Robbins Arroyo LLP: The Southern Company (SO) Misled Shareholders According to a Recently Filed Lawsuit
Robbins Arroyo LLP announces that a shareholder derivative lawsuit was filed on behalf of The Southern Company (NYSE: SO) in the U.S. District Court for the Northern District of Georgia, Atlanta Division. The complaint is brought against certain current and former officers and directors of the company for alleged breaches of fiduciary duties, unjust enrichment, and corporate waste. Southern Company, together with its subsidiaries, engages in the generation, transmission, and distribution of electricity through coal, nuclear, oil and gas, and hydro resources in Alabama, Georgia, Florida, and Mississippi. In 2006, Southern Company announced plans for its subsidiary, Mississippi Power, to build a “clean coal” plant in Kemper County, Mississippi (the “Kemper Plant”).
Southern Company Accused of Providing Inaccurate Timeline for Its Kemper Plant
According to the complaint, in an earnings call with investors and analysts on July 28, 2010, Southern Company announced that the Kemper Plant was expected to be placed in service in May 2014, with a construction cost estimate of $2.4 billion. If timely built, the Kemper Plant would qualify for nearly $700 million in federal incentives, including $412 million in investment tax credits and $270 million in clean coal power initiative funds.
In a series of subsequent public statements, Southern Company officials repeatedly assured investors that the Kemper Plant would be completed by the deadline. However, the complaint alleges that Southern Company officials issued misleading statements about the company’s business, operations, and financial prospects, including misrepresentations regarding internal controls over financial reporting and the costs and timing of the expected completion of the Kemper Plant. In particular, Southern Company failed to disclose that the Kemper Plant would not be completed by the May 2014 deadline, that the total project cost would exceed the $2.88 billion cost cap set by state regulators, and that the company’s management actively prevented accurate information regarding the true status of the Kemper Plant from reaching investors.
On October 2, 2013, Southern Company revealed that the Kemper Plant would not be completed by the May 2014 deadline and that the company would have to repay $133 million in federal tax credits. However, company officials continued to suggest that the Kemper Plant would be completed in 2014 and that the company would still be eligible to receive approximately $150 million of additional tax credits.
In May 2016, the company announced that it was being investigated by the U.S. Securities and Exchange Commission regarding “accounting matters, disclosure controls and procedures, and internal controls over financial reporting” associated with the Kemper Plant. In July 2016, the New York Times published a report based on documents and recordings from a whistleblower at Southern Company that revealed that company officials intentionally concealed construction delays and issued misleading statements in order to remain eligible for tax credits and avoid disclosing to investors that the company would lose federal subsidies. On February 22, 2017, Southern Company announced that the Kemper Plant would not be fully operational until mid-March 2017, and that the estimated cost of the project increased to $6.99 billion, more than double the cost estimate at the time that construction began.
Southern Company Shareholders Have Legal Options
Concerned shareholders who would like more information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.
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