SEC v. ENTERGY CORPORATION, No. 1:24-cv-03554, District of Columbia (Jan. 1, 2024) — Complaint

UNITED STATES DISTRICT COURT
DISTRICT OF COLUMBIA

UNITED STATES SECURITIES AND
EXCHANGE COMMISSION,
100 F Street NE
Washington, D.C. 20549

Plaintiff,

v.

ENTERGY CORPORATION,
639 Loyola Avenue
New Orleans, Louisiana 70113

Defendant.

No. 24-CV-3554

COMPLAINT

  Plaintiff United States Securities and Exchange Commission (“SEC”) for its complaint
against Defendant Entergy Corporation (“Entergy” or “Defendant”), alleges as follows:
SUMMARY

1. This case involves Entergy’s violations of the internal accounting controls and
books and records provisions of the federal securities laws relating to its materials and supplies
asset in its financial statements.
2. Entergy, through its subsidiaries, is engaged in the generation, sale, and retail
distribution of electricity in Arkansas, Louisiana, Mississippi, and Texas. Entergy’s stock is
registered with the SEC and publicly traded on the New York Stock Exchange. The federal
securities laws and SEC rules and regulations require that public companies like Entergy
maintain and file with the SEC financial statements in conformity with Generally Accepted
Accounting Principles (“GAAP”). Entergy’s materials and supplies consist of tangible goods,

equipment, and materials that Entergy purchased for use to construct and maintain its power
plants, to transmit and distribute power to customers, and for other general facilities and
operational use. Entergy’s internal policies also noted the importance of accounting for materials
and supplies in conformity with GAAP.
3. Nonetheless, from at least mid-2018 to the present (the “Relevant Period”),
Entergy failed to devise and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that surplus materials and supplies were timely identified and
properly remeasured in its books and reported in its financial statements in accordance with
GAAP.
4. Under GAAP, materials and supplies are generally initially recognized as assets
measured at acquisition cost. For materials and supplies not yet consumed, the asset must be
evaluated for remeasurement, for example, where evidence indicates the materials and supplies
are surplus, no longer have service potential, or if a decision is made to dispose of the asset by
sale or other means. An expense is required to be recognized if the carrying value of the asset
(e.g., historical cost) exceeds the remeasured amount.
5. Throughout the Relevant Period, Entergy included materials and supplies at their
average cost as an asset on its balance sheet. During this time, Entergy had information that this
asset included materials and supplies that were slow-moving, aged, and potentially in excess of
its business needs, and thus were not being used.
6. In fact, Entergy considered materials and supplies that had accumulated in
quantities greater than needed for future use to be surplus. However, Entergy’s system of internal
accounting controls was insufficient because it did not ensure that Entergy’s materials and

supplies asset was regularly reviewed for surplus, and that surplus materials and supplies were
remeasured at the appropriate amount and recognized timely in accordance with GAAP.
7. More specifically, over the Relevant Period, Entergy employees and two
management consultants identified a substantial amount of potential surplus materials and
supplies including: (1) aged non-critical materials and supplies in excess of Entergy’s historical
use and anticipated future use; (2) materials and supplies exceeding the maximum stocking
levels set by the business units; and (3) materials and supplies that had not been used in 20 or
more years. Each of these categories indicated the existence of materials and supplies that either
would, or would potentially, go unused or otherwise lack service potential for Entergy.
Nevertheless, Entergy repeatedly failed to establish a comprehensive process to review these
materials and supplies to identify surplus, remeasure it, and record any differences between its
initial cost and remeasured cost as an expense.
8. In August 2021, in an attempt to address its slow-moving and aged materials and
supplies, the company established a reserve for an anticipated write-down of surplus and
obsolete materials and supplies, reserving $3 million in late 2021, $9 million for the full 2022
year and $5 million for the 2023 year. These amounts, however, were not derived from an
analysis of the materials and supplies identified by Entergy’s consultants as potential surplus. By
2022, Entergy employees suggested a “significantly larger reserve fund for disposing of potential
surplus.”
9. As a result of Entergy’s failures to devise and maintain sufficient internal
accounting controls for materials and supplies, Entergy’s evaluation of its recorded materials and
supplies for surplus was inadequate, and it therefore failed to devise and maintain a system of
internal accounting controls sufficient to provide reasonable assurances that surplus materials

and supplies were timely identified and properly remeasured in its books and reported in its
financial statements in accordance with GAAP.
VIOLATIONS
10. By virtue of the conduct alleged in this Complaint, Entergy violated the internal
accounting controls and books and records provisions of Section 13(b)(2)(A) and 13(b)(2)(B) of
the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78m(b)(2)(A) and
78m(b)(2)(B)].
11. Unless Entergy is restrained and enjoined, it will continue to engage in the acts,
practices, transactions, and courses of business set forth in this Complaint, or in acts, practices,
transactions, and courses of business of similar type and object.
12. The SEC seeks an order enjoining Entergy from future violations of the above
provisions, requiring Entergy to pay a civil money penalty and ordering Entergy to undertake
specific remedial relief as set forth in more detail below.
JURISDICTION AND VENUE

