Tuesday, March 7, 2023

Did Deloitte fail to catch Alabama Power's funding of affairs involving politicos and their girlfriends, including Robert Bentley and Rebekah Mason?

Robert Bentley and Rebekah Caldwell Mason

In September 2021, longtime Alabama attorney Donald Watkins uncovered documents that included hand-written notes of Matrix LLC founder Joe Perkins on his plan to discredit and destroy a prominent legal figure. Perkins' target proved to be Watkins himself. Never known as one to go quietly, Watkins has continued his investigative work -- and now it has turned up more of Perkins' notes, this time focusing on ways to deal with fallout from apparent accounting fraud, money laundering, and related racketeering activities swirling around Southern Company.

Under the headline "Southern Company Fraud Documented," Watkins includes copies of internal notes and writes:

Despite all of the law enforcement and negative media coverage that Alabama “dirty trick” operative Joe Perkins has brought to the Southern Company (which trades on the New York Stock Exchange under the symbol “SO”), Alabama Power Company, Georgia Power Company, Mississippi Power Company, Florida Power & Light (“FPL”), and NextEra Energy (“NEE”) in 2022, the Southern Company has NOT terminated Perkins' multi-million-dollar contracts to provide shady clandestine services “without invoicing” to the Southern Company and its affiliates.

In 2022, FPL and NEE distanced themselves from Perkins and his public relations firm, Matrix, LLC. On January 25, 2023, FPL and NEE issued a Form 8-K to alert shareholders and investors about the mess Perkins and Matrix created for them in Florida.

The Southern Company has failed to issue a Form 8-K on the matters discussed in this article, even though they have been known, discussed, and concealed these matters since April 6, 2017. Likewise, these sensitive and material matters are not expressly disclosed in the company's annual 10-K filing for 2022, which was filed on February 15, 2023.

Watkins' latest investigative coup comes on the heels of his report about auditors' failure to catch rampant cost overruns at Southern Company's coal-gasification plant in Kemper County, Mississippi. That was the focus of our post yesterday, which included this stunning revelation:

Alabama Power Company officials also made the company's fleet of private jets available to a host of greedy public officials for impressionable joy-riding with their girlfriends, mistresses, and/or lovers. Additionally, the company paid key vendors to pick up the tab for out-of-town partying.for many of these public officials. Alabama Power also financed an illicit love affair between former Alabama governor Robert Bentley and his married mistress, Rebekah Caldwell Mason.

 As we've reported previously at Legal Schnauzer, there were early signs that Bentley did not take the requirements of his plea deal seriously, that he had not learned any lessons at all.

This strongly suggests legal problems for Bentley and Mason might not be behind them. And it raises the possibility that a serious investigation could unearth multiple instances of Alabama Power funding illicit affairs for politicos and their lady friends.

That brings us back to Joe Perkins and his joined-at-the-hip connections to Alabama Power. How did the relationship get that way? Watkins explains:

At this juncture, the Southern Company cannot terminate its business relationship with Joe Perkins. Why? Perkins has a mountain of documented “dirt” on Southern Company senior management executives which could result in criminal charges and jail time for many of them.

With that as a backdrop, let's examine the latest insights from Watkins' reporting:

The "Homewood Notes" Joe Perkins made during an April 6, 2017, meeting with a top Southern Company executive and others document part of a sophisticated, multi-state accounting-fraud scheme and ongoing racketeering enterprise that engaged in the following nefarious conduct:

1. The Southern Company skimmed billions of dollars from its affiliates by using Southern Company Services (SCS) and funneled this money to the Southern Company to “prop up bad decisions by SO.” SCS is the shared services division of the Southern Company. SCS provides administrative and operational services to all of Southern Company's operating divisions. In 2017, the company also provided engineering services to Alabama Power, Georgia Power, Gulf Power, and Mississippi Power. It is a cash cow in the non-regulated part of the Southern Company.

2. Participants in the meeting devised a plan to attack Southern Company board member “Johnny Johns” (whose real name is John D. Johns) for “Audit Board performance,” while specifically mentioning the “clean coal” plant construction project in Kemper, Mississippi and the Vogtle Nuclear Power Plant construction project for Units 3 and 4 in Waynesboro, Georgia. Currently, the Kemper project has $4 billion in cost overruns, while the Vogtle project is experiencing $21 billion in cost overruns. In 2017, Johnny Johns served on the board’s finance committee, which oversaw the internal and external auditing of the Southern Company’s financial books and records for both projects. Johns is a Senior Advisor for Blackstone, Inc. and former Chairman and Chief Executive Officer, Protective Life Corporation.

