|David J. Grain|
A member of Southern Company's board of directors has used board connections to enrich himself while turning a blind eye to apparent misconduct that has the company engulfed in scandal, putting investors and the firm itself at risk, according to a report today at DonaldWatkins.com.
Donald Watkins, a longtime Alabama lawyer and businessman, says the story of David J. Grain signifies a Southern Company culture gone wildly off track. Under the headline "David J. Grain: Getting Rich From His Southern Company Platform," Watkins writes:
David J. Grain serves as the lead independent director at the Southern Company, a New York Stock Exchange/Fortune 500 company. He is also the chief executive officer and managing director of Grain Management, LLC, a private-equity and telecommunications-infrastructure firm.
In January 2019, Grain parlayed his Southern Company relationship to secure a seat on the board of New Fortress Energy, a NASDAQ company specializing in the production of liquefied natural gas. Grain’s relationship with New Fortress Energy will be the subject of an upcoming article.
Grain has used his Southern Company directorship, New Fortress Energy board seat, and political relationship with the Democratic Party to grow Grain Management’s assets under management from $359 million in 2012, when he joined the Southern Company's board of directors, to $8 billion today.
How do Grain's exploding wealth and his role on the Southern Company board intersect? Watkins explains, noting that it all has come with a cost, especially for customers and the public in general. In short, Watkins reports, Grain failed to do his job, especially in his oversight role as a board director:
After Grain became lead independent director on May 26, 2021, his firm’s assets under management grew by $2.9 billion. Along the way, Grain pocketed $365,000 in Southern Company director fees in 2021, courtesy of the Southern Company’s financially strapped electricity and natural gas customers.
As discussed below, had David Grain fully and faithfully discharged his fiduciary responsibilities as a Southern Company director, particularly as lead independent director, the company’s long-running, multi-state, racketeering enterprise and massive accounting-fraud schemes would have been detected and reported in time to preserve and protect shareholder value, as well as the integrity of the company’s business operations.
Had David Grain done his job, the Southern Company's general counsel, chief compliance officer, chief of staff, and in-house bigot, James Y. "Jim" Kerr, would have been fired following his phone call with CDLU Chief Executive Officer Kevin B. Forbes in 2018.
Had David Grain done his job, former Nuclear Regulatory Commission chairwoman Kristine L. Svinicki would NOT have been appointed to the Southern Company's board of directors on October 18, 2021, and she would NOT have contaminated the board’s governance with her glaring conflicts of interest. Now, Ms. Svinicki may be in personal legal jeopardy based upon legal advice from Jim Kerr on conflicts of interest.
Instead, Grain was apparently too busy enriching himself from his Southern Company directorship platform. As a result, the work environment within the corporation's Atlanta headquarters has become so toxic, executives need to don a hazmat suit before entering the building.
At the heart of Watkins' report is this question: What does Grain Management do, and how does it do it? The answer is disconcerting:
Grain Management invests in global broadband technology and other telecommunications assets. The company targets the acquisition of hard assets (e.g., Federal Communications Commission licenses, fiber networks, wireless spectrum licenses, and cell towers) and companies with inflation-protected revenue streams and sustainable cash flows that are uncorrelated to market cycles in secondary markets. Grain’s investment portfolio is linked here.
The capital for Grain Management’s acquisitions comes from venture capital firms. It is channeled into nine investment funds that are used to acquire and build Grain Management’s portfolio of broadband and telecommunications assets.
Grain Management’s business model is simple, but distasteful and possibly illegal. White-owned venture-capital firms use a black-owned private equity firm as a “front” to compete for and acquire FCC licenses and other telecommunications assets as a “small business” and/or “minority-owned business.” The federal government provides bidding credits, or discounts, which are applied to the gross bid amount based upon his firm’s status as a "small business" and/or "minority-owned business."
This business arrangement looks, smells, and feels like "fleecing" in the digital era.
Grain's company certainly sounds like a business enterprise, but matters of race and political connections help fuel it. Writes Watkins:
In 2014, Grain Management played the race card when it requested an FCC rule waiver that would allow the company to bid as a “small business” for an upcoming AWS-3 spectrum license auction even though the company’s lease arrangements with AT&T and Verizon caused Grain Management to exceed the lid on the small business program’s income requirements. The waiver request would allow Grain Management to bid in the auction using valuable bidding credits that were reserved for small, minority, and disadvantaged businesses.
Prior to making the waiver request, David Grain made a $12,000 campaign contribution to Barack Obama’s presidential re-election campaign and a $8,400 donation to Congressman James "Jim" Clyburn (D-S.C.) in January of 2012. Clyburn was Democratic Majority Whip from 2007 to 2011 and later served as Nancy Pelosi's Majority Whip from 2019 to 2023.
