The Cost of Energy, The Price of Power--Part I

One hundred and five years ago, Theodore Roosevelt declared in his State of the Union speech, "All contributions by corporations to any political committee or for any political purpose should be forbidden by law; directors should not be permitted to use stockholders' money for such purposes." 

That was then, this is now.

One look at a utility bill will tell you that power costs money. 

It costs the consumer who uses it, and it costs the utility company to produce it. If the utility company is the Southern Company (US utility subsidiaries: Alabama Power, Gulf Power, Georgia Power,and Mississippi Power), there’s another hidden cost of business:  the millions upon millions of dollars the company’s pay to lobbyists, influence peddlers, politicians, and others in the “power” game. 

As John Archibald pointed out in the Birmingham News last Sunday:

“Alabama Power spends almost $20 million a year to sway public or political opinion, federal documents show… $138 million in the seven-year period between 2003 and 2009 -- the most recent year available.”

A company that spends that much money to “sway public or political opinion” must have high-stake reasons. And they usually have a corporate philosophy that is ingrained and unchanging--sort of a 'business as usual' model that stands still while the rest of the world moves forward and evolves.

In a NYT article from November of 1989 by Jeffery Schmalz entitled: "Utility in Florida Pleads Guilty in Political Contributions" we read that what Mr. Archibald's article revealed is not a new concept by the Southern Company and its subsidiaries:

The Gulf Power Company, the major supplier of electricity in northwestern Florida, pleaded guilty today to conspiring to make secret illegal campaign contributions to political candidates.
The plea, in Federal District Court in Atlanta, is the latest twist in a long and complicated investigation of hundreds of thousands of dollars in political contributions involving not only Gulf Power but also its parent company, the Atlanta-based Southern Company.
The case has drawn nationwide attention because at least three figures in or closely associated with Gulf Power's hierarchy have suffered violent deaths since the investigations began, prompting officials to initiate inquiries into the deaths. No charges have been filed, but the cases are still open.
Gulf Power, a Pensacola-based utility that accounts for 7 percent of Southern's $7.2 billion in annual income, paid a $500,000 fine, which it agreed not to pass on to its customers, after pleading guilty to two felony counts.

In a similar case, Georgia Power pleaded "no contest" to misdemeanor charges a year before that were based on accusations of "high ranking utility officials violating state law by asking employees to contribute to the campaign of Bobby Rowan, a successful candidate for the the Public Service Commission."

U.S. Attorney Robert L. Barr was quoted in a news conference announcing Gulf Power's plea agreement saying that there were "obvious similarities" in the two cases. The investigation of Georgia Power's creative accounting was detailed in the Georgia Press:

In an affidavit unsealed today in Federal District Court here, a special agent of the Internal Revenue Service maintained that high-ranking executives of the Georgia Power Company and its parent, the Southern Company, had engaged in a complex six-year plan to evade millions of dollars in corporate taxes.
No party has been charged with wrongdoing. At a news conference, Robert L. Barr Jr., the United States Attorney for the Northern District of Georgia, said the affidavit was filed to help obtain warrants to search Georgia Power headquarters and the home of Timothy L. Fallaw, Southern's director of taxes and a former IRS agent.
Mr. Barr also said the investigation was but one part of a "complex and very lengthy investigation" involving several electric utilities and Arthur Andersen & Company, the accounting firm. $61 million in spare parts.
In the 33-page affidavit, the IRS special agent, Arthur D. McGovern Jr., contends that the tax evasion occurred from 1982 through 1987. He said Georgia Power improperly accounted for $61 million in spare parts held in inventory.
According to the affidavit, executives of Arthur Andersen, Southern's auditors, participated in meetings at which the tax matters were discussed. The affidavit quotes one Arthur Andersen employee as having told Georgia Power executives: "This seems awfully sneaky at best - I mean, at worst it seems real sneaky."

Corporations pay accountants and book cookers handsome sums to make sure the company uses every available loophole to enhance their bottom lines. Sometimes it's legal and ethical, other times maybe not so much. But it's the responsibility of the company and the government (IRS) to make certain tax and acceptable accounting rules are followed, and sure they will allow for some bending here and there, but not a complete twisting beyond any semblance of what was once a fairly straight line.

All of this happened before the Citizens United ruling, before the Supreme Court undid Teddy Roosevelt's 1935 law and handed corporations the reins of unchecked power through unlimited political donations. It was a dark day in America that has led to the best power that money can buy in our political process. Southern Company now takes full advantage of that ruling--all corporations do, but what's the real price of power and who will keep it in check? The shareholders maybe?

