Tuesday, March 28, 2023

Southern Company CEO Tom Fanning is almost out the door with loads of ill-gotten gains -- the "benefits" of fraud schemes-- but obstacles might block his exit

Tom Fanning

CEO Tom Fanning is expected to retire soon at Southern Company, and he might hit the exits with a stash of ill-gotten gains -- you might call them "benefits" of a massive accounting-fraud scheme, over which Fanning presided. Will Fanning make out like a bandit? Not necessarily, says longtime Alabama attorney and businessman Donald Watkins in a post titled "Will Tom Fanning Exit Southern Company with Mega Cash, Stock Options Based Upon Accounting Fraud?" Writes Watkins:

This week, I will begin publishing my exclusive series of articles on how the Southern Company hoodwinked its external auditor (Deloitte & Touche), its regulators (the U.S. Securities and Exchange Commission and state Public Service Commissions), its two largest shareholders (the Vanguard Group, Inc, BlackRock, Inc.), its banks and other lenders (including the U.S. Department of Energy), and other stakeholders with cooked financial books and records that concealed up to $27 billion in accounting fraud over a 10-year period, all while pretending to meet the earnings expectations of unsuspecting Wall Street analysts.

It was a masterful accounting-fraud scheme. In fact, it was much better than the one used in the $2.7-billion HealthSouth accounting-fraud case.

Along the way, CEO Tom Fanning was rewarded handsomely with a multimillion-dollar annual salary, fantastic bonuses, and valuable stock options. Fanning has made more than $100 million in total compensation that was based on cooked Southern Company financial books and records.

Did anyone in Southern Company's chain of command bother to notice that Fanning was about to reap huge benefits from fraudulent financial records? Apparently not. Could that put some higher-ups in the company at legal risk? Yes, says Watkins:

Those entities and persons who should have detected the accounting fraud at the Southern Company and its affiliates were too busy hanging out in the sky boxes at sporting events and concerts, or getting "wasted" at PGA events like the Masters, or experiencing the thrill of big-game hunting and fishing trips, or enjoying corporate jet rides to exotics ports of call, or smiling while their wives, mistresses, and children spent the money loaded onto the gift cards they received, in violation of the company's Code of Ethics. The Southern Company was able to anesthetize the guardians of the public interest using unreported gifts and a waterfall of opulence as tranquilizers. It worked, very well.

In the process, Tom Fanning and his loyal crew got rich – super rich. Meanwhile, the customers of Alabama Power Company, Georgia Power Company, and Mississippi Power Company got raped and pillaged each month.

A lot of good and decent employees who served as chief executive officers and chief financial officers of Southern Company and its affiliates signed their names to 10-Qs and 10-Ks trusting that the parent company’s financial books were "clean," as required by the Sarbanes-Oxley Act of 2002. They were NOT.

Sarbanes-Oxley is the federal criminal statute that burned the corporate executives at HealthSouth, Enron, WorldCom, and Tyco, who willingly or unwillingly cooked their companies' financial books and records.

Today, the Southern Company's Sarbanes-Oxley signatory officers are at-risk of going to jail. Bill Clinton, Barack Obama, and Kamala Harris will NOT be able to “fix” this problem for the company in Washington. This is NOT a problem that can be solved with political "juice." This is a financial-crimes problem.

Could Tom Fanning encounter serious problems before he is out the door? The answer appears to be yes, writes Watkins:

Mr. Fanning almost made it to the exit door with his bags of cash and ill-gotten wealth. Right now, nobody is blocking this exit door but me. Mr. Fanning can leave the headquarters building in Atlanta, but the cash and ill-gotten gains from the accounting-fraud scheme must stay in the Southern Company.

Whenever they wake up, I think federal law-enforcement agencies in Atlanta and Washington should claw back all of the bonuses that were awarded to corporate executives of the Southern Company based upon the accounting fraud scheme.

So that you know, I have been exposing wrongdoing throughout my entire 50-year career. This is the worst racketeering-enterprise and accounting-fraud scheme I have seen.

The rollout of my exclusive accounting-fraud articles will commence this week.


Robby Scott Hill said...

The shareholder derivative lawsuit is a powerful civil action. Since Alabama Power is a publicly traded company, I would hope my law professor, Joe Borg, would look into how current & former Southern Company executives have and will exercise their stock options. Y’all should call him up and ask him for an interview.

legalschnauzer said...

Wasn't a shareholder derivative lawsuit filed in the HealthSouth matter? My memory might be foggy on this, but I believe that's the civil action involving Doug Jones and Rob Riley.

I do recall that I reported on the matter, and then attempted to interview Mr. Jones, and he was none too pleased. In fact, I think my attempted interview -- he refused to actually answer any questions from me, if my memory is correct -- came after he attacked me on the Pam Miles listserv out of Huntsville for, gee, practicing journalism. Not much difference between Dems and Repugs in Alabama. I need to look up what I wrote on that case to make sure my memory is correct. Pretty sure Sam Stein, who I think was with HuffPost at the time, broke the story, and I picked up on it from there.

legalschnauzer said...

Rob: I'm pretty sure my memory is on target about the Health-South derivative lawsuit, which involved Ernst & Young. Here is a link to the first post I wrote on the subject, once Sam Stein (of Huffington Post) broke it: https://legalschnauzer.blogspot.com/2009/03/does-rob-riley-engage-in-fraud-while-he.html

Here is the headline: " Does Rob Riley Engage in Fraud While He "Fights" Fraud?"

here is how the post begins:

Alabama attorney Rob Riley, who has a curious history of cashing in on the Don Siegelman prosecution, recently announced a $109-million settlement in a fraud lawsuit involving HealthSouth Corporation. But sources tell Legal Schnauzer that Riley himself is involved in a company that faces allegations it practices health-care fraud.

