Wednesday, May 3, 2023

Problems were evident early at Mississippi power plant, but Southern Company executives dithered as the project limped toward ignominious demolition

Kemper Plant (AP)

The building of Southern Company's Kemper Power Plant in Mississippi was plagued by deceit, fraud, and a cover-up, according to a former construction manager on the project. Kelli Williams essentially had a front-row seat for all of the problems at the project, which concluded with a demolition, and appears willing to recount what she saw for federal investigators.

That's from a 2019 story at the Jackson Clarion-Ledger, under the headline: "Ex-Kemper plant manager says execs ignored her warnings: 'It was essentially a cover-up'." Reporter Giacomo Bologna writes:

Kelli Williams said the feds haven't contacted her yet.

But if they called, Williams said she would tell them about the deceit, fraud and cover-up she saw firsthand.

Williams was a construction manager at the Kemper County power plant, which is now the subject of a second federal probe.

The plant was supposed to use new technology to burn cheap, wet coal found in eastern Mississippi without sending plumes of smoke into the atmosphere.

Leaders across the globe watched the years-long project to see whether "clean coal" was truly feasible.

It was a $7.5-billion flop.

The bottom line? "The people of Mississippi were deceived," Williams said. Writes Bologna:

Deadlines passed and budgets ballooned, yet the message from the plant's owner, Southern Company, stayed the same — the plant would be successful.

Then in 2017, Southern Company reversed course. The company announced it had given up on the first-of-its-kind coal plant and said the plant would only burn gas.

Now, Southern Company is warning investors of a new civil investigation by the U.S. Department of Justice.

Williams said there's plenty to investigate.

“I believe there were some frauds committed regarding the cost of the project and when things were known versus when they were publicly admitted,” Williams said. "...The people of Mississippi were deceived from the very beginning on the project."

Schuyler Baehman, spokesperson for Southern Company, declined to comment on the federal investigation and the allegations made by Williams.

The plant was built and operated by Mississippi Power, a subsidiary of Atlanta-based Southern Company.

Williams said she became one of two construction site managers at the power plant project in 2010, when Southern Company's then-CEO was telling investors the project was expected to cost $2.4 billion and be operational by 2014.

Did those projections prove accurate. Not even close, according to news reports. The Institute for Energy Economics and Financial Analysis (IEEFA) says cost estimates grew from about $3 billion to $7.5 billion

It did not take Williams long to detect problems with the project, Bologna reports:

Williams said she saw problems with the budget and cost immediately.

There was little contingency money set aside for unexpected costs, Williams said, and there were "quantity problems," where the amount of resources such as dirt and concrete was seriously underestimated.

"Just about every bid project we put out would be more than the estimate," Williams said. "... Nobody wanted to hear those concerns. The company line was, 'We're gonna make the budget, we're gonna make the schedule.'"

Williams said she told people at the highest levels of the project about these problems.

"I was given the advice to stop telling the executives what they didn't want to hear because I was very vocal that we were not going to make the budget," Williams said. "... It was essentially a cover-up."

Higher-ups at Southern Company did not want to hear Williams concerns. But the Kemper project proved to be such a flop that portions of it are being demolished:

According to Williams, her boss told her that raising these concerns was "hurting your career."

"I feel kind of stupid looking back on it now," she said.

Williams said she had never experienced a construction site like the Kemper site.

Normally, if there's a problem on a construction site," Williams said, "You make everyone aware, often and loudly."

Williams said she realizes now there was another factor at play, far removed from the day-to-day realities of a construction site: Southern Company's stock price.

"The reason they don't want to admit they're going over is they'll have to report it," Williams said. "It'll essentially hurt stock price and confidence."

An investigation would not be a first for the Kemper plant, Bologna writes:

In 2016, the public learned the Securities and Exchange Commission had been investigating Southern Company and the Kemper plant.

The SEC is a federal agency that is supposed to protect investors.

Williams said she expected someone from the SEC would contact her, but the call never came.

"I honestly don’t know anybody that they did reach out to," she said of investigators.

The only people who contacted her were Southern Company's own attorneys.

The investigation was eventually shelved with no conclusion.

"I was shocked that the investigation didn't go into more detail," Williams said. "... It just didn't seem like much of an investigation."

Williams hopes this new civil investigation by the Department of Justice is more rigorous.

"I’m happy that they’re investigating. I think there’s some potential wrongdoing involved and I would like to see it fully investigated,” Williams said.

Williams resigned her job in 2016, saying she was disillusioned with the company.

She hopes the truth about the plant eventually comes out.

"A lot of people were hurt by the project," Williams said. "There were 300 people laid off when the project was abandoned."

What might a civil investigation mean? In essence, it means the situation could get expensive for Southern Company, under the U.S. False Claims Act. Bologna explains:

Scott Gilbert is a former federal prosecutor who now defends individuals and companies against False Claims Act cases at Watkins & Eager in Jackson.

According to Gilbert, there could be serious penalties awaiting Southern Company under the False Claims Act, which he called "the government's civil tool to bring lawsuits to recover money it believes was obtained wrongfully."

Under this statute, Gilbert said the federal government can force companies to pay up to three times the amount of fraudulently obtained money.

The U.S. Department of Energy said it pledged up to $407 million to the project.

Ernest Moniz, who was the Secretary of Energy during much of the Kemper plant's construction, now sits on Southern Company's board of directors.

Could a criminal investigation be in the offing? That appears to be possible, even likely:

Gilbert was cautious about speculating on the Kemper Plant investigation, but said that in his experience, the Department of Justice often runs criminal investigations parallel to civil investigations.

“You always assume you’re looking at a criminal and civil investigation — especially when you're dealing with a subject as complex as this one is," Gilbert said. "This is the bread and butter of DOJ.”

According to Gilbert, any investigation into public money and private companies rests on a simple question: Did that company lie to the government to get money?

No comments: