A law firm that conducted Southern Company’s internal investigation into reports that a political consulting firm used by a Southern subsidiary directed private surveillance of Southern’s CEO – possibly with the approval of the subsidiary’s CEO – has its own ties to both the consultant and the subsidiary.
In 2017, the political firm Matrix LLC, or its employees, directed a private investigator to surveil Southern Company’s then-CEO Tom Fanning, according to reporting from AL.com last year. The reporting did not name Mark Crosswhite, former CEO of the Southern Company subsidiary, Alabama Power, but questions grew about his involvement after he “abruptly announced plans to retire” late last year. (After stepping down as CEO, Crosswhite had a six-month $125,000 consulting contract with Alabama Power; it was scheduled to end June 30th.) Sources told the Wall Street Journal “the surveillance allegations and subsequent investigation played a role in his [Crosswhite’s] decision to leave.” Southern said it had “zero factor.”
But the Wall Street Journal’s report revealed that the target of the surveillance, Southern CEO Tom Fanning, was “incensed” about the allegations, and hired two law firms to conduct an internal investigation.
The investigation was “unable to substantiate the allegation that the highly inappropriate surveillance of Tom Fanning was authorized by any employee of the company,” Southern told the Journal.
But one of the law firms that led Southern’s internal investigation into the matter has their own ties to Matrix LLC. The ties present a potential conflict of interest, and call into question Southern’s narrative that it “conducted a thorough internal investigation.” Southern told the Journal that it has “moved on.”
Two firms conducted Southern’s internal investigation, according to the Journal: King & Spalding and White, Arnold, & Dowd P.C. Those firms may have their own interests, however. Both firms have years of experience working for Southern Company in high-profile cases and one of the firms – White, Arnold & Dowd – has worked directly with Matrix LLC.
The Energy and Policy Institute reached out to Southern Company, White, Arnold & Dowd, King & Spalding, and Matrix for comment. Southern did not have a comment. Neither White, Arnold & Dowd, King & Spalding, nor Matrix responded to EPI’s request for comment.
White, Arnold & Dowd’s connections to Alabama Power, Matrix LLC
White, Arnold & Dowd represented an Alabama Power front group that had been organized by Matrix LLC at a contentious 2013 proceeding at the Alabama Public Service Commission. In the proceeding, various Matrix-connected front groups opposed an effort by consumer and environmental advocates to reduce Alabama Power’s profits to levels more commonly seen across the country.
J. Mark White, an attorney with White, Arnold & Dowd, was listed as the attorney of record for the Partnership for Affordable Clean Energy (PACE). PACE, now known as Energy Fairness, was incorporated by William Lineberry, a former attorney with the Birmingham, Alabama office of Balch & Bingham, a firm that lobbies on behalf of Southern Company and represents Alabama Power before the Alabama Public Service Commission (PSC).
Lance Brown served as the Executive Director of PACE from January 2009 through June 2017, according to his LinkedIn profile. Brown claimed a $100,000 per year income from Matrix LLC, according to August 2009 divorce filings in Montgomery County, Alabama. Brown participated in the 2013 hearings about Alabama Power’s profits while White was PACE’s attorney.
Lance Brown LinkedIn profile, accessed July 7, 2023.
PACE appeared to continue receiving payments from Matrix LLC as late as 2018, according to files sent from Matrix to then-chairman of NextEra Energy James Robo in November 2021, along with a partially redacted cover letter. The files were sent to Robo amidst a feud and litigation between Matrix’s founder, Joe Perkins, and its former CEO, Jeff Pitts, who conducted political work for Florida Power & Light, a NextEra subsidiary. The letter to NextEra and accompanying files were sent anonymously to press outlets who used them in reporting, but they have not been published in full; The Orlando Sentinel independently corroborated many of the details contained in the files. EPI obtained the files from multiple sources who asked to remain anonymous.
Apparent payments from Matrix LLC to PACE
EPI reached out to PACE and Perkins for comment but did not receive any response.
PACE defended the positions of Alabama Power in the docket and claimed the method used to calculate Alabama Power’s return on equity (ROE), a measure of its profit, was fair despite it being one of the highest in the nation. PACE claimed that it had “no hidden agenda or intent” and that its work at the PSC was “geared toward serving the economic interests of it [sic] partners.”
PACE did not disclose its relationship with Matrix or Alabama Power to the PSC or the public.