13. This Court has jurisdiction over this action, and venue lies in this District,
pursuant to Exchange Act §§ 21(d), 21(e) and 27 [15 U.S.C. §§ 78u(d), 78u(e)and 78aa], and 28
U.S.C. § 1331.
14. Defendant, directly or indirectly, made use of the means or instrumentalities of
interstate commerce, or of the mails, or the facilities of a national securities exchange in
connection with the acts, practices, transactions, and courses of business alleged in this
Complaint.
15. Venue lies in this Court pursuant to Exchange Act 27 [15 U.S.C. § 78aa].
During the Relevant Period, Entergy filed with the SEC quarterly and annual reports which

reported the total value of materials and supplies at average cost as an asset on Entergy’s
consolidated balance sheets. Entergy also furnished to the SEC current reports which attached
Entergy’s earnings press releases reporting earnings/net income and the total value of materials
and supplies at average cost as an asset on Entergy’s consolidated balance sheets.
DEFENDANT

16. Entergy Corporation is incorporated in Delaware and has its principal place of
business in New Orleans, Louisiana. Entergy owns five utility Operating Companies that are
engaged primarily in the generation, transmission, and retail distribution of electricity in the
states of Arkansas, Louisiana, Mississippi, and Texas. Entergy has been a SEC-reporting
company since 1989. Entergy is a public company whose securities are registered pursuant to
Section 12(b) of the Exchange Act and trade on the New York Stock Exchange.
FACTS

A. Entergy’s Materials and Supplies Asset
17. Entergy’s materials and supplies consist of tangible goods, equipment, and
materials that Entergy purchased for use to construct and maintain its power plants, to transmit
and distribute power to customers, and for other general facilities and operational use. Entergy
records and reports materials and supplies as an asset on its balance sheet and measures materials
and supplies at average cost.
18. At year-end 2018, Entergy reported $752 million of materials and supplies at
average cost on its balance sheet. The value of Entergy’s materials and supplies significantly
increased over the Relevant Period and was reported to be more than $1.49 billion as of March
31, 2024.

B. Entergy Had Insufficient Internal Accounting Controls to Address the
Accounting for Surplus Materials and Supplies
19. Entergy’s internal accounting policies acknowledged the importance of properly
accounting for surplus materials and supplies, yet Entergy failed to implement sufficient internal
accounting controls to review, identify, measure, and write-down surplus materials and supplies,
as necessary.
20. Entergy’s accounting policies defined “surplus” materials and supplies to include
both materials and supplies that are serviceable but no longer required by the company for its
intended purpose, as well as items that have accumulated in quantities greater than needed for
future use.
21. Under GAAP, a company would be required to determine whether an
expenditure, such as Entergy’s acquisition of materials and supplies, should be recognized as an
asset on its balance sheet, initially reported at cost when acquired. For materials and supplies that
are recognized as an asset, GAAP also requires remeasurement of such assets in certain
circumstances to ensure that the assets are not carried at more than their recoverable amount. For
example, a company should remeasure: (1) equipment held and used, at the lower of its carrying
amount or fair value, if the carrying amount is determined not to be recoverable; (2) equipment
held for sale, at the lower of its carrying amount or fair value less cost to sell; and (3) equipment
to be abandoned at its salvage value when the company ceases to use that equipment. The
company must recognize any resulting loss in the then-current period, and the updated amount
also must be reported on the company’s balance sheet.
22. During the Relevant Period, Entergy should have regularly reviewed its materials
and supplies to determine if any of it was surplus to its business’ needs and recognized a loss
when remeasurement of the materials and supplies was required. As discussed below, Entergy

failed to devise and maintain a system of internal accounting controls sufficient to provide
reasonable assurances that surplus materials and supplies were timely identified and properly
remeasured in its books and reported in its financial statements in accordance with GAAP.
23. Instead, each quarter from at least mid-2018 to the present, in quarterly reports,
annual reports, and earnings press releases attached to current reports which Entergy filed with
the SEC, Entergy reported the value of its materials and supplies at average unit cost as an asset
on its balance sheet and in its books and records without adequate consideration of whether those
assets were in excess of its business needs and thus should have been considered surplus and
remeasured accordingly.
C. Entergy Was Informed of Significant Amounts of
Potential Surplus Materials and Supplies
24. As described in further detail below, during the Relevant Period, Entergy hired
two management consultants to review Entergy’s materials and supplies and improve the
company’s management practices relating to materials and supplies. Both consultants identified
significant quantities of potential surplus materials and supplies based on a review of Entergy’s
internal data and interviews with Entergy employees.
25. In addition, Entergy’s employees identified significant amounts of materials and
supplies that had not been used in at least 20 years.
26. Despite being informed that Entergy held significant amounts of potential surplus,
Entergy failed to take steps to regularly review, identify, and remeasure surplus materials and
supplies for accounting purposes.

