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  • Writer's pictureDonald V. Watkins

The FBI Must Raid Southern Company Headquarters; Execs Reportedly Destroying Documents

Updated: Aug 17, 2023

By: Donald V. Watkins

Copyrighted and Published on April 3, 2023

IMAGE: On August 8, 2022, FBI agents under the direction of Director Christoher Wray and with the approval of U.S. Attorney General Merrick Garland raided Donald Trump's home at Mar-a-Largo. This raid was unprecedented in federal law enforcement. The raid justified on the basis that classified documents were at-risk of exposure to individuals without the proper national security clearance, or they might be inappropriately used by Trump.

[Part 3 in a Special Three-Part Series of Investigative Reports]

On March 19, 2003, federal agents swooped into HealthSouth Corp.'s Birmingham, Alabama headquarters in connection with an ongoing probe of accounting fraud that was committed by 15 senior management executives over a six-year period.

FBI agents served search warrants at HealthSouth’s corporate offices and left with six million pages of financial documents, as well as computer hard drives. The agents also served the company and certain unnamed employees with grand jury subpoenas relating to investigations by the Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC).

The Corporate Fraud Task Force created by President George W. Bush on July 9, 2002, oversaw the raid, criminal investigation, and subsequent prosecutions against participants in a $2.7 billion accounting fraud scheme at HealthSouth. The Task Force, which was created by Executive Order 13271, was designed to combat corporate fraud and restore investor confidence in the marketplace.

Between July 2002 and January 9, 2009, the Task Force obtained 1,300 corporate fraud convictions, including more than 200 chief executive officers and presidents, more than 120 corporate vice presidents, and more than 50 chief financial officers.

Accounting Fraud Charges Against HealthSouth Officials

Following the FBI raid, HealthSouth announced that it was cooperating with the investigation. HealthSouth sought and received a non-prosecution agreement from the DOJ for itself and its board of directors.

Shares of HealthSouth plunged after the investigation became public, and the company was hit with more than two dozen shareholder lawsuits.

On November 4, 2003, the DOJ announced the indictment of HealthSouth CEO Richard Scrushy on 85 felony accounts in connection with the accounting fraud scheme. The indictment alleged that Scrushy directed his senior officers to meet or beat Wall Street predictions by cooking the books. Scrushy denied the charges and maintained his innocence throughout the criminal proceedings.

IMAGE: Assistant U.S. Attorney General and present FBI Director Christopher Wray (2nd Left) speaks during a press conference held with Grant Ashley (Left), Assistant Director, FBI Criminal Investigative Division; Josh Hochberg (C), Chief, Fraud Section FBI Criminal Division; Marc Everson (2nd Right), IRS Commissioner; and Alice Martin (R), U.S. Attorney for the Northern District of Alabama, in the Justice Department in Washington November 4, 2003. Wray announced an indictment was unsealed in Birmingham, Alabama Tuesday, charging Richard M. Scrushy, former chief executive officer and chairman of the board of HealthSouth Corp., with fraud, money laundering and other offenses, based on his participation in a multi-billion-dollar scheme that defrauded members of the public who invested in HealthSouth

Richard Scrushy was the highest-ranking corporate officer of the 16 former executives at HealthSouth who were charged in the accounting fraud scheme. Fourteen of these executives pled guilty, including all five of the men who served as the company’s chief financial officers, and became cooperating witnesses for the government.

Even though Scrushy was acquitted, all five CEOs received light sentences for testifying against Scrushy

The Southern Company is Following in the Footsteps of HealthSouth and Bernie Madoff

Fast forward to April 3, 2023.

As described in Part 1, “How the Southern Company Cooked Its Books in a Massive $27 Billion Accounting Fraud Scheme,” and in Part 2, “The Southern Company Fraud Scheme: Is This the Resurrection of Bernie Madoff?,” a deep-dive into the Southern Company’s 10-K for 2022 shows that the monopolistic utility giant with nine million customers in six states and 99,521 shareholders (as of December 31, 2022) is following in the footsteps of HealthSouth and reviled New York financier/fraudster, Bernie Madoff.

For years, the Southern Company, which is cash strapped and destitute, has adopted, adapted, and implemented the worst financial practices and crimes perpetrated by guilty HealthSouth executives and Bernie Madoff.

As was the case in HealthSouth, top Southern Company executives “cooked the books” to meet or beat Wall Street expectations. Because of the fraud, the company was able to manipulate and maintain high stock prices for market cap purposes. With an artificially inflated market cap, the Southern Company was able to induce lenders to provide the company with $55.2 billion in long-term debt and $7.6 billion in credit lines.

The Southern Company’s consolidated $59 billion in annual cash flows from the sales of electricity, natural gas, and other forms of energy fell way short of covering the company’s operating expenses in 2022.

The company faked profitability for years by consistently and regularly paying dividends from borrowed money and capital injections provided by new investors, à la Bernie Madoff style.

The Southern Company also withheld more than 2,500 corporate documents that evidences the accounting fraud and other financial crimes from Deloitte & Touche, its outside auditing firm since 2002.

The drag on the Southern Company’s deteriorating financial condition comes from (a) $7.5 billion in losses and write-downs associated with its abandoned goal gasification construction project in Kemper, Mississippi, and (b) $21 billion in unexpected cost overruns from Georgia Power’s construction of Units 3 and 4 at the Vogtle Nuclear Power Plant. These write-downs and costs overruns drove Southern Company senior management executives to “cook the books.”

