By: Donald V. Watkins
Copyrighted and Published on May 7, 2023
Special Investigative Report---
In 2005, a Georgia appellate court ruled that easements for electric power lines permit use of fiber optic communication lines as an accommodation for new technology. The court ruling declared that running fiber optic lines on these easements was a mere change in the degree of use of the easement that did not require additional compensation to the landowner.
The court ruling cleared the way for the 49 small cities in the Municipal Electric Authority of Georgia and utility giant Georgia Power Company to run fiber optic lines and other digital communications infrastructure on their easements across lands owned by third parties.
Since 2009, the federal government has poured more than $150 billion into digital communications infrastructure.
In 2019, the Georgia General Assembly passed a law allowing local electric membership corporations to offer broadband along with electric power.
On February 8, 2021, Georgia Governor Brian Kemp announced that the state would begin Internet expansion for certain rural Georgia counties, with $20 million in his budget recommendation for that fiscal year and $10 million the next year.
On November 6, 2021, Congress enacted the Infrastructure Investment Bill and American Jobs Act, which dedicated $65 billion for broadband funding.
What is Southern Fiber Company, LLC
On April 3, 2017, a private company was formed in Atlanta, Georgia called Southern Fiber Company, LLC, to take advantage of the ramped up commercial opportunities in the fiber optic infrastructure business. Southern Fiber Company planned to offer an all-inclusive service on multiple-stage projects--from planning and development, make-ready, installation, splicing, to maintenance and repairs.
Patrick S. Pittard organized the company, incorporated it, and served as its Chairman and CEO in 2017 and 2018. Pittard was one of six equity members of Southern Fiber. The company was funded with a $6 million investment from the MacLeod Family Trust. Eric MacLeod, who runs the Trust, became the Lead Director of Southern Fiber Company.
Despite its name, Southern Fiber had no known affiliation with the Southern Company when it was formed. It was not a Southern Company subsidiary, nor a tax equity partner, nor a non-tax equity partner for SEC reporting purposes.
Southern Fiber Company struggled financially during the early years. Between 2018 and 2020, five of the six original equity partners left the firm under buyout arrangements brokered by Charles Clayton Sanders (a/k/a known as “Clay Sanders"), who became the sole founding member in the company. Sanders was a college student of Pittard’s at the University of Georgia and Southern Fiber was his brainchild.
Sanders bought out the MacLeod interest in the company for $2.5 million, leaving the Trust with a $3.5 million loss on the buyout.
The buyouts were amazing, given the facts that: (a) Clay Sanders did not have the capital to start Southern Fiber in 2017, (b) Southern Fiber Company had nearly run out of operating money during this buyout period, and (c) the company almost went out of business during the COVID-19 pandemic.
On December 13, 2019, Clay Sanders formed Elite Utility Solution, LLC. The company says it provides turnkey services, from traffic control, utility construction, and directional drilling to hydro-excavation and backfilling. Elite Utility Solution is headquartered in the same building with Southern Fiber Company at 471 Meadow Lake Terrace, Hoschton, Georgia.
On March 20, 2020, Southern Fiber hired Hang Nguyen as its financial analyst. Ms. Nguyen’s LinkedIn page shows that she is still with the company.
Southern Fiber applied for and received a $171,689 federal Paycheck Protection Program loan on May 1, 2020. The company claimed that it retained 25 employees with its PPP money. Approximately $163,776 of the loan amount was “forgiven” on August 19, 2021.
On May 26, 2021, Christopher Womack was named as Chairman and CEO of Georgia Power Company.
In 2022, everything changed for Southern Fiber Company. The company filed two Annual Registration forms that year with the Georgia Secretary of State’s Office.
The Annual Registration form filed on March 22, 2022, contained the same basic information on the company that had been reported after the departure of Patrick Pittard in 2018.
On September 8, 2022, Southern Fiber amended its March 22nd Annual Registration form to list the Duluth, Georgia law firm of Andersen, Tate, & Carr as its registered agent. The law firm replaced Chad Brown, who is Clay Sanders brother-in-law, as registered agent. Attorney Kathleen Hart, a merger and acquisition specialist, was also listed as the company’s “Attorney-in-Fact.”
