Deloitte has agreed to pay $34 million to investors who blamed the auditor for losses linked to the collapse of the South Carolina utility Scana’s nuclear reactor project, marking a rare securities settlement involving a Big Four accounting firm. The Financial Times highlighted the significance of the agreement, noting that shareholder claims against auditors are typically difficult to sustain.
Former Scana shareholders argued that Deloitte failed to identify red flags in the construction of two nuclear reactors, allowing management to hide mounting problems over a decade. The project was ultimately abandoned in 2017, sending Scana shares tumbling, prompting a discounted sale to a rival utility, and leading to jail time for the company’s former chief executive, who pleaded guilty to misleading regulators. The fiasco also contributed to the bankruptcy of construction firm Westinghouse.
Plaintiffs claimed Deloitte should bear responsibility for part of estimated losses of $800 million, as the firm repeatedly signed off on financial statements asserting the reactors would be completed on time. The settlement, filed in South Carolina federal court on Friday, still requires judicial approval, but shareholder lawyers described it as “an excellent result.” This payment follows a $192.5 million settlement from Scana and its officers in 2020.
“The $34 million recovery from Deloitte is one of the largest securities class-action settlements against an auditing firm in the last decade,” the lawyers noted, adding that the agreement resulted from extensive, arm’s-length negotiations overseen by a respected mediator.
Deloitte stated on Friday, “Deloitte stands behind the quality of its audit work and is participating in this settlement to avoid the ongoing cost and distraction of extended litigation.” Auditors face a high legal threshold in securities fraud cases, as audits are intended to provide “reasonable assurance” rather than absolute guarantees. By comparison, PwC paid $65 million in 2015 over claims tied to the collapse of brokerage MF Global.
Litigation revealed scrutiny of Deloitte’s work, particularly its dismissal of concerns raised by a Scana whistleblower in 2015, who warned the reactors would not be finished in time to secure critical government subsidies. An internal review by Deloitte’s own construction expert later concluded that the firm should have investigated the whistleblower’s claims more thoroughly.
Deloitte has maintained it stands by its audits, arguing in court that Scana’s financial statements included multiple warnings about the project’s risks. The settlement does not constitute an admission of liability but allows the firm to resolve the dispute and avoid further legal costs.
