Friday, February 17, 2023

Wall Street analyst for U.S. utilities poses serious questions on earnings call, and Southern Company executives respond with glorified soft-shoe routine


A Southern Company earnings call on Thursday (2/16/23) proved to be mostly an exercise in feinting and dodging, according to reports at and

K.B. Forbes, at Ban Balch, called the proceeding a "spectacle of concealment." Under the headline "Kings of Concealment! Southern Company Bruised and Battered After Earnings Call; Vogtle Delayed Yet Again," Forbes wrote:

Not a peep about the numerous victims who have lodged criminal RICO complaints against Southern Company with the U.S. Department of Justice.

Not a cheep about the demand for evidentiary hearings by RICO victims and the possible license revocation of Southern Company by the U.S. Nuclear Regulatory Commission.

Not a chirp about the Matrix Meltdown and hiring of King & Spalding last year to conduct a deep internal criminal probe and secure a deferred prosecution agreement.

Not a chitter about the coming civil RICO lawsuits or law-enforcement investigations including the $8.4-million settlement in December with the U.S. Department of Justice for alleged fraud and false claims in Puerto Rico by a wholly owned subsidiary of Southern Company.

The earnings call yesterday was a spectacle of concealment.

As the Ban Balch headline suggests, the earnings call included distressing news about the oft-delayed Vogtle Nuclear Plant near Waynesboro, GA. Writes Forbes:

Besides the concealment, the earnings call revealed that yet again the Vogtle Nuclear Power Plant will be delayed a couple more months at an estimated cost of $200 million.

And who will pay for the boondoggle delays?

Rate payers of course.

The Associated Press reports:

Ratepayers at Georgia Power and some cooperatives served by Oglethorpe are already paying for Vogtle, and most electric customers in Georgia, as well as in parts of Alabama and Florida, will eventually be charged.

Last year, the Alabama Public Service Commission rubber stamped three Alabama Power rate increases with no debate, no thought whatsoever.

The $400 million generated annually by the rate increases in Alabama will easily pay for Vogtle’s cost overruns and the estimated $345 million in litigation settlement costs with two co-operators of Vogtle (Oglethorpe Power and Dalton Utilities) who have sued Southern Company.

The public is outraged by higher utility bills, and will now clearly see the facade, the concealment, and the deception.

[Thursday] before Southern Company’s earnings call, CDLU Chairman Ernesto Pichardo called on the U.S. Nuclear Regulatory Commission (NRC) to revoke and suspend all licenses granted to Southern Company, including those tied to Plant Vogtle, calling the company’s racketeer influenced and criminal organization a “national security threat.”

“At a minimum, the NRC should hold evidentiary hearings. Ironically or intentionally, Southern Company is represented by Balch & Bingham before the NRC. A former Balch partner who represented Southern is sitting in federal prison for money laundering and bribery, while another ex-Balch attorney who represented Southern will be sentenced next month for possession of graphic and repulsive kiddie porn,” noted Pichardo.

Southern Company is indeed bruised and battered.

Longtime Alabama attorney Donald Watkins, reporting at his Web site, included a headline that succinctly summed up his view of the earnings call: "Southern Company Misleads Wall Street Analysts." Writes Watkins:

On February 16, 2023, the Southern Company conducted an “earnings call” with seven Wall Street industry analysts. A transcript of the call shows that the Southern Company presented the typical “dog and pony” slide show that reported the company’s finances for 2022 and made financial projections for 2023.

Outgoing CEO Tom Fanning painted a positive picture of the company that was nearly devoid of any mention of Alabama Power Company and its recently ousted CEO, Mark Crosswhite. Fanning made no reference to the controversial Alabama-based political consulting firm Matrix, LLC, and its embattled owner, Joe Perkins.

Initially, Fanning limited his comments regarding Alabama Power to this promotional comment:

“We are proud of the significant role that our subsidiaries play in attracting new businesses to our service territories. And in 2022, Site Selection Magazine named Alabama Power and Georgia Power, Top U.S. utilities for economic development for the fourth consecutive year.

 Not everyone on the call was impressed with Fanning's soft-shoe routine, Watkins writes:

Ms. Angie Storozynski, a New York City-based Managing Director and Senior Equity Research Analyst at Seaport Global Holdings, LLC, for U.S. utilities and power companies, cut through the Southern Company’s “smoke and mirrors” presentation and asked Fanning this point-blank question:

“[W]e've had some negative [media] headlines around Alabama Power. There's been a change in CEO. And I'm just basically asking if there's any link in those management changes at that subsidiary and those media headlines?

Fanning provided this vague, misleading, and grossly incomplete answer to Ms. Storozynski’s clear, direct, and material question:

“There really wasn't any connection with Mark Crossley (sic), to be honest with you. He had -- I don't know [if] I want to go into all that, but he had some issues he wanted to deal with. It was reasonably clear that he wasn't a contender as a successor here, and I think he decided to retire. That was kind of his choice at the end of the day.”

With this vague, misleading, and grossly incomplete answer, Ms. Storozynski moved on to another subject.

The Southern Company’s Failure to Timely Disclose its Regulatory and Law Enforcement Issues To Shareholders and Industry Analysts Has Evolved Into a Pattern and Practice of Concealment Conduct.

Ms. Storozynski provided Tom Fanning and the Southern Company with an opportunity to come clean with respect to the growing scandal that has plagued the Southern Company, Alabama Power Company, Mark Crosswhite, and Georgia Power in recent months because of their longstanding business relationship with Matrix and Joe Perkins.