On September 8, 2022, Elite Utility Solution made the identical amendment to its Annual Registration.
On September 20, 2022, Clay Sanders registered the “Southern Utility Group, LLC” with the Georgia Secretary of State for a “Utility Contractor” license (UM102697). However, there is no record of incorporation for “Southern Utility Group, LLC” in the Secretary of State’s Office as a legal entity. As such, the contractor’s license for “Southern Utility Group” was apparently issued to a company that does not exist from a legal standpoint.
On March 8, 2023, both Southern Fiber Company and Elite Utility Solution filed their Annual Registrations for 2023, 2024, and 2025, all at one time. The registrations were filed by Andrew Bell, chief financial officer for the Southern Utility Group in Gainesville, Georgia. This was a very unusual filing.
The identical scenario played out for Sanders Capital LLC, which was formed by Clay Sanders in Georgia on July 3, 2017. Sanders served as the sole incorporator, member, and registered agent, until September 9, 2022. On that date, the identical Andersen, Tate & Carr/Kathleen Hart/Andrew Bell corporate registration arrangement was put in place for Sanders Capital, LLC, including the filing of an amended Annual Registration for 2023, 2024, and 2025 on March 8, 2023.
The changes to Sanders Capital, LLC occurred even though the Secretary of State’s Office issued a “Notice of Intent to Administratively Dissolve” to Sanders Capital, LLC, on July 19, 2021, and August 19, 2022, for a deficiency relating to the designated registered agent.
Today, Southern Fiber Company is awash in fiber optic installation contracts with Georgia Power Company. Yet, the company’s website is devoid of any information regarding its owners, executive officers, board members, major contract awards, business alliance partners, and/or fiber optic installation projects in progress.
The omission of this basic corporate information on the websites for Sanders’ companies is highly unusual. Most companies tout their relationship with anchor clients like Georgia Power as a promotional and marketing tool to generate future business. This is particularly true for startup companies and those that survived a COVID-related near death experience.
The same lack of basic corporate information exists on the website for Elite Utility Solutions.
Sanders Capital has no published website.
How did Southern Fiber Company, which was destitute in 2020 when it applied for a PPP loan in 2020, become awash in multimillion dollar fiber optic installation contracts with Georgia Power Company in 2022?
Why is this Georgia Power Company key external vendor relationship not listed in the consolidated Form 10-K financial statement for 2022 filed by the Southern Company with the SEC on February 15, 2023? The amount paid to Southern Fiber falls within the Southern Company’s definition of a “material” expense for its 10-K for 2022.
What Does David J. Grain Have to Do with Any of This?
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, including fiber optic infrastructure.
We profiled Grain in a March 25, 2023, article titled, “David J. Grain: Getting Rich from his Southern Company Platform.”
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 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.
After Grain became Lead Independent Director on May 26, 2021, his firm’s assets under management grew by $2.9 billion. This is the same date that Christopher Womack began his tenure as CEO of Georgia Power.
Along the way, Grain pocketed $365,000 in Southern Company director fees in 2021 and a comparable amount in 2022, courtesy of the Southern Company’s financially strapped electricity and natural gas customers.
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, telecommunications, and fiber optic 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."
Whenever Grain Management wins bids to acquire FCC digital communications licenses, the company immediately leases up to 80% of its bandwidth capacity under the license to giant companies like AT&T and Verizon. This is a slick way for white-owned digital communications companies to use a black face and play the race card to secure taxpayer-funded subsidies for the purpose of acquiring these valuable licenses.
This business arrangement with Grain Management looks, smells, and feels like a "fleecing" of federal taxpayers in the digital era.
Georgia Power Entered the Fiber Optic Infrastructure Business in 2017
The Southern Company entered the fiber optic business on December 13, 2017, when Georgia Power announced that it had begun working with AT&T for a Georgia-based trail of AT&T’s Project AirGig – a first-of-its-kind system that could one day deliver ultra-fast internet service over power lines.
Under Project AirGig, AT&T and Georgia Power would install devices on existing Georgia Power poles to provide high speed broadband which could be clamped on by trained electrical workers in just a few minutes. This project allows AT&T and Georgia Power to offer broadband to 2.5 million customers across the state.