1. Entergy Failed to Address Potential Surplus Materials and
Supplies Identified by Its First Management Consultant
27. In late 2017, Entergy retained its first consultant to improve the company’s
management of its materials and supplies, including identifying potential opportunities to sell
excess materials and supplies.
28. In January 2018, after receiving the consultant’s initial reports, an officer in
Entergy’s supply chain group communicated to another supply chain officer that it looks like
Entergy is “massively over stocked” in its nuclear business unit, which has the company’s largest
amount of materials and supplies.
29. In February 2018, the consultant, based on an analysis of Entergy’s internal data,
documented that Entergy had over $121 million of non-critical materials and supplies in its
nuclear plants that had not been used in 10 or more years, and an additional $56 million of
materials and supplies in its non-nuclear power plants that had not been used in 10 or more years
and that the business unit had determined it would not re-order. The consultant analyzed
Entergy’s historical usage and demand data, including the fact that most materials and supplies
actually used were purchased within the past three years. Based on that analysis, the consultant
emailed supply chain officials stating that, with respect to this $177 million worth of materials
and supplies, Entergy’s power plants had “unlimited years of stock on hand,” which would not
be possible to use over any reasonable time horizon. In other words, some of these materials and
supplies were surplus to Entergy’s business needs.
30. By March 2018, the consultant prepared a report addressing a broader population
of slow-moving materials and supplies, in which it identified additional materials and supplies
beyond the $177 million that could be dispositioned without negatively impacting Entergy’s
business operations. This population of materials and supplies included non-critical items that

had not been used in 10 or more years and non-critical items exceeding the maximum stocking
levels set by the business units, suggesting that these assets lacked service potential for Entergy.
In the March 2018 report, the consultant also noted, based on information it received from a
different management expert, that Entergy could expect to recover, on average, 15-20% of the
reported value through dispositioning - i.e., exchanging, returning, selling, or scrapping - slow-
moving materials and supplies.
31. The consultant’s findings were shared with Entergy’s finance department,
accounting managers, and its supply chain officer. The supply chain officer responded, “[t]here
is of course concern about the magnitude of any eventual [write] off.”
32. Ultimately, the first consultant recommended that Entergy conduct a more
detailed analysis of, and then disposition of, slow-moving materials and supplies across its
business units. Entergy, however, did not authorize the consultant’s continued work on a
comprehensive review of slow-moving materials and supplies. Nor did Entergy conduct its own
comprehensive review of the significant quantities of potential surplus identified by the
consultant to identify actual surplus and remeasure the surplus in accordance with GAAP.
33. In August 2019, an Entergy accounting manager was sent this consultant’s March
2018 report and was told that Entergy’s SOX controls (i.e., internal control over financial
reporting) for materials and supplies were not “necessarily operating effectively in all cases.”
Nevertheless, Entergy failed to make improvements to its internal accounting controls relating to
surplus materials and supplies.

2. Entergy Failed to Review Potential Surplus Materials and
Supplies Identified by Company Employees
34. In November 2020, Entergy’s supply chain group briefed several accounting
managers regarding their limited analysis of the company’s materials and supplies. The supply
chain group identified nuclear materials and supplies reported at over $90 million that had not
been used in 20 or more years. The briefing also noted a “significant amount of slow-moving
inventory across the system,” and explained that in its limited review, it “found opportunities to
reduce inventory levels.”
35. Accounting and supply chain employees then devised a plan to “improve SOX
compliance,” by, among other things, evaluating Entergy’s controls around materials and
supplies and counting and evaluating the usefulness of this $90 million of materials and supplies.
In their review of Entergy’s controls, Entergy employees identified “inconsistencies and gaps
across functions.” Despite the issues identified by Entergy employees, the company did not
provide funding for engineers to evaluate and determine whether any of the $90 million materials
and supplies was in fact needed or anticipated to be used – i.e., whether it was surplus. In
addition, Entergy did not remeasure any surplus materials and supplies and record any expense
in accordance with GAAP. The company also failed to adopt accounting controls to address the
proper accounting for surplus materials and supplies.
3. Entergy Failed to Address Potential Surplus Materials and
Supplies Identified by a Second Management Consultant
36. In mid-2021, Entergy retained a second management consultant to evaluate its
practices relating to materials and supplies. In response to requests from this consultant, Entergy
identified, based on its 2020 data, that it had over 130,000 categories of materials and supplies
that exceeded the maximum amounts set by its business units. These materials and supplies were
carried on Entergy’s books at a total average cost of approximately $303 million. Entergy did not