On July 21, 2014, the FCC voted 3-2 to grant the requested waiver after concluding that it was in the public’s interest to do so. The waiver request was supported by the Minority Media & Telecommunications Council, Rev. Jesse Jackson, and other Democratic power players in Washington, all of whom received generous donations from David Grain, Grain Management, and/or networking companies aligned with them.
Congressional Republicans smelled a quid pro quo “rat” in connection with this FCC waiver and tried to investigate how and why it was granted. At the time, nothing came of this effort.
Something, however, could come of it in the future:
Based upon newly discovered evidence arising from the Southern Company's racketeering activity and accounting fraud schemes, Grain Management's 2014 FCC waiver, as well as the firm’s 2021 successful FCC license bid award discussed below, may arouse the interest of the House Judiciary Committee, chaired by Rep. Jim Jordan (R-Ohio).
Between 2014 and 2021, David Grain continued to “juice” the political system with big contributions to powerful Democrats. In 2016, Grain contributed $95,000 to the Democratic National Committee. In 2017, Grain contributed $13,100 to Sen. Mark Warner’s (D-Virginia) campaign and $7,700 to Congresswoman Yvette Diane Clark (D-New York).
In 2018, David Grain contributed $32,000 to Democrats for Opportunity, $12,000 to the Forward Together PAC, $12,150 to Sen. Bill Nelson (D-Florida), who lost his re-election bid, and $26,401 to Bennie Thompson (D-Mississippi, who chaired the January 6th Committee).
During this seven-year period, Grain made a single $500 contribution to the Republican Party of Florida.
Grain’s political contributions, Democratic Party connections, and Southern Company directorship paid off big-time when Joe Biden took office. On February 24, 2021, exactly one month and three days after Joe Biden was sworn-in as president, Grain Management was awarded a C-band license for $1.3 billion at the conclusion of FCC Auction 107. Together with bidding credits for a minority-owned “small business,” Grain Management’s bid represented 1.6% of the $81.1billion in net license prices. Grain Management was the most surprising top five winner at the auction.
Beneath the surface, Gain's company presents a picture of private investors profiting in spectacular fashion, with the assistance of federal tax dollars. Writes Watkins:
Since 2009, the federal government has poured more than $150 billion into digital infrastructure. Passed in 2021, the Infrastructure Investment Bill and American Jobs Act, alone, dedicates $65 billion for broadband funding.
Venture capitalists are NOT long-term partners. They are financial “vultures,” who typically own nearly 100% of the assets parked inside a private equity firm like Grain Management. They put up the money needed to acquire digital assets developed with federal tax dollars and private investments, use Grain's minority status to win bids for FCC licenses, and flip these assets for gigantic profits as soon as they can.
On September 3, 2019, for example, Grain Management completed the sale of its nationwide portfolio of wireless communications assets to American Tower. Through this transaction, American Tower acquired approximately 400 cell towers and other related property interests from Grain.
During the rollout and ramp up of Grain Management since 2007, the company has received management fees from the $8 billion under management and bonuses from the sale of assets in the portfolio. These fees and bonuses enable Grain Management to acquire and maintain office locations, professional staffing, and vendor support services.
Today, Grain Management has offices in Washington, New York, Sarasota, Florida, and London.
Has Grain's status as a Southern Company director helped spike his personal income? Watkins answers with a resounding "yes":
Grain was on the Southern Company governance scene during the entire time when the company was engaged in a multi-state racketeering enterprise and massive, multi-year accounting-fraud schemes.
As lead independent director, a position Grain assumed on May 26, 2021, he is tasked with the following key authorities and responsibilities:
Working with CEO and Chairman Tom Fanning to set the agenda for board meetings
Approving information sent to the board
Meeting regularly with Chairman Fanning
Serving as the primary contact director for stockholders and other interested parties
Communicating any sensitive issues to the directors
Overseeing the independent directors’ performance evaluation of Chairman Fanning, in conjunction with the chair of the Compensation and Management Succession Committee
David Grain’s professional background, leadership position on the Southern Company's board of directors, and assigned areas of responsibility since 2021 placed him in a position to know about AND stop the racketeering, criminal conspiracy, obstruction of justice, and accounting fraud under investigation by news-media organizations and federal law-enforcement authorities.
Grain failed to act because he was too busy getting rich with his own deals, all while using his Southern Company position to cloak himself with the credentialing necessary for a black entrepreneur to be taken seriously in the world of FCC auctions and Wall Street transactions.
Has David Grain engaged in wrongdoing, and if so, will he be held accountable? Too many variables likely are in play to provide a definitive answer at the moment. But, Watkins writes, the broad picture suggests Grain could wind up with some significant problems landing on his desk:
It is unknown at this time whether David Grain is a cooperating witness with federal law-enforcement officials. However, it is known that the Southern Company is seeking a non-prosecution agreement from the U.S. Department of Justice for itself and its affiliates.