Two northern former Southern Company shareholders tried once, but they were unsuccessful and the SEC ended their probe with no findings of wrongdoing by the company:

The suit alleges the officers, including President Edward L. Addison, acted to fraudulently account for power plant spare parts, make illegal political contributions, submit filings to the Securities and Exchange Commission that misrepresented the company's true financial condition, and conceal prior
mismanagement and illegal acts.
The lawsuit - by stockholders Barnett Stepak of New Jersey and Roger Mondschein of New York - also alleges that 13 current and former directors breached their fiduciary duties.
The existence of the lawsuit was disclosed in a footnote to the company's first-quarter earnings report, which was released Wednesday. (“Southern Co. stockholders sue officers" by Robert Luke The Atlanta Journal and Constitution, April 25, 1991)

An earlier IRS and a DOJ investigation of Edward Addison *ended in a similar manner:

In 1990 James Fagan, assistant U.S. Attorney in Atlanta, was preparing to indict Southern Company Services--a company run by major Bush campaign donor Edward Addison--for criminal tax evasion. Before the indictments could be handed down, the criminal investigation was halted by the head of the DOJs tax division, Shirley Peterson, who was later promoted to the Commissioner of the IRS.

*(Mother Jones Investigations Jan-Feb 1993 Column 2, paragraph 2)

November 1, 1989 Edition: The Atlanta Constitution
Barr: Gulf, Ga. Power Cases Similar
Florida Subsidiary Pleads Guilty in Illicit Funds Scheme

In a penitential statement accompanying Gulf Power's guilty pleas, Gulf's President Douglas L. McCrary and Southern Co. President Edward L. Addison announced a number of steps designed "to see - as far as humanly possible - that nothing like this will ever happen again." Welcome as it is, this declaration of reform would be more convincing had a different future been carved out for Elmer B. Harris, the senior executive vice president of Georgia Power at the time of its campaign-contribution violations.

There seems to be a familiar chord being struck repeatedly--it's always somebody else's fault, if it weren't for this person, or if it weren't for that one...

Anyone who’s done a little digging into the history of the Southern Company and its subsidiary, Gulf Power, will realize that there are skeletons in the closet, and that’s not just a figure of speech--it’s a grim fact that mysterious unsolved murders, disappearances of former employees and unusual deaths are a part of the Southern Company’s corporate history.  And so are allegations of cover-ups, mismanagement and misdirection, all explained by pious claims to the contrary. 

Or as you will soon learn the other excuse was it was all "that Horton guys fault."

Who is was Jacob "Jake" Horton?

Mr. Horton was from Pensacola, Florida and had given thirty-three years of his life to the Southern Company, through Gulf Power, ending up as a vice president, one of four that reported to Gulf Power CEO Douglas McCrary, father of present Alabama Power CEO, Charles Douglas McCrary.

Thirty three years is a long time at one company. And many people would view that as a corporate loyalist, someone who could be trusted, the quintessential company man who would always advance the agenda and philosophy of the company first and foremost.

*"For many years, Jake Horton was a trusted employee of Gulf, and as a result was given a great deal of latitude in carrying out his duties," said Mr. Klappa. "If someone who has earned trust fails that trust, then all the systems in the world won't help."*(Same AJC article as above. Gale Klappa was the Southern Company's PR man)

And by all accounts he did his job well, if you were to ask his wife, his brother John and those that knew him outside of his corporate life. Even many that knew him in his corporate world marvelled at his dedication to his work.  But if you were to ask Mr. McCrary and the upper levels of Southern Company men, the federal government, the Florida PSC Commission and some news writers, Mr. Horton was capable of unspeakable acts of disloyalty that included murder and suicide. 

Those sources claim resorted to two of the three one fateful day in April of 1989. 

That was the day Jake Horton boarded a Southern Company plane with two pilots, and four minutes into the flight, a fire broke out in the cabin and all three men fell from the sky in a fireball.

People who saw Jake that day heard him say he was on his way to Atlanta to meet with Edward L. Addison and Douglas McCrary (who knew he was coming because he asked permission to use the company jet) for one of two things in an attempt to save his job--clear his name of the serious allegations of misconduct leveled at him from the company in the wake of the investigations, or he was on his way to the FBI to tell them what he knew:

With a briefcase full of papers, Jacob F. Horton, the senior vice president of the Gulf Power Company, took off for Atlanta in a corporate jet here in April to talk with corporate officials about possible theft, payoffs and cover-ups that are under investigation by a Federal grand jury.

He never made it to either.

to be continued.....

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