identify which materials and supplies were surplus to its business needs or no longer had service
potential or determine if remeasurement was necessary.
D.  Entergy Established an Allowance Without Reasonable Support
37. In August 2021, the company established an allowance for surplus and obsolete
materials and supplies. The allowance was purportedly established to address the diminished
likelihood that a part would be used once it is significantly aged.  Entergy recorded $3 million in
expense in late 2021, $9 million for the full year 2022, and $5 million for 2023 to adjust the
carrying value of its $90 million of materials and supplies, primarily from its nuclear business,
that had not been used in twenty or more years. These amounts, however, were not derived from
an analysis of the materials and supplies identified by Entergy’s consultants as potential surplus.
38. By November 2022, Entergy employees estimated that potential surplus materials
and supplies that had not been used in 20 years had grown from $90 million to $193 million.  At
that time, Entergy employees suggested a “significantly larger reserve fund for disposing of
potential surplus.” Nevertheless, Entergy did not increase the reserve amount.
E. Despite Employees’ Documented Concerns, Entergy Failed to Devise
and Maintain Adequate Internal Accounting Controls

39. In numerous instances throughout the Relevant Period, Entergy employees raised
issues concerning the company’s failure to identify and properly account for surplus materials
and supplies.
40. For example, in September 2020, supply chain employees identified and raised
issues concerning materials and supplies, including opportunities to consistently and
systematically identify surplus material, ensure surplus was processed in accordance with
standard accounting procedures, and remove surplus from inventory over time.

41. In June 2021, supply chain employees relayed to accounting employees that only
one business unit had a well-defined process to review material and supplies that had not been
used in 10 or more years and suggested they “give consideration to how [to] best provide
oversight” to the other business units.
42. In August 2021, Entergy’s second management consultant documented an
Entergy employee’s view that “sub-optimal controls” over materials and supplies were “a key
contributor to asset growth,” as Entergy employees could purchase materials and supplies when
Entergy’s quantity on hand was already over its maximum stocking levels.
43. A November 2021 presentation provided to one of Entergy’s officers described
the “lack of meaningful inventory reporting for each [business unit], in particular [for] slow
moving [and] surplus” as one of the root causes of Entergy’s materials and supplies growth.
44. Despite these documented issues, Entergy still failed to devise and maintain a
system of internal accounting controls sufficient to provide reasonable assurance that its
accounting for surplus materials and supplies complied with GAAP. As a result of Entergy’s
failures to devise and maintain sufficient internal accounting controls for materials and supplies,
Entergy’s evaluation of its recorded materials and supplies for surplus was inadequate, and it
therefore failed to ensure that it accurately and fairly remeasured these assets in accordance with
GAAP.

FIRST CLAIM FOR RELIEF
(Violation of Exchange Act Books and Records Requirement)
45. The SEC realleges and incorporates by reference here the allegations in all the
foregoing paragraphs.
46. As an issuer of securities registered with the SEC, Entergy was required to make
and keep books, records, and accounts, which, in reasonable detail, accurately and fairly
reflected the transactions and disposition of the assets of Entergy.  By the conduct described
above, Entergy failed to do so, in violation of Section 13(b)(2)(A) of the Exchange Act [15
U.S.C. § 78m(b)(2)(A)].
SECOND CLAIM FOR RELIEF
(Violations of Exchange Act Internal Controls Requirements)
47. The SEC realleges and incorporates by reference here the allegations in all the
foregoing paragraphs.
48. As an issuer of securities registered with the SEC, Entergy was required to devise
and maintain a system of internal accounting controls sufficient to provide reasonable assurances
that Entergy’s corporate transactions were recorded as necessary to permit the preparation of
financial statements in conformity with GAAP and maintain accountability for assets pursuant to
Exchange Act Section 13(b)(2)(B) [15 U.S.C. § 78m(b)(2)(B)]. By the conduct described above,
Entergy failed to do so, in violation of Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. §
78m(b)(2)(B)].

PRAYER FOR RELIEF

 WHEREFORE, the SEC respectfully requests that this Court:
I.

 Enter an order permanently enjoining Entergy from directly or indirectly violating the
applicable provisions and rules of the federal securities laws as alleged and asserted above.
II.

 Enter an order requiring Entergy to: (1) retain, at its own expense, the services of a
qualified Independent Consultant not unacceptable to the Commission staff, to (a) conduct a
comprehensive assessment of Entergy’s system of internal accounting controls related to the
remeasurement of surplus materials and supplies,  (b) make recommendations concerning
Entergy’s system of internal accounting controls related to the accounting for surplus materials
and supplies, and (c) provide the SEC staff with a report documenting the review and
recommendations not more than six months after being retained  (the “Independent Consultant’s
Report”); (2) adopt and implement the recommendations in the Independent Consultant’s Report
within three months of the issuance of the report.
III.