The Southern Company attempted to cover its tracks by issuing and certifying phony financial statements, accompanied by rosy investment documents, all in violation of the Sarbanes-Oxley Act of 2002. The individuals who signed the Sarbanes-Oxley certifications on the Southern Company’s phony 10-K for 2022 are: (a) Thomas A. Fanning (CEO) and Daniel S. Tucker (CFO), for the Southern Company; (b) J. Jeffrey Peoples (CEO) and Philip C. Raymond (CFO), for Alabama Power Company; (c) Christopher C. Womack (CEO) and Aaron P. Abramovitz (CFO), for Georgia Power Company; (d) Anthony L. Wilson (CEO) and Moses H. Feagin (CFO), for Mississippi Power Company; (e) Christopher Cummiskey (CEO) and Gary Kerr (CFO), for Southern Power Company; and (f) Kimberly S. Greene (CEO) and David P. Poroch (CFO), for Southern Gas Company.

These individuals share the same criminal exposure as the 15 executives who were criminally charged and pled guilty in the HealthSouth case. Tom Fanning is expected to use the successful Scrushy criminal defense playbook to escape charges and a prosecution.

The phony financial reports fooled shareholders, new investors, institution lenders, major private equity firms like Vanguard Group, Inc. and BlackRock, Inc., Deloitte & Touche, the SEC, state and federal regulators, and mainstream media organizations that cover publicly traded companies.

The accounting fraud could have been detected by Deloitte & Touche, but this did not happen. Deloitte was paid at least $17 million to opine that the phony K-10 for 2022 presented a fair and accurate picture of the company's financial condition when, in fact, the 10-K was rife with fraud.

Joe Biden Did Not Reinstate Bush’s Corporate Fraud Task Force

On November 17, 2009, President Barack Obama terminated President Bush’s Corporate Fraud Task Force with Executive Order 13519. President Donald Trump never created one.

President Biden does not have one, either. Biden did establish a limited purpose COVID-19 fraud task force with a lackluster track record.

The implosion of Theranos, Inc., FTX Trading Ltd., Silicon Valley Bank, and a host of other Wall Street companies since 2018, as well as the unrelenting serial crime spree perpetrated by Wells Fargo Bank since 2009, clearly shows that Obama’s termination of President Bush’s Corporate Fraud Task Force was a bad idea.

As a result, corporate fraud crimes by Wall Street publicly traded companies are out of control. Nobody is effectively policing them. When they get caught, these companies simply pay a fine and penalties and resume their crime sprees.

Today, corporate reformers and crime fighters fear that Joe Biden is soft on crime, unless it involves a DOJ/FBI raid on Donald Trump’s Mar-a-Largo home or the prosecution of MAGA Republicans who participated in the January 6th Insurrection.

Corporate prosecutions under President Joe Biden remain in the abyss after reaching record lows under Trump, according to government data analyzed in a Public Citizen report released on April 25, 2022. The Biden administration has shown no interest in amassing a strong prosecutorial record against Wall Street crooks.

What is worst, Attorney General Garland appears to be missing-in-action on all crime-fighting fronts.

In the absence of a Corporate Fraud Task Force like the one created by George Bush and considering Joe Biden’s apparent “softness” on white collar crimes committed by Wall Street crooks, Attorney General Garland has opened the door for notorious influence peddlers like former president Bill Clinton (D-Arkansas) to roam the halls of the DOJ in search of top officials who will permit him to assist them in resolving corporate fraud cases without criminal prosecutions of the companies involved or their CEOs.

Clinton, who is reportedly working behind the scenes to help Southern Company CEO Tom Fanning secure a non-prosecution agreement for the Southern Company, its affiliates, and himself and Chris Womack, is an expensive influencer. Reportedly, Clinton was paid $5 million, which was laundered through a Washington, D.C. law firm, to escort Fanning, Womack (Fanning’s successor), the Southern Company, and its affiliates to safety so that Fanning can exit the company on May 24, 2023 with a retirement package that is valued up to $100 million.

The fate of the other signatory officials on the jointly filed 10-K for 2022 is up in the air. What is worst for these individuals is this simple fact: Financial fraud crimes are excluded from commercial insurance coverage for corporate officers and directors. All of the signatory officials on the 10-K, except for Tom Fanning and Christopher Womack, must fend for themselves in a Sarbanes-Oxley investigation and prosecution, as was the case in HealthSouth.

Southern Company Officials are Reportedly Destroying Fraud Documents

Our confidential sources at Southern Company headquarters in Atlanta report that executives are discreetly destroying thousands of corporate records at multiple company locations that: (a) were withheld from Deloitte & Touche and (b) are relevant to a forensic audit and subsequent criminal investigation into financial frauds and other crimes at the Southern Company.

It is unclear as to who is directing the destruction of this documentary evidence in this case. A federal grand jury needs to be convened to ascertain what is happening at the Southern Company in this regard, and why.

Like President Bush’s Corporate Fraud Task Force in the HealthSouth case, the Biden White House must show leadership and instruct Attorney General Garland to: (a) conduct an immediate raid of Southern Company’s and Georgia Power Company's separate headquarters in Atlanta, together with Mississippi Power Company's headquarters in Gulfport, Mississippi, (b) retrieve the relevant financial documents and computer hard drives at all locations, (c) preserve this crucial physical evidence, and (d) serve grand jury subpoenas upon culpable executives at each location, as was done in the HealthSouth accounting fraud case.

Time is of the essence, unless the case has already been “fixed.”



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