3. Perkins' notes suggested that Nancy Sykes, then-Executive Vice President and Chief Human Resources Officer at Southern Company Services, James Gravie, then-Senior Vice President in Human Resources for Total Rewards and Technology, and Jeff Peoples, then-Executive Vice President of Customer and Employee Services at Alabama Power Company, could submit an “anonymous complaint” to the Southern Company board of directors that “would require an investigation” into the matters discussed during the April 6 meeting. According to the plan that was pitched during the meeting, they would "mention [Mark] Crosswhite in the complaint." On November 21, 2022, Crosswhite was ousted as CEO, effective on December 31, 2022. In a February 16, 2023, earnings call, Fanning misled Wall Street analyst Angie Storozynski when he falsely claimed that (a) there was no linkage between Crosswhite’s ouster and the negative media headlines around Alabama Power in 2022, and (b) Crosswhite voluntarily departed Alabama Power because “he had some issues he wanted to deal with.” In truth, Crosswhite was forced out by Fanning at a time when Alabama Power was engulfed in the flames of corrupt business practices.

4. Matrix used a private investigator named "Derreck (sic)" (meaning, Derek Uman) to do "research"on Kim Tananka (sic), Southern Company CEO Tom Fanning’s then-girlfriend (whose correct name is Kim Tanaka). The participants believed the anonymous complaint “need[ed] more intel” on Ms. Tanaka. Interestingly, Ms. Tanaka was an innocent party who held no position in any Southern Company business entity at the time she was targeted for clandestine surveillance activities.

5. The meeting participants discussed on a “state by state basis [,] the money that [was] going back to [Southern Company headquarters in] Atlanta.” In other words, the Southern Company was sweeping money out of its affiliates and channeling it back to Atlanta to cover Kemper and Vogtle cost overruns. The company's "cooked" financial books and records concealed the true amount of these cost overruns from utility regulators, investors, and the Southern Company's business partners in these projects. In 2022, Georgia Power's partners in Vogtle sued the company over the allocation of the cost overruns. It does not appear that Georgia Power's three Vogtle business partners knew about the accounting fraud scheme at the time they filed their lawsuits.

6. The meeting notes identified the Southern Company's issues with “Airplanes, Accounting, Personnel Services, Engineering, Innovation Centers, [and] Law firm payments." The company's external auditors, Deloitte & Touche, apparently failed to detect this accounting fraud. After the April 6 meeting, Jeff Peoples became a member of an Alabama Power Company-sponsored “innovation” program called Bronze Valley Investment Accelerator. Interestingly, Peoples' name was removed from the Bronze Valley website on November 28, 2022 -- one week after Crosswhite was ousted as CEO of Alabama Power. Despite the reference to Peoples' involvement in the planned "anonymous complaint" about inflated law-firm payments (for money laundering purposes), inappropriate corporate airplane usage (to compromise and corrupt politicians), personnel services (to bilk billions of dollars out of affiliates), shoddy engineering work on the Kemper and Vogtle construction projects (that resulted in $25 billion in cost overruns for these two projects, alone), and questionable accounting practices (across-the-board), Peoples never filed any such complaint with the Southern Company board of directors, or with anyone else. Instead, the Southern Company elevated Jeff Peoples to the position of CEO of Alabama Power on January 5, 2023.

7. Participants in the meeting questioned, “what voices can raise this issue?” Despite the Southern Company's Code of Ethics, no Southern Company executive or vendor in attendance at the meeting raised the issue of accounting fraud, money laundering, bribery, extortion, or racketeering activities with any Southern Company ethics officer or outside law-enforcement agency.

8. Participants in the meeting considered involving “Troutman Sanders-Channel" in their scheme. Troutman Sanders is a large, independent, Atlanta-based law firm. The idea was to post a copy of the "anonymous complaint" on the law firm's website. For whatever reason, this event did not happen. Furthermore, it does not appear that Troutman Sanders participated in the accounting fraud or racketeering activities discussed in Perkins' notes.

The typed agenda of the April 6, 2017, meeting was prepared by Matrix. The handwritten notations on the printed agenda were made by Perkins during the meeting.