Enter an order requiring Entergy to pay penalties pursuant to Section 21(d) of the
Exchange Act [15 U.S.C. § 78u(d)].
IV.

 Retain jurisdiction of this action in accordance with the principles of equity and the
Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and
decrees that may be entered, or to entertain any suitable application or motion for additional
relief within the jurisdiction of this Court.

V.

Grant such other and further relief as this Court may determine to be just and necessary.

Dated: December 20, 2024 Respectfully submitted,

U.S. SECURITIES AND EXCHANGE COMMISSION

/s/ Carina A. Cuellar_____________________
Carina Cuellar, Esq. (DC Bar No. 1012127)
Ada Fernandez Johnson (DC Bar No. 463296)
Katherine H. Stella (NY Bar No. 4893723)

100 F Street, NE
Washington, DC 20549
(202) 551-6414 (Cuellar)
(202) 551-4604 (Johnson)
(202) 551-2113 (Stella)
[email protected]
[email protected]
[email protected]

Attorneys for Plaintiff

Of counsel:

Christopher M. Bruckmann
Lisa Deitch
Stacy Bogert

UNITED STATES DISTRICT COURT 
DISTRICT OF COLUMBIA  
 
 
UNITED STATES SECURITIES AND 
EXCHANGE COMMISSION, 
100 F Street NE 
Washington, D.C. 20549 
 

Plaintiff, 

 
 

 
 

v. 
 
ENTERGY CORPORATION, 
639 Loyola Avenue 
New Orleans, Louisiana 70113 
 

Defendant. 
 

No. 24-CV-3554 
 
 

 
 

COMPLAINT   
 
  Plaintiff United States Securities and Exchange Commission (“SEC”) for its complaint 

against Defendant Entergy Corporation (“Entergy” or “Defendant”), alleges as follows: 

SUMMARY 
 

1. This case involves Entergy’s violations of the internal accounting controls and 

books and records provisions of the federal securities laws relating to its materials and supplies 

asset in its financial statements.   

2. Entergy, through its subsidiaries, is engaged in the generation, sale, and retail 

distribution of electricity in Arkansas, Louisiana, Mississippi, and Texas. Entergy’s stock is 

registered with the SEC and publicly traded on the New York Stock Exchange. The federal 

securities laws and SEC rules and regulations require that public companies like Entergy 

maintain and file with the SEC financial statements in conformity with Generally Accepted 

Accounting Principles (“GAAP”). Entergy’s materials and supplies consist of tangible goods, 

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equipment, and materials that Entergy purchased for use to construct and maintain its power 

plants, to transmit and distribute power to customers, and for other general facilities and 

operational use. Entergy’s internal policies also noted the importance of accounting for materials 

and supplies in conformity with GAAP.   

3. Nonetheless, from at least mid-2018 to the present (the “Relevant Period”), 

Entergy failed to devise and maintain a system of internal accounting controls sufficient to 

provide reasonable assurances that surplus materials and supplies were timely identified and 

properly remeasured in its books and reported in its financial statements in accordance with 

GAAP.   

4. Under GAAP, materials and supplies are generally initially recognized as assets 

measured at acquisition cost. For materials and supplies not yet consumed, the asset must be 

evaluated for remeasurement, for example, where evidence indicates the materials and supplies 

are surplus, no longer have service potential, or if a decision is made to dispose of the asset by 

sale or other means. An expense is required to be recognized if the carrying value of the asset 

(e.g., historical cost) exceeds the remeasured amount.     

5. Throughout the Relevant Period, Entergy included materials and supplies at their 

average cost as an asset on its balance sheet. During this time, Entergy had information that this 

asset included materials and supplies that were slow-moving, aged, and potentially in excess of 

its business needs, and thus were not being used.  

6. In fact, Entergy considered materials and supplies that had accumulated in 

quantities greater than needed for future use to be surplus. However, Entergy’s system of internal 

accounting controls was insufficient because it did not ensure that Entergy’s materials and 

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supplies asset was regularly reviewed for surplus, and that surplus materials and supplies were 

remeasured at the appropriate amount and recognized timely in accordance with GAAP.   

7. More specifically, over the Relevant Period, Entergy employees and two 

management consultants identified a substantial amount of potential surplus materials and 

supplies including: (1) aged non-critical materials and supplies in excess of Entergy’s historical 

use and anticipated future use; (2) materials and supplies exceeding the maximum stocking 

levels set by the business units; and (3) materials and supplies that had not been used in 20 or 

more years. Each of these categories indicated the existence of materials and supplies that either 

would, or would potentially, go unused or otherwise lack service potential for Entergy. 

