Shareholder suit claims Duke Energy influenced state regulators

One of the six shareholder lawsuits Duke Energy faces over coal ash issues claims the company improperly influenced North Carolina’s Department of Environment and Natural Resources.

Duke disclosed the claim in a quarterly securities report filed Friday. The lawsuit itself was filed in March under seal in North Carolina Business Court.

The litigation by shareholder Judy Mesirov follows the broad outlines of five other lawsuits filed against Duke in Delaware, Duke said in the securities filing.

It claims Duke directors and officers knew about Clean Water Act violations related to coal ash and of failure to maintain its ash ponds. A pipe rupture at a Duke power plant in Eden spilled tons of ash into the Dan River in February 2014.

Court filings not under seal say breaches of fiduciary duties, wastes of corporate assets and “unjust enrichment” exposed Duke to billions of dollars in potential liability.

But Mesirov’s complaint introduces a new claim, according to the securities filing: That directors “sanctioned activities to avoid compliance with the law by allowing improper influence of DENR to minimize regulation and by opposing previously anticipated citizen suit litigation.”

The lawsuit seeks corporate governance reforms and damages related to the Dan River spill, ash basin work and fines and settlements from state and federal investigations.

Duke spokesman David Scanzoni said Monday the allegation is baseless.

Directors and senior managers were engaged in coal ash management and oversight before the Dan River spill, Duke says. In its aftermath, the company says, it retooled its ash policy and worked to comply with state legislation requiring it to close 32 ash ponds by 2029.

DENR spokesman Jamie Kritzer said the department doesn’t comment on pending litigation.

Environmental advocates have insisted that DENR softly regulated Duke under the administration of Gov. Pat McCrory, a former Duke employee. The department has strongly denied those claims.

A federal grand jury investigation launched soon after the Dan River spill probed “the nature of Duke Energy’s contacts with DENR” regarding ash, Duke’s securities filing said.

The investigation resulted in a negotiated settlement in which Duke agreed to pay $102 million for nine misdemeanor violations at five power plants, but no charges against DENR employees. The settlement will go before a federal judge on Thursday.

DENR filed lawsuits against Duke over ash contamination in 2013, early in McCrory’s term, but only after advocates filed notices they would file their own litigation.

In March, DENR fined Duke $25 million for groundwater contamination at its Sutton power plant. Duke has appealed the fine.

The five Delaware shareholder lawsuits have been combined and are still before the court.

This story was originally published May 11, 2015 at 12:30 PM with the headline "Shareholder suit claims Duke Energy influenced state regulators."