By: Donald V. Watkins
Copyrighted and Published on March 27, 2023
This week, I will begin publishing my exclusive series of articles on how the Southern Company hoodwinked its external auditor (Deloitte & Touche), its regulators (the U.S. Securities and Exchange Commission and state Public Service Commissions), its two largest shareholders (the Vanguard Group, Inc, BlackRock, Inc.), its banks and other lenders (including the U.S. Department of Energy), and other stakeholders with cooked financial books and records that concealed up to $27 billion in accounting fraud over a ten-year period, all while pretending to meet the earnings expectations of unsuspecting Wall Street analysts.
It was a masterful accounting fraud scheme. In fact, it was much better than the one used in the $2.7 billion HealthSouth accounting fraud case.
Along the way, CEO Tom Fanning was rewarded handsomely with a multimillion-dollar annual salary, fantastic bonuses, and valuable stock options. Fanning has made over $100 million in total compensation that was based upon cooked Southern Company financial books and records.
Apparently, nobody cared.
Those entities and persons who should have detected the accounting fraud at the Southern Company and its affiliates were too busy hanging out in the skyboxes at sporting events and concerts, or getting "wasted" at PGA events like the Masters, or experiencing the thrill of big-game hunting and fishing trips, or enjoying corporate jet rides to exotics ports of call, or smiling while their wives, mistresses, and children spent the money loaded onto the gift cards they received, in violation of the company's Code of Ethics. The Southern Company was able to anesthetize the guardians of the public interest using unreported gifts and a waterfall of opulence as tranquilizers. It worked, very well.
In the process, Tom Fanning and his loyal crew got rich – super rich. Meanwhile, the customers of Alabama Power Company, Georgia Power Company, and Mississippi Power Company got raped and pillaged each month.
Again, nobody cared.
A lot of good and decent employees who served as chief executive officers and chief financial officers of Southern Company and its affiliates signed their names to 10-Qs and 10-Ks trusting that the parent company’s financial books were "clean," as required by the Sarbanes-Oxley Act of 2002. They were NOT.
Sarbanes-Oxley is the federal criminal statute that burned the corporate executives at HealthSouth, Enron, WorldCom, and Tyco who willingly or unwillingly cooked their companies' financial books and records.
Today, the Southern Company's Sarbanes-Oxley signatory officers are at-risk of going to jail. Bill Clinton, Barack Obama, and Kamala Harris will NOT be able to “fix” this problem for the company in Washington. This is NOT a problem that can be solved with political "juice." This is a financial crimes problem.
Mr. Fanning almost made it to the exit door with his bags of cash and ill-gotten wealth. Right now, nobody is blocking this exit door but me. Mr. Fanning can leave the headquarters building in Atlanta, but the cash and ill-gotten gains from the accounting fraud scheme must stay in the Southern Company.
Whenever they wake up, I think federal law enforcement agencies in Atlanta and Washington should clawback all of the bonuses that were awarded to corporate executives of the Southern Company based upon the accounting fraud scheme.
So that you know, I have been exposing wrongdoing throughout my entire 50-year career. This is the worst racketeering enterprise and accounting fraud scheme I have seen in my career.
The rollout of my exclusive accounting fraud articles will commence this week.