Instead of coming clean with Ms. Storozynski, Fanning and the other two Southern Company executives on the call -- Scott Gammill, Vice President, Investor Relations & Treasurer, and Dan Tucker, Chief Financial Officer – withheld a full, accurate, and complete answer to Ms. Storozynski's direct question. In lieu of transparency, they stuck with a pre-planned script of concealing the regulatory and law enforcement problems associated with Alabama Power Company, Mark Crosswhite, Matrix, and Joe Perkins.

Chris Womack, Southern Company's CEO-in-waiting, did not fare too well, either:

Soon-to-be Southern Company CEO Chris Womack, who is Georgia Power’s present CEO and the Southern Company's new President, was on the conference call. However, Womack’s comments were limited to perfunctory remarks about how excited he was to succeed Fanning as CEO in March. Later in the call, Womack provided a short answer to a question about the fuel load for Vogtle Unit 4.

During the earnings call, the Southern Company never mentioned the fact that the company is the subject of several pending racketeering complaints filed with the U.S. Department of Justice’s Criminal Division on January 27, 2023.

Likewise, the Southern Company never mentioned that several formal complaints against two of its wholly-owned affiliates were lodged with the U.S. Nuclear Regulatory Commission (NRC) on February 3, 2023 The complaints challenge the "fitness" of these affiliates to hold licenses to own and operate the Vogtle Nuclear Power Plant.

Even though Tom Fanning and Dan Tucker provided detailed information about the delays in commissioning Vogtle Nuclear Units 3 and 4, they skillfully skirted around any mention of these complaints.

During the call, Fanning bragged about the Southern Company’s great relationship with the NRC. According to Fanning,

“We've been in constant contact with the NRC ….. I think that we continue to work hand in glove with those guys. You should understand that the working relationship with all of the external parties, whether it's the NRC or whether it's the state commission or DOE, anybody. We all sit in the same meetings. We all see the same stuff. We have and complete transparency and everything we do on that side.”

"Complete transparency"? Watkins seemed to view that as a load of excrement:

Prior to the February 16th earnings call, the Southern Company issued four Form 8-Ks in 2023. None of these U.S. Securities and Exchange Commission (SEC) filings disclosed the regulatory and law-enforcement problems arising from the Southern Company’s, Alabama Power's, and Georgia Power's business relationship with Matrix and Perkins.

The Southern Company Joins Enron, WorldCom, and HealthSouth in Concealing Material Information from Shareholders and Industry Analysts.

Strangely, the Southern Company’s pattern and practice of concealing adverse information of a material nature from its shareholders and Wall Street analysts paves the way for the company to join the ranks of Enron, Worldcom, HealthSouth, and other publicly trade companies that engaged in similar corporate concealment conduct since 2003.

Nothing good ever comes out of corporate concealment conduct where there is a duty to timely disclose material events of an adverse nature.

Interestingly, on January 25, 2023, NextEra Energy (NEE) and Florida Power & Light Company (FPL) filed a Form 8-K with the SEC announcing that “Allegations of violations of law by FPL or NEE have the potential to result in fines, penalties, or other sanctions or effects, as well as cause reputational damage for FPL and NEE, and could hamper FPL’s and NEE’s effectiveness in interacting with governmental authorities.”

The Form 8-K stated that “FPL’s and NEE’s business and reputation could be adversely affected by allegations that FPL or NEE has violated laws, by any investigations or proceedings that arise from such allegations, or by ultimate determinations of legal violations.”

FPL and NEE are also engulfed in a growing Matrix/Perkins-related scandal in Florida. The professional services contracts and special work orders that got Matrix/Perkins in hot water in Florida flourished in Alabama and Georgia under secret contracts with the Southern Company, Alabama Power, and Georgia Power and the payment of millions of dollars "without invoicing" for highly questionable clandestine professional services.

Ironically, Ms. Storozynski downgraded Seaport Global's assessment of NEE stock from "buy" to "neutral" after growing media scrutiny of the shady FPL/NEE/Matrix business relationship occurred in Florida in late July 2022.

Watkins concludes by addressing what he views as the bottom line:

What's the Motivation for the Southern Company's Concealment Behavior?

Obviously, Tom Fanning and the Southern Company concealed the adverse and material information regarding Alabama Power, Mark Crosswhite, Matrix, and Perkins from Ms. Storozynski because they did not want to experience a downgrade in Seaport Global's assessment of the Southern Company's stock as a result of the dubious and highly suspect clandestine work that Matrix and Joe Perkins have performed for the Southern Company, Alabama Power, and Georgia Power -- for decades.

What is more, reliable sources closely connected to the Southern Company say that Tom Fanning and his senior management executives believe that President Joe Biden and U.S. Attorney General Merrick Garland are too weak and inept to hold a New York Stock Exchange corporation of the Southern Company’s size and market value accountable for its participation in regulatory violations and criminal conduct of any kind or nature. Fanning and his sycophants reportedly believe the Southern Company falls within the Department of Justice’s unofficial category of Wall Street companies that are “too big to prosecute.”

Finally, Southern Company executives find solace in the fact that Attorney General Garland failed to prosecute Wells Fargo Bank or any of its executives last December for ripping off the bank's customers in Wells Fargo's latest nationwide crime spree, even though the Bank’s rap sheet evidences an unrelenting spree of 229 major federal criminal and civil offenses since 2000. From 2000 to 2020, Wells Fargo had paid more than $22 billion in fines and penalties for the privilege to rip off its bank customers without criminal consequences. The bank's December 2022 fine added another $3.7 billion to this $22 billion figure. Eventually, Wells Fargo's bank customers are forced to pony up the billions of dollars the bank uses to pay its fines and penalties.

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