Riley, the son of Alabama governor and former Siegelman opponent Bob Riley, announced that HealthSouth investors had reached a settlement with the accounting firm Ernst & Young. The suit alleged that Ernst & Young failed to detect a fraud that almost destroyed Birmingham-based HealthSouth.

"We think it is a good settlement for the shareholders, many of whom thought they would never see any return on their investment," Riley told The Birmingham News.

Riley is a curious choice to be lead counsel in a lawsuit alleging health-care fraud. That's because, according to our sources, he is an officer in a company that appears to have engaged in health-care fraud--and perhaps still is.

Sources tell Legal Schnauzer that Riley is an owner and officer in a Birmingham-based company that provides physical-therapy services. The company is facing allegations that it has repeatedly defrauded federal health-care programs.

Alice Martin, U.S. attorney for the Northern District of Alabama, has received extensive information about the alleged fraud scheme involving Riley's company, sources say. But Martin, a George W. Bush appointee and a long-time ally of Bob Riley, has refused to intervene in the case. . . .

Robby Scott Hill said...

Roger, I’ve had some temporary problems posting on your blog, but I think I’ve found a workaround.

Robby Scott Hill said...

I’ve heard lots about the situation surrounding HealthSouth. Let me confirm with my sources. I’m able to post under my profile again.

legalschnauzer said...

Not sure what would cause problems posting a comment to LS, but let me know if you can't get it fixed. I think we've had a few issues in the past with items sent from certain kinds of mobile phones, but my memory is that's pretty uncommon.

legalschnauzer said...

Why was Doug Jones displeased with my reporting on the the HealthSouth lawsuit and Rob Riley's peculiar role in it? We addressed that in a post titled " Striking a Nerve With a Key Figure in the Don Siegelman Case" . . . https://legalschnauzer.blogspot.com/2009/05/striking-nerve-with-key-figure-in-don.html

Have you ever said or written something and then wondered why it seemed to strike a nerve with a certain person?

We recently had such an experience here at Legal Schnauzer. It involved a central character in the Don Siegelman case. And it left me wondering about possible conflicts of interest involving the Siegelman criminal case and an ongoing federal lawsuit against people and entities connected to HealthSouth Corp.

For what it's worth, it also raised a number of questions in my mind about my unlawful termination at the University of Alabama at Birmingham (UAB).

It started with a post we titled "Does Rob Riley Engage in Fraud While He 'Fights' Fraud?" And it ended with a heated missive from Doug Jones, a prominent Alabama Democrat who served as lead counsel on Siegelman's defense team for roughly three years. Jones did not represent Siegelman during the trial. . . .

Doug Jones and I would seem to be political "brothers in arms." On the same day that Jones testified before Congress, documents were entered that contained numerous references to my reporting on the Paul Minor case in Mississippi, a political prosecution with many similarities to the Siegelman case.

From the tone of Jones' response to my post about Rob Riley and the HealthSouth lawsuit, we don't seem to be on the same wavelength at this point. Maybe that's because Jones, like Riley, is one of the lead plaintiffs' lawyers in a case against Scrushy and others that has generated more than $500 million in settlements--with more to come. You can only imagine what kind of attorney fees that case might generate.

Robby Scott Hill said...

Roger, you’ve discovered the existence of the “One Party State” aka “Uni-party.” Although, Rob Riley is officially a Republican & Doug Jones is officially a Democrat, they cooperate on issues of mutual concern. The “revolving door” from Big Law & Corporate America to Government and back to Big Law & Corporate America creates the “corporate interest,” which is a financial interest that benefits shareholders & executives without regard to their political beliefs. That’s why a lot of Democratic lawyers & professionals will tell you they are “fiscally conservative,” but socially liberal. That means they’re willing to help ordinary folks & animals until it starts affecting their bank account. When Minda Riley Campbell wants that new car, her two Robs: her husband, Rob and brother Rob, had better drop the charitable stuff and get her some money. Doug Jones grew up poor like me. So, Doug is going to hustle up cash too so he doesn’t have to sit in the nosebleed section at the ballpark with me & eat ramen noodles & crackers like I do. The “One Party State” is guys in both parties representing big corporations like ExxonMobil or Alabama Power in court, then getting themselves or their relatives elected with campaign contributions from above-stated companies, making laws favorable to them and going back to work for said big corporations. There was a time when I could have sold out to ExxonMobil, but I told them to choke on a big one. I’m sure it’s been puzzling them, but my great uncle’s business partners, the Hollars, were Royal Dutch Shell franchisees & Mr. Hollar was General Counsel for Shell in Houston. Also, my ancestor, Charles II, fled to Holland when Cromwell kicked us out of England. So, if you’re a Stuart, Berry or Hollar, you’re Royal Dutch Shell. But here’s the kicker, Roger. They never asked, nor did they ever pay me to do anything to sabotage ExxonMobil or the Alabama Gang. I did it because I despise what they stand for. I’m just hoping to retire to Amsterdam without a lot of hassle and smoke my Weed in peace while I learn how to speak Dutch. I chose to stay at home & not become a corporate agent because I loved my family and my pets.