Conflicted In The Southern Company Scandal?" Watkins writes in a special investigative report:
According to published media reports, the Southern Company has paid King & Spalding a seven-figure retainer to conduct the internal investigation.
A deep dive into the relationship between King & Spalding and the Southern Company reveals that King & Spalding may have major conflicts of interest that threaten to undermine the objectivity, validity, and credibility of any investigative report the law firm produces to the U.S. Department of Justice (DOJ) for purposes of Justice Manual (JM) §9-28-900
What led to the investigation? Watkins provides background:
In late 2022, the Atlanta-based law firm of King & Spalding was hired by the Southern Company to conduct an objective and “independent” internal investigation of the massive multi-year, interstate racketeering scheme operated by the Southern Company, Alabama Power Company, Georgia Power Company, Montgomery, Alabama-based public relations firm Matrix, LLC, Joseph Perkins, Jr., and others acting in concert with them.
The investigation is part of the Southern Company’s ongoing effort to seek and secure a non-prosecution agreement for itself and its affiliates for their participation in a long-running, interstate, criminal racketeering scheme. The U.S. Department of Justice (DOJ) is authorized to grant the Southern Company and its affiliates a prosecutorial “pass” if they meet the criteria set forth in Title 9-28.000 of the DOJ’s Justice Manual (JM).
At this juncture, King & Spalding is working to position the Southern Company to climb through the window of “Voluntary Disclosures,” as described in JM, §9-28-900.
Watkins points to three King & Spalding attorneys of special note regarding the Southern Company investigation:
Paul B. Murphy is a King & Spalding attorney who once served as a former Chief of Staff at the Federal Bureau of Investigation. He is a member of King & Spalding's Special Matters and Government Investigations practice. Mr. Murphy is working with a team of King & Spalding lawyers who are conducting an internal investigation of the Southern Company and its racketeering enterprise.
David L. Balser is another King & Spalding attorney. He specializes in handling a client's "most sensitive, complex, and enterprise-threatening matters." Mr. Balser is assisting the firm's Special Matters and Government Investigations team in securing the non-prosecution agreement, as well. As discussed below, Balser also handled another sensitive legal matter for the Southern Company.
On January 18, 2023, King & Spalding announced that Olivia Radin had joined the firm as a partner on its Special Matters and Government Investigations team. She is based in the firm’s New York office.
Ms. Radin assists clients on internal and regulatory investigations that arise from allegations of fraud, bribery, workplace misconduct, accounting and securities fraud, market manipulation, mis-selling and anti-money laundering violations. She has extensive experience defending clients before the DOJ, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission, state attorneys general, the Public Company Accounting Oversight Board, and other regulators.
It is not known at this time whether Ms. Radin is performing legal work on the Southern Company's quest for a non-prosecution agreement.
Ms. Radin joined King & Spalding a little more than one month ago, and her location in New York could be of particular importance, Watkins reports:
The Southern Company, Alabama Power Company, and Georgia Power Company are in serious trouble with the DOJ and several regulatory agencies. These companies are facing criminal and regulatory complaints with allegations of extortion, bribery, fraud, witness tampering, money laundering, price-fixing, obstruction of justice, antitrust conduct, and a host of other crimes, all of which arise from a decades-long, interstate racketeering enterprise run by them.
In the event there is a DOJ prosecution of the Southern Company and its affiliates based upon their criminal racketeering activities, it will likely be conducted in the Southern District of New York because the Southern Company is registered on the New York Stock Exchange. This potential scenario makes Ms. Radin's area of professional expertise and employment in King & Spalding's New York office relevant for this article.
A 2022 lawsuit over cost overruns at the Vogtle Nuclear Power Plant in Waynesboro, Georgia, could be at the heart of possible conflicts for King & Spalding. Writes Watkins:
For starters, King & Spalding represented the Southern Company in the case of Municipal Electric Authority of Georgia et al. vs. Georgia Power Company, Case No.: 2022-CV-366416, in the Superior Court of Fulton County, Georgia. According to Law 360, King & Spalding attorneys Brandon R. Keel, Peter Starr, and David L. Balser represented the Southern Company in this case.