Nevertheless, Entergy repeatedly failed to establish a comprehensive process to review these 

materials and supplies to identify surplus, remeasure it, and record any differences between its 

initial cost and remeasured cost as an expense.  

8. In August 2021, in an attempt to address its slow-moving and aged materials and 

supplies, the company established a reserve for an anticipated write-down of surplus and 

obsolete materials and supplies, reserving $3 million in late 2021, $9 million for the full 2022 

year and $5 million for the 2023 year. These amounts, however, were not derived from an 

analysis of the materials and supplies identified by Entergy’s consultants as potential surplus. By 

2022, Entergy employees suggested a “significantly larger reserve fund for disposing of potential 

surplus.” 

9. As a result of Entergy’s failures to devise and maintain sufficient internal 

accounting controls for materials and supplies, Entergy’s evaluation of its recorded materials and 

supplies for surplus was inadequate, and it therefore failed to devise and maintain a system of 

internal accounting controls sufficient to provide reasonable assurances that surplus materials 

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and supplies were timely identified and properly remeasured in its books and reported in its 

financial statements in accordance with GAAP.  

VIOLATIONS 

10. By virtue of the conduct alleged in this Complaint, Entergy violated the internal 

accounting controls and books and records provisions of Section 13(b)(2)(A) and 13(b)(2)(B) of 

the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78m(b)(2)(A) and 

78m(b)(2)(B)].   

11. Unless Entergy is restrained and enjoined, it will continue to engage in the acts, 

practices, transactions, and courses of business set forth in this Complaint, or in acts, practices, 

transactions, and courses of business of similar type and object.  

12. The SEC seeks an order enjoining Entergy from future violations of the above 

provisions, requiring Entergy to pay a civil money penalty and ordering Entergy to undertake 

specific remedial relief as set forth in more detail below. 

JURISDICTION AND VENUE 
 

13. This Court has jurisdiction over this action, and venue lies in this District, 

pursuant to Exchange Act §§ 21(d), 21(e) and 27 [15 U.S.C. §§ 78u(d), 78u(e)and 78aa], and 28 

U.S.C. § 1331.   

14. Defendant, directly or indirectly, made use of the means or instrumentalities of 

interstate commerce, or of the mails, or the facilities of a national securities exchange in 

connection with the acts, practices, transactions, and courses of business alleged in this 

Complaint. 

15. Venue lies in this Court pursuant to Exchange Act 27 [15 U.S.C. § 78aa].  

During the Relevant Period, Entergy filed with the SEC quarterly and annual reports which 

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reported the total value of materials and supplies at average cost as an asset on Entergy’s 

consolidated balance sheets. Entergy also furnished to the SEC current reports which attached 

Entergy’s earnings press releases reporting earnings/net income and the total value of materials 

and supplies at average cost as an asset on Entergy’s consolidated balance sheets. 

DEFENDANT 
 

16. Entergy Corporation is incorporated in Delaware and has its principal place of 

business in New Orleans, Louisiana. Entergy owns five utility Operating Companies that are 

engaged primarily in the generation, transmission, and retail distribution of electricity in the 

states of Arkansas, Louisiana, Mississippi, and Texas. Entergy has been a SEC-reporting 

company since 1989. Entergy is a public company whose securities are registered pursuant to 

Section 12(b) of the Exchange Act and trade on the New York Stock Exchange.  

FACTS 
 
A. Entergy’s Materials and Supplies Asset 

17. Entergy’s materials and supplies consist of tangible goods, equipment, and 

materials that Entergy purchased for use to construct and maintain its power plants, to transmit 

and distribute power to customers, and for other general facilities and operational use. Entergy 

records and reports materials and supplies as an asset on its balance sheet and measures materials 

and supplies at average cost. 

18. At year-end 2018, Entergy reported $752 million of materials and supplies at 

average cost on its balance sheet. The value of Entergy’s materials and supplies significantly 

increased over the Relevant Period and was reported to be more than $1.49 billion as of March 

31, 2024.  

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B. Entergy Had Insufficient Internal Accounting Controls to Address the 
Accounting for Surplus Materials and Supplies 

19. Entergy’s internal accounting policies acknowledged the importance of properly 

accounting for surplus materials and supplies, yet Entergy failed to implement sufficient internal 

accounting controls to review, identify, measure, and write-down surplus materials and supplies, 

as necessary.  

20. Entergy’s accounting policies defined “surplus” materials and supplies to include 

both materials and supplies that are serviceable but no longer required by the company for its 

intended purpose, as well as items that have accumulated in quantities greater than needed for 

future use.   