In the intervening years, an EPI analysis of the ROE changes made in 2013 demonstrated that Alabama Power earned $1 billion in excess profits over a five-year period compared to the utility industry average. Commissioner Terry Dunn, who served on the Commission from 2011 – 2015, called the hearings at the time “just a dog and pony show. It was all staged. The people that you saw get up, they were reading off the same script.”
An internal email between Mark White and a number of Southern Company and Matrix LLC officials from 2013 also appears to show White working directly with Southern Company and Matrix LLC officials at that time, months before he began representing PACE at the Alabama PSC. White was emailing about a briefing that he and Perkins would co-lead for company officials about “the laws of defamation in Alabama.” In the email, White described Perkins as a long-time colleague with whom he had worked on political campaigns. The email was obtained by the Energy and Policy Institute from a source who asked to remain anonymous.
The Journal’s report said that an ex-Matrix employee, Jeff Pitts, alleged that a motivator of the surveillance of Fanning could have been concerns about a proposal at Southern to consolidate certain resources, “such as consulting and legal services” away from Alabama Power and into Southern, which is based in Atlanta. Such a consolidation would have potentially meant lost business for Matrix – but also possibly for White, Arnold & Dowd.
White did not respond to a request for comment.
King & Spalding also connected to Southern Company
King & Spalding has represented Southern in lawsuits before, most notably in an ongoing dispute between Oglethorpe Power Corporation (OPC) and Georgia Power. OPC claimed Georgia Power was unlawfully attempting to force it to pay for more than its fair share of cost overruns for the long-delayed Plant Vogtle Units 3 and 4 after an agreement in 2018 between the parties to keep the project going and shift more risk onto Georgia Power. OPC said it could lose more than $400 million because Georgia Power was refusing to abide by an agreement that would limit how much OPC would pay in the event of additional cost overruns.
King & Spalding did not respond to a request for comment.
Internal investigations at other utilities accompanied federal charges, investigations, or lawsuits
Bribery and political scandals have engulfed the utility industry in recent years, and many utilities have conducted internal investigations that they claimed found no fault of employees, only to later face criminal investigations, indictments and later lawsuits.
NextEra subsidiary Florida Power & Light paid millions of dollars to consultants who helped to run spoiler candidates in Florida State Senate elections. NextEra conducted an internal investigation and it claimed there was “no evidence […] of illegality or wrongdoing on the part of FPL or any of its employees.”
NextEra is now the subject of a Federal Election Commission complaint and a class action lawsuit accusing the company of defrauding investors for withholding material information related to the scandals. And Florida Power & Light CEO Eric Silagy, who retired unexpectedly in January 2023, “signed an exit agreement that includes a multi-year “claw back on compensation” if there is a finding of “any legal wrongdoing,” after NextEra’s internal investigation was completed.
FirstEnergy signed a deferred prosecution agreement and paid a $230 million fine for its $60 million bribery scheme, which was designed to pass a $1.3 billion bailout of its ailing nuclear and coal-fired power plants. Former Ohio Speaker of the House Larry Householder and former chair of the Ohio Republican Party were found guilty of racketeering and sentenced to 20 years and 5 years respectively.
FirstEnergy did its own internal investigation after the criminal indictments, and its subsidiaries proposed refunds to customers for ratepayer money that was improperly spent in relation to the Ohio bribery scheme, but multiple investigations and audits by federal and state regulators later forced FirstEnergy to conduct further internal reviews, resulting in dramatically larger proposed refunds. Jersey Central Power & Light, for instance, initially proposed more than $500K in refunds in 2021, but in 2023 it proposed a $10 million refund to ratepayers who were wrongly charged for lobbying, sponsorships, donations, advertising, and other costs.
A shareholder lawsuit against FirstEnergy accused the company and some of its current and former directors and officers of using its internal investigation as a method to convince its auditor, PriceWaterhouseCooper, to sign off on the utility’s filings with the Securities and Exchange Commission after Householder’s arrest.
Exelon subsidiary ComEd agreed to pay $200 million three years ago as part of a deferred prosecution agreement with the Department of Justice to resolve a federal criminal investigation into a years-long bribery scheme in Illinois. A federal jury recently found four former ComEd executives and associates guilty for bribery, record falsification, and conspiring to influence and reward the former Speaker of the Illinois House to assist with favorable utility legislation. Exelon’s internal investigation began after the U.S. Attorneys Office’s probe started and resulted in the departure of a “small number of senior ComEd employees”.
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