The lawsuit, which was filed in June 2022, grew out of a dispute among the four owners of the Vogtle Nuclear Power Plant in Waynesboro, Georgia over how to allocate the $20 billion in cost overruns that have plagued the plant. Municipal Electric Authority of Georgia (MEAG), Oglethorpe Power Corp. (OPC), and the city of Dalton, Georgia’s utility company (Dalton Utilities) sued Georgia Power for $695 million in the dispute.
Georgia Power has a 45.7% ownership in the Vogtle plant, while OPC owns 30%, MEAG owns 22.7%, and Dalton Utilities owns 1.6% of the facility.
On September 30, 2022, Georgia Power announced in an SEC filing that it had reached a settlement with MEAG. Georgia Power said it would pay a portion of MEAG's future construction costs, which are estimated to be as much as $76 million. Georgia Power will also pay 20% of MEAG's construction costs that exceed the project's current, forecasted price tag.
In its SEC filing, Georgia Power also announced that the litigation with OPC and Dalton Utilities remains active and that the company's potential financial exposure could be as much as $165 million of further pre-tax charges to its income.
Apart from the ongoing litigation with OPC and Dalton Utilities, the Southern Company’s “fitness” to hold a combined “Owner/Operator” license for Vogtle has been challenged in regulatory complaints filed with the U.S. Nuclear Regulatory Commission (NRC) by several victims of the Southern Company’s criminal racketeering enterprise. The complaints, which were filed on February 3, 2023, allege that Section 2133(d) of the Atomic Energy Act of 1954, as amended, prohibits any regulated person or entity that knowingly participated in an ongoing criminal racketeering enterprise from owning and operating nuclear power facilities in the U.S.
On January 27, 2023, formal criminal RICO complaints were filed with the DOJ's Criminal Division against the Southern Company and those persons/entities that acted in concert with the company. The complainants are victims of the company’s interstate racketeering enterprise.
The central question likely is this: Does King & Spalding possess the objectivity and independence to conduct an internal investigation of Southern Company on sensitive issues that include power generation, jumbled finances, possible criminality, apparent mismanagement, and potential threats to public health? Watkins writes:
The Southern Company could have chosen any one of hundreds of truly independent and highly qualified Tier One law firms in the United States to conduct its JM, §9-28-900 investigation. A law firm is considered "independent" if it had no prior business relationship with the client. Instead of choosing an "independent" law firm to conduct its internal investigation, the Southern Company chose King & Spalding.
King & Spalding’s prior business relationship with the Southern Company/Georgia Power with respect to the Vogtle litigation, calls into question its objectivity and independence to conduct the JM, §9-28-900 investigation. King & Spalding appears to have a "real" and/or "apparent" conflict of interest in this matter.
Additionally, King & Spalding's representation of the Southern Company/Georgia Power in the Vogtle litigation occurred while the racketeering scheme was in full swing.
Did King & Spalding become aware of the ongoing racketeering scheme when it was representing the Southern Company/Georgia Power in the Vogtle litigation? If so, did King & Spalding report this racketeering activity to the DOJ and Vogtle co-owners MEAG, OPC, and Dalton Utilities?
Based upon confidential and reliable media sources, it appears that the Southern Company kept MEAG, OPC, and Dalton Utilities in the dark about the racketeering activities carried out in Georgia and elsewhere by the Southern Company, Georgia Power, and others acting in concert with them.
It now appears that King & Spalding may be guiding the Southern Company through a maze of thorny regulatory and legal issues that have arisen from the racketeering complaints filed with the DOJ and NRC by its victims.
What is more, it appears that the Southern Company has NOT terminated its business relationship with Matrix/Perkins, despite (a) Matrix's/ Perkins' substantial involvement in the interstate racketeering activities and (b) the avalanche of legal and public relations problems that Matrix has created for the Southern Company and its affiliates in this regard.
Should the public be alarmed that Southern Company chose to be investigated by a law firm with which it has a working relationship? Yes, says Watkins, and he points to specific areas of concern:
Here are four issues that spring from the thicket of King & Spalding's "real" and/or "apparent" conflicts of interest:
1. Whether King & Spalding coached Southern Company CEO Tom Fanning on how to evade a direct question from Angie Storozynski about the link between the negative headlines around Alabama Power Company and the recent management changes at that affiliate during a February 16, 2023, earnings call? Ms. Storozynski is a Managing Director and Senior Equity Research Analyst for U.S. utilities and power companies at Seaport Global Holdings, LLC (New York City). When HealthSouth executives gave Wall Street analysts false and misleading information on the financial condition and operations of that company during earnings calls, it produced multiple felony counts in the 2003 HealthSouth criminal case against the company's senior management team.