21. Under GAAP, a company would be required to determine whether an 

expenditure, such as Entergy’s acquisition of materials and supplies, should be recognized as an 

asset on its balance sheet, initially reported at cost when acquired. For materials and supplies that 

are recognized as an asset, GAAP also requires remeasurement of such assets in certain 

circumstances to ensure that the assets are not carried at more than their recoverable amount. For 

example, a company should remeasure: (1) equipment held and used, at the lower of its carrying 

amount or fair value, if the carrying amount is determined not to be recoverable; (2) equipment 

held for sale, at the lower of its carrying amount or fair value less cost to sell; and (3) equipment 

to be abandoned at its salvage value when the company ceases to use that equipment. The 

company must recognize any resulting loss in the then-current period, and the updated amount 

also must be reported on the company’s balance sheet. 

22. During the Relevant Period, Entergy should have regularly reviewed its materials 

and supplies to determine if any of it was surplus to its business’ needs and recognized a loss 

when remeasurement of the materials and supplies was required. As discussed below, Entergy 

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failed to devise and maintain a system of internal accounting controls sufficient to provide 

reasonable assurances that surplus materials and supplies were timely identified and properly 

remeasured in its books and reported in its financial statements in accordance with GAAP.   

23. Instead, each quarter from at least mid-2018 to the present, in quarterly reports, 

annual reports, and earnings press releases attached to current reports which Entergy filed with 

the SEC, Entergy reported the value of its materials and supplies at average unit cost as an asset 

on its balance sheet and in its books and records without adequate consideration of whether those 

assets were in excess of its business needs and thus should have been considered surplus and 

remeasured accordingly.  

C. Entergy Was Informed of Significant Amounts of  
Potential Surplus Materials and Supplies 

24. As described in further detail below, during the Relevant Period, Entergy hired 

two management consultants to review Entergy’s materials and supplies and improve the 

company’s management practices relating to materials and supplies. Both consultants identified 

significant quantities of potential surplus materials and supplies based on a review of Entergy’s 

internal data and interviews with Entergy employees.   

25. In addition, Entergy’s employees identified significant amounts of materials and 

supplies that had not been used in at least 20 years.   

26. Despite being informed that Entergy held significant amounts of potential surplus, 

Entergy failed to take steps to regularly review, identify, and remeasure surplus materials and 

supplies for accounting purposes.   

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1. Entergy Failed to Address Potential Surplus Materials and 
Supplies Identified by Its First Management Consultant 

27. In late 2017, Entergy retained its first consultant to improve the company’s 

management of its materials and supplies, including identifying potential opportunities to sell 

excess materials and supplies. 

28. In January 2018, after receiving the consultant’s initial reports, an officer in 

Entergy’s supply chain group communicated to another supply chain officer that it looks like 

Entergy is “massively over stocked” in its nuclear business unit, which has the company’s largest 

amount of materials and supplies. 

29. In February 2018, the consultant, based on an analysis of Entergy’s internal data, 

documented that Entergy had over $121 million of non-critical materials and supplies in its 

nuclear plants that had not been used in 10 or more years, and an additional $56 million of 

materials and supplies in its non-nuclear power plants that had not been used in 10 or more years 

and that the business unit had determined it would not re-order. The consultant analyzed 

Entergy’s historical usage and demand data, including the fact that most materials and supplies 

actually used were purchased within the past three years. Based on that analysis, the consultant 

emailed supply chain officials stating that, with respect to this $177 million worth of materials 

and supplies, Entergy’s power plants had “unlimited years of stock on hand,” which would not 

be possible to use over any reasonable time horizon. In other words, some of these materials and 

supplies were surplus to Entergy’s business needs.   

30. By March 2018, the consultant prepared a report addressing a broader population 

of slow-moving materials and supplies, in which it identified additional materials and supplies 

beyond the $177 million that could be dispositioned without negatively impacting Entergy’s 

business operations. This population of materials and supplies included non-critical items that 

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had not been used in 10 or more years and non-critical items exceeding the maximum stocking 

levels set by the business units, suggesting that these assets lacked service potential for Entergy. 

In the March 2018 report, the consultant also noted, based on information it received from a 

different management expert, that Entergy could expect to recover, on average, 15-20% of the 

reported value through dispositioning - i.e., exchanging, returning, selling, or scrapping - slow-

moving materials and supplies.   

31. The consultant’s findings were shared with Entergy’s finance department, 

accounting managers, and its supply chain officer. The supply chain officer responded, “[t]here 

is of course concern about the magnitude of any eventual [write] off.”   

32. Ultimately, the first consultant recommended that Entergy conduct a more 

detailed analysis of, and then disposition of, slow-moving materials and supplies across its 

business units. Entergy, however, did not authorize the consultant’s continued work on a 

comprehensive review of slow-moving materials and supplies. Nor did Entergy conduct its own 

comprehensive review of the significant quantities of potential surplus identified by the 

consultant to identify actual surplus and remeasure the surplus in accordance with GAAP.              