Perkins meeting notes even addressed issues related to China, and they included a Nixonion "enemies list." Writes Watkins:

Perkins noted that the Southern Company was shipping “jobs to China” and jobs were "going back" to Atlanta. This was true in 2017 and it was a politically sensitive issue.

Perkins’ notes designated the Southern Company’s "enemies," as of April 6, 2017. These “natural enemies” were identified as:

1. GASP, which is the Greater Birmingham Alliance to Stop Pollution.

2. AARP, which is the American Association of Retired People.

3. "Curvaii (sic)," who we have learned is Eddie Curran, a former reporter for the Mobile Press Register. Mr. Curran has been very critical of Alabama Power Company on environmental issues.

4. Debbie Dooley, a well-known Buford, Georgia, advocate for green energy and energy choice.

Donald V. Watkins was added to the enemies list in October of 2017. Perkins developed a handwritten plan for Watkins' destruction. His notes may be viewed here.

As was the case with Ernst & Young in the 2003 HealthSouth accounting fraud scandal, Deloitte & Touche never discovered the Southern Company's accounting fraud and racketeering activities evidenced in Perkins’ notes. Since 2022, Deloitte has come under fire for its questionable work in auditing the Southern Company’s financial books and records over the past decade.

Sources tell Watkins that Southern Company might be in the midst of an effort to cover up accounting fraud and boost the firm's stock price. Signs of this, Watkins states, can be found in Perkins' notes:

Perkins' notes discussed a “Consolidation in Atlanta.” In the world of business “mergers and acquisitions” (M&A), this notation suggests a possible restructuring of the Southern Company. Such a restructuring would typically combine the regulated Southern Company entities into one company and the non-regulated entities into another company, with separate CEOs for each company.

This particular notation is straight out of the HealthSouth accounting-fraud playbook. Using this play, the accounting fraud and bad conduct could be moved out of the regulated entities (i.e., Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power, Southern Company Gas) and into the non-regulated entities (i.e., Southern Services Company, Southern Nuclear, Power Secure, Southern Telecom, and Southern Link) to evade detection by the U.S. Securities and Exchange Commission (SEC), Wall Street analysts, and large institutional investors like The Vanguard Group, Inc. (which owns 8.7% of Southern Company’s stock) and BlackRock, Inc. (which owns 7% of the company’s stock), as of November 28, 2022.

Institutional investors own 63% of the Southern Company. Yet, Perkins' notes are devoid of any mention of presenting evidence of the accounting-fraud scheme and cost overruns issues to the attention of the company's largest institutional shareholders.

Confidential news sources tell our news platform, www.donaldwatkins.com, that the Southern Company may be in the midst of an M&A transaction right now to (a) cleanse its financial books and records of the existing accounting fraud and (b) pump up the company's stock prices as Tom Fanning departs the company at the end of March. The company's February 15, 2023, 10-K filing discloses the possibility of M&A transactions in vague terms in several sections of the financial report. These sections are "fig-leaf" provisions to provide cover for an M&A transaction, should one occur.

Under an M&A scenario, if and when the stock prices plummet due to accounting fraud and/or restated financial statements, the stock will tank under incoming CEO Chris Womack's tenure at the helm.

At this juncture, it does not appear that state and federal regulators and U.S. Department of Justice (DOJ) investigators are aware of the nature and scope of the Southern Company's multi-year accounting fraud scheme. However, the company's racketeering activities were reported to the DOJ's Criminal Division on January 27, 2023 by two groups of victims

While Southern Company presents a polished image to the public, Watkins' reporting suggests it gets ugly and dirty behind the scenes. He also indicates that this is a developing story, with more revelations likely to come soon:

Joe Perkins has thoroughly documented his dealings with the Southern Company and its top executives. They apparently cannot divorce themselves from him because his files can totally destroy the company and a host of culpable senior management executives.

What is worse, the Southern Company believes it has successfully hoodwinked U.S. Attorney General Merrick Garland and his handpicked Criminal Division Chief, Kenneth Polite, into signing off on a non-prosecution agreement for the Southern Company and its affiliates without their awareness of the massive accounting fraud scheme or the Perkins notes that evidence it.

The Southern Company has hired powerful Washington lawyers with strong political ties to the Joe Biden White House and DOJ to help the company and its affiliates escape criminal liability for their accounting fraud scheme and racketeering activities. Big legal fees are flowing in Atlanta and Washington toward this goal, and the Southern Company's lawyers and lobbyists are lapping it up like honey.

Stay tuned! This is a rapidly developing story.

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