2. Whether King & Spalding knew at the time, or subsequently learned through its JM, §9-28-900 investigation, that Fanning's answer to Wall Street analyst Angie Storozynski’s question was misleading and grossly incomplete? In his answer, Fanning stated that Alabama Power Company CEO Mark Crosswhite departed from the company because “he had some issues he wanted to deal with.” Fanning also said, “[i]t was reasonably clear that [Crosswhite] wasn't a contender as [his] successor.” Fanning’s answer to Ms. Storozynski’s question conflicts with Alabama Power’s official press release in which Crosswhite said, “[a]s I approach my 60th birthday, though, I have come to realize it is time for me to spend more time with my family.”
3. Whether King & Spalding is responsible, in any way, for the Southern Company’s failure and refusal to promptly issue a Form 8-K announcing that: (a) there have been allegations of violations of law by the Southern Company, Alabama Power, and Georgia Power that have the potential to result in fines, penalties, or other sanctions or effects that may cause reputational damage for the Southern Company and its affiliates, and could hamper their effectiveness in interacting with governmental authorities, and (b) the Southern Company’s business and reputation could be adversely affected by allegations that the parent company, along with its affiliates, have violated laws, by any investigations or proceedings that arise from such allegations, or by ultimate determinations of legal violations? On January 25, 2023, Florida Power & Light and its parent company, NextEra Energy, issued such a 8-K statement to inform shareholders about the mounting legal problems emanating from their toxic business relationship with Matrix and Perkins.
4. Whether King & Spalding helped the Southern Company craft a strategy to blame the external auditing firm of Deloitte & Touche, LLP, for not detecting the long-running racketeering scheme? As stated earlier, two of the main participants in the racketeering scheme are Matrix and Joe Perkins. They were paid millions of dollars, without invoicing, to maul critics and political adversaries of the Southern Company and its affiliates. The Southern Company's blame-shifting legal strategy comes straight out of the playbook used by HealthSouth after its $2.7 billion, multi-year accounting fraud scandal was publicly exposed in 2003. In 2009, Ernst & Young, which served as HealthSouth's external auditors, paid $109 million to shareholders to get out of its HealthSouth-related legal nightmare.
Because of King & Spalding’s role in the Vogtle project litigation and its role in performing the Southern Company's JM, §9-28-900 investigation, attorneys Brandon R. Keel, Peter Starr, and David L. Balser might reasonably be considered "material witnesses" in the DOJ’s criminal investigation. If so, King & Spalding would be disqualified from conducting the JM, §9-28-900 investigation.
Furthermore, any report produced by King & Spalding would be "tainted" and subject to collateral attack by the victims of the Southern Company’s racketeering activities who have formal criminal RICO complaints against the company pending with the DOJ and NRC, as well as OPC and Dalton Utilities.
Epilogue
In 2022, the Southern Company's racketeering enterprise generated $59.7 billion for the marketplace monopolies operated by its affiliates in Alabama, Georgia, Mississippi, Tennessee, Illinois, and Virginia. Corporate insiders thought they could expand the company's interstate racketeering enterprise into Florida. This move backfired on them and exposed the Southern Company, Alabama Power, Georgia Power, Matrix, Joe Perkins, and others to intense media scrutiny and law-enforcement investigations.
Today, Southern Company executives feel confident that the company, its affiliates, its senior management executives, and board members are "too big to prosecute." Their perennial ability to compromise state and federal regulators, prosecutors, and judges in Alabama -- for decades -- leads them to believe that nearly all public officials are "for sale" or "for rent."
Finally, Southern Company “insiders” believe that U.S. Attorney General Merrick Garland and DOJ Criminal Division chief Kenneth Polite are too weak, too inexperienced, and too distracted by the DOJ's criminal investigation of Donald Trump to hold the nation's second largest public utility company fully accountable for its massive, interstate racketeering scheme.
