Duke Energy could be in for a fresh round of embarrassing and damaging revelations in the ongoing state investigation of its merger with Progress Energy.
The N.C. Utilities Commission on Friday ordered Duke to publicly disclose hundreds of internal emails chronicling executive-level discussions that led up to the utility’s $32 billion merger with Progress Energy and the subsequent firing of CEO Bill Johnson.
The Utilities Commission said most of the emails Charlotte-based Duke and Raleigh-based Progress filed under seal this summer do not qualify as trade secrets. The ruling orders the utilities to release roughly four times the volume of internal documents they had previously made public.
The commission further rebuked the companies for claiming those emails should be kept from the public.
“The Commission is not persuaded that any person or business would benefit economically from the disclosure of the information,” the commission wrote in its order. “In the Applicants’ future filings in this and all dockets, the Commission expects the Applicants to be more forthright in their assertions as to what documents in fact contain confidential information.”
The Utilities Commission in July had requested more than a year’s worth of emails as part of its investigation into Johnson’s firing. The agency received some 6,000 pages of internal documents, but Duke and Progress filed 5,033 pages under seal as “trade secrets.”
Several media organizations, including The News & Observer, asked the Utilities Commission to unseal documents that did not meet the legal standard of a trade secret.
Even the small portion that was filed publicly revealed swirling doubts about Johnson’s ability to lead the combined company and growing anxiety within Duke’s executive suite over the mounting cost of the merger.
Duke has 10 days to divulge its emails or fight the commission in court to shield its internal documents from public scrutiny. The company is weighing all options.
“Duke Energy is reviewing the order and will determine next steps upon completion of that review,” the company said in a statement.
Unsealing the documents won’t sway the investigation. The commission has already viewed all the documents that have been labeled confidential.
New York analyst Marc de Croisset of FBR Capital Markets said additional disclosures could prove titillating but might yield little new information.
"It may make for great cocktail chatter, but I don’t expect anything substantive from a business standpoint that is not already known,” he said.
The Utilities Commission had approved the merger in late June on the understanding that Johnson, who had been CEO of Progress, would lead the combined company. Johnson’s firing, just hours after the merger was finalized, triggered a wave of condemnation from customers, employees and former Progress board members.
The commission launched its investigation with public hearings this summer, challenging Duke’s CEO Jim Rogers and Duke board members as to their credibility and trustworthiness. Rogers, under oath, said Duke’s board felt Johnson’s “style was autocratic and discouraged different points of view.” Johnson countered that Duke had “buyer’s remorse” and tried to squirm out of the merger without paying a $675 million breakup fee.
In addition to the commission’s probe into whether Duke deliberately misled regulators and the public about its CEO strategy, the N.C. Attorney General launched a parallel investigation, which is also ongoing.
The commission has the authority to repeal the merger, modify its terms or levy a fine against Duke. It could hold another round of hearings to follow up on leads that have surfaced during the probe. The panel has not commented on the progress or status of its investigation.
The commission hired a prominent national law firm that specializes in auditing financial fraud and corporate malfeasance to conduct the investigation and has suggested that Duke could end the matter by proposing a settlement.
The emails that were released this summer offered a rare glimpse into the workings of Duke’s corporate boardroom and the delicate relationships between CEO Rogers and his bosses on Duke’s board.
The emails, often typed on smartphones, showed that even as board members sent Johnson congratulatory emails – and congratulated themselves for sending those emails – their attitude toward Johnson remained tepid and rapidly cooled as the merger ran into regulatory trouble in Washington and as Progress’ nuclear plant performance deteriorated.
On Friday the commission said that of the 5,000-plus pages of confidential filings, only 672 pages should remain classified as confidential, while 1,432 pages include portions that are confidential and portions that are public.
Nearly 3,000 pages contain no trade secrets at all and should be released in their entirety, the commission concluded. The 1,432 pages that are partially confidential should be released to the public with the trade secrets blotted out, the commission said.