Monday, March 24, 2014
RALEIGH, N.C. (AP) — The lawyer hired to represent North Carolina's environmental agency during a federal investigation into its regulation of Duke Energy's coal ash dumps once represented the utility company in a different criminal probe.
The state Department of Environment and Natural Resources has hired Mark T. Calloway of Charlotte to help respond to 20 grand jury subpoenas the agency and its employees have received after the Feb. 2 spill at Duke's Eden plant, which coated 70 miles of the Dan River in toxic sludge. Duke has been issued at least two subpoenas as part of that investigation.
The state regulatory agency has issued notice of eight environmental violations against Duke in the last month arising from the Eden spill and issues at the utility's other coal-fired plants, including the recent dumping of 61 million gallons of contaminated water into the Cape Fear River.
The state agency's chief lawyer said Monday that he saw no conflict of interest in Calloway's prior representation of Duke, the nation's largest electricity company.
Calloway did not respond Monday to messages seeking comment.
Legal experts said Calloway's representation of the state agency likely doesn't violate ethical standards, as long as Duke doesn't object to its former lawyer now representing a client with potentially adverse interests in the current criminal probe.
"As far as the rules of professional conduct and the State Bar ethics rules that govern attorney conflict, it doesn't sound like an obvious violation," said Eric Fink, and associate professor at Elon University School of Law. "But for a reasonable person looking at this, it would raise eyebrows."
"It's a fuzzy area. I see real grounds for members of the public to question what this says about the state's independence of Duke," he added.
Duke spokesman Tom Williams declined to comment on the issue.
A former federal prosecutor who now specializes in white-collar defense, Calloway represented Duke during a 2004 federal investigation into the company's accounting practices.
That probe began after a grand jury was convened after a 2002 audit ordered by commissions overseeing utilities in North and South Carolina found Duke underreported its profits by $124 million over a three year span. Duke was cleared of any criminal wrongdoing, but agreed to reimburse customers $25 million to settle the matter.
Records show other lawyers at the firm where Calloway is a partner — Alston & Bird — also defended Duke in a lawsuit filed by the company's retirees that was settled in 2011.
Lacy Presnell, the general counsel at the state environmental agency, said Calloway will assist with retrieving documents demanded by the subpoenas, but will not be asked to provide legal advice to employees called to testify before the grand jury.
"We reviewed all potential conflicts before he was chosen and determined there are no conflicts which prevent him from representing the department," Presnell said.
The agency, also known as DENR, did not respond to questions about who first recommended hiring Calloway.
In his biographical information listed on the firm's webpage, Calloway touts his representation of "a major energy company during a year-long federal grand jury investigation" as an example of his experience.
As part of its March 13 agreement with Alston & Bird, the state agency agreed to pay an hourly fee of up to $350. The agency also waived any conflict that might arise from the law firm "representing another client or clients in a matter adverse" to the state, according to its contract.
Last week, the agency asked a judge to dismiss an agreement proposed before the Dan River spill that would have allowed Duke to settle environmental violations at two of its plants by paying a $99,000 fine with no requirement that the company actually clean up its pollution. The deal was struck after the state agency intervened last year as environmental groups sought to sue Duke under the federal Clean Water Act over groundwater contamination leaching from its 33 unlined ash pits scattered across the state.
Gov. Pat McCrory worked at Duke for more than 28 years and the company and its executives have remained generous contributors to his campaign and GOP groups that support him. McCrory, a Republican, denies Duke received any special treatment from his administration.
But environmentalists have derided the now scuttled settlement as a "sweetheart deal" to the governor's former employer. Peter Harrison, an attorney for the WaterKeeper Alliance, said the hiring of Calloway provides further evidence of the administration's cozy ties with Duke.
"Governor McCrory and his appointees at DENR seem unable to at least appear as anything other than business associates of energy company they should be regulating," Harrison said. "By hiring Duke's former criminal defense attorney, they demonstrate an arrogant indifference toward regaining the confidence of the public."
In South Carolina on Monday, Duke's chief lobbyist sought to reassure regulators there that a disaster like the one affecting their northern neighbor couldn't happen in their state.
George Everett, the director of environmental and legislative affairs for Duke, told the S.C. Public Service Commission on Monday that its ash dumps in that state don't have stormwater pipes under them like the one that collapsed in Eden, triggering the massive Dan River spill.
Weiss reported from Charlotte. Associated Press reporter Jeffrey Collins contributed from Columbia, S.C.
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