“Georgia Power continuously utilizes technology research and collaborates with companies like AT&T in order to introduce new products and services that help meet the changing needs of our customers,” said Paul Bowers, then-Chairman, President, and CEO of Georgia Power. “Expanding access to high-speed Internet is an important initiative that provides value for all of our customers and helps us remain a competitive state in which to do business.”
With this announcement, David Grain and Grain Management were legally precluded from conducting any business, directly or indirectly, with Southern Fiber Company and/or AT&T in the Southern Company’s six state service market (i.e., Mississippi, Alabama, Georgia, Tennessee, Virginia, and Illinois) without a full disclosure to the Southern Company board of directors and an express waiver by the board of directors of this conflict of interest.
David Grain Appears to be Dripping With Conflicts of Interests
It is obvious that someone in the Georgia Power/Southern Company sphere of influence has taken a special interest in growing Southern Fiber Company.
It is also obvious that the Southern Company, via its partnership between Georgia Power and AT&T, has staked out the hosting of fiber optic communications lines – for a fee -- as a profit center for the Southern Company’s business operations. The installation, splicing, maintenance, and repair business of these fiber optic lines is an add-on economic benefit for Southern Fiber and whoever else is discretely financing and growing the company behind-the-scenes.
Some individual or entity has financed the restructuring and rapid expansion of the Southern Fiber Company and this person or entity is hiding behind the thick veil of a well-known Georgia law firm to conceal his/her/its identity.
It is obvious that somebody at Georgia Power is channeling a lot of fiber optic installation work to a company that was near bankruptcy in 2020.
Who at the Southern Company would have a focused interest in growing Southern Fiber Company?
Confidential sources, who spoke to us on the condition of anonymity, tell us that David Grain has used his “juice” as Lead Director to get Georgia Power to secretly grow and fatten the financial coffers of Southern Fiber Company. As we understand it, Southern Fiber is being developed with Georgia Power money as a potential acquisition target for Grain Management.
What is more, substantial questions have arisen as to whether Grain Management’s multiple FCC licenses and bandwidth capacity leasing arrangements with AT&T facilitate any aspect of the commercial implementation of the Georgia Power-AT&T’s Project AirGig rollout to 2.5 million Southern Company customers in Georgia (and other states in the Southern Company service markets).
No aspect of Grain’s apparent conflict of interest involving Southern Fiber Company and potential conflict of interest with the Georgia Power-AT&T Project AirGig rollout has been reported by Mr. Grain to the Southern Company’s board of directors or the company’s state and federal regulators, as required by law.
If the Southern Company, acting through Georgia Power, wanted to grow the Southern Fiber Company as part its internal economic value creation strategy, it would have invested directly in Southern Fiber and listed this investment in its 10-K, along with the other 127 firms that received Southern Company investment money in 2022.
Instead, it appears that the secret Georgia Power fiber optic contracts are being used to grow and fatten the Southern Fiber Company financial coffers for Mr. Grain’s personal, undisclosed, and unreported financial interests.
If this scenario is true, Grain’s conduct would constitute impermissible “grifting” by a Southern Company director and would give rise to several felony offenses that should be investigated by federal and state prosecutors.
Southern Fiber Company went to great lengths to conceal the nature and scope of its business relationship with Georgia Power. It took a forensic investigation to track down this suspicious activity and identify the parties involved.
Apparently, no oversight or law enforcement agency is adequately monitoring or policing any of the “insider” transactions that are robbing the Southern Company’s shareholders and 9 million customers of potentially billions of dollars in tangible economic value from its entry into the fiber optic business sector.
Based upon the matters disclosed in this article, this may be one of the most creative “grifting” and corporate rip-off fraud schemes since the HealthSouth Corp. scams in Birmingham that operated from 1996 to 2002.
This is one hot mess! Meanwhile, Southern Company affiliates in Georgia and elsewhere are seeking more rate increases to finance the company’s scams and business losses.
Stay tuned! Much more is coming to you regarding undisclosed “insider” transactions at the Southern Company.