The Bond Buyer
July 22, 2020
…While the Cook litigation has ended, a federal judge ordered discovery to begin in another proposed class-action lawsuit by an investor in Santee Cooper’s mini-bond program, filed in the U.S. District Court of South Carolina’s Charleston Division on April 15, 2019.
Murray C. Turka, the lead plaintiff, filed the federal complaint against Santee Cooper and Lonnie Carter, the authority’s former chief executive officer, alleging violations of federal securities law anti-fraud provisions for failing to disclose pertinent information to investors about the nuclear project when the mini-bonds were sold.
During the period questioned in the lawsuit, Santee Cooper issued mini-bonds directly to residents of the state in 2014, 2015 and 2016 totaling $117.8 million. Turka certified that he purchased $15,000 of the bonds in 2014.
Gore, Santee Cooper’s spokeswoman, said Tuesday that all of the utility’s mini-bonds were called Jan. 1, and the program has been closed.
On June 25, Federal Judge Richard Mark Gergel ordered the parties to begin discovery in preparation for a jury selection and trial on or after July 1, 2021, according to the latest scheduling order in the Turka litigation.
Both sides are due to file lists of expert witnesses by December of this year. Final motions pertaining to the case and pretrial briefs are due five days prior to jury selection.
Santee Cooper and Carter had filed a motion to dismiss the case, but Gergel rejected those requests on Feb. 25.
The judge found that Turka had standing to bring the case for himself and a class of investors like him, and that Turka “sufficiently alleged misstatements or material omissions” in bond documents and other communications about the nuclear project.
Official statements for the mini-bonds, however, represented that the project was “subject to generic financial risk factors,” Gergel said. “Out of these allegations, the complaint generates a strong inference that Santee Cooper and Carter acted recklessly in that the danger of misleading mini-bond purchasers was so obvious that they must have been aware of it.
“Considering the totality of the circumstances alleged and giving ‘the inferential weight warranted by context and common sense,’ the court finds that plaintiff plausibly pled at least reckless scienter [or knowledge of wrongdoing] as to Santee Cooper and Carter,” the judge said.
Gergel also found that Turka “plausibly pled” that he and the putative class suffered an economic loss as a result of the alleged misstatements and material omissions in official statements, and that they suffered damages by receiving artificially deflated interest payments on the mini-bonds.
The cost of Summer Nuclear Units 2 and 3 was originally estimated to be approximately $9.8 billion. Based on its 45% ownership interest, Santee Cooper’s original cost to construct the two reactors was estimated to be approximately $4.4 billion.