33. In August 2019, an Entergy accounting manager was sent this consultant’s March 

2018 report and was told that Entergy’s SOX controls (i.e., internal control over financial 

reporting) for materials and supplies were not “necessarily operating effectively in all cases.” 

Nevertheless, Entergy failed to make improvements to its internal accounting controls relating to 

surplus materials and supplies.   

 

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2. Entergy Failed to Review Potential Surplus Materials and 
Supplies Identified by Company Employees 

34. In November 2020, Entergy’s supply chain group briefed several accounting 

managers regarding their limited analysis of the company’s materials and supplies. The supply 

chain group identified nuclear materials and supplies reported at over $90 million that had not 

been used in 20 or more years. The briefing also noted a “significant amount of slow-moving 

inventory across the system,” and explained that in its limited review, it “found opportunities to 

reduce inventory levels.”   

35. Accounting and supply chain employees then devised a plan to “improve SOX 

compliance,” by, among other things, evaluating Entergy’s controls around materials and 

supplies and counting and evaluating the usefulness of this $90 million of materials and supplies.  

In their review of Entergy’s controls, Entergy employees identified “inconsistencies and gaps 

across functions.” Despite the issues identified by Entergy employees, the company did not 

provide funding for engineers to evaluate and determine whether any of the $90 million materials 

and supplies was in fact needed or anticipated to be used – i.e., whether it was surplus. In 

addition, Entergy did not remeasure any surplus materials and supplies and record any expense 

in accordance with GAAP. The company also failed to adopt accounting controls to address the 

proper accounting for surplus materials and supplies. 

3. Entergy Failed to Address Potential Surplus Materials and 
Supplies Identified by a Second Management Consultant 

36. In mid-2021, Entergy retained a second management consultant to evaluate its 

practices relating to materials and supplies. In response to requests from this consultant, Entergy 

identified, based on its 2020 data, that it had over 130,000 categories of materials and supplies 

that exceeded the maximum amounts set by its business units. These materials and supplies were 

carried on Entergy’s books at a total average cost of approximately $303 million. Entergy did not 

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identify which materials and supplies were surplus to its business needs or no longer had service 

potential or determine if remeasurement was necessary.     

D.  Entergy Established an Allowance Without Reasonable Support 

37. In August 2021, the company established an allowance for surplus and obsolete 

materials and supplies. The allowance was purportedly established to address the diminished 

likelihood that a part would be used once it is significantly aged.  Entergy recorded $3 million in 

expense in late 2021, $9 million for the full year 2022, and $5 million for 2023 to adjust the 

carrying value of its $90 million of materials and supplies, primarily from its nuclear business, 

that had not been used in twenty or more years. These amounts, however, were not derived from 

an analysis of the materials and supplies identified by Entergy’s consultants as potential surplus. 

38. By November 2022, Entergy employees estimated that potential surplus materials 

and supplies that had not been used in 20 years had grown from $90 million to $193 million.  At 

that time, Entergy employees suggested a “significantly larger reserve fund for disposing of 

potential surplus.” Nevertheless, Entergy did not increase the reserve amount.   

E. Despite Employees’ Documented Concerns, Entergy Failed to Devise 
and Maintain Adequate Internal Accounting Controls  
 

39. In numerous instances throughout the Relevant Period, Entergy employees raised 

issues concerning the company’s failure to identify and properly account for surplus materials 

and supplies.  

40. For example, in September 2020, supply chain employees identified and raised 

issues concerning materials and supplies, including opportunities to consistently and 

systematically identify surplus material, ensure surplus was processed in accordance with 

standard accounting procedures, and remove surplus from inventory over time.   

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41. In June 2021, supply chain employees relayed to accounting employees that only 

one business unit had a well-defined process to review material and supplies that had not been 

used in 10 or more years and suggested they “give consideration to how [to] best provide 

oversight” to the other business units. 

42. In August 2021, Entergy’s second management consultant documented an 

Entergy employee’s view that “sub-optimal controls” over materials and supplies were “a key 

contributor to asset growth,” as Entergy employees could purchase materials and supplies when 

Entergy’s quantity on hand was already over its maximum stocking levels.   

43. A November 2021 presentation provided to one of Entergy’s officers described 

the “lack of meaningful inventory reporting for each [business unit], in particular [for] slow 

moving [and] surplus” as one of the root causes of Entergy’s materials and supplies growth.   

44. Despite these documented issues, Entergy still failed to devise and maintain a 

system of internal accounting controls sufficient to provide reasonable assurance that its 

accounting for surplus materials and supplies complied with GAAP. As a result of Entergy’s 

failures to devise and maintain sufficient internal accounting controls for materials and supplies, 

Entergy’s evaluation of its recorded materials and supplies for surplus was inadequate, and it 

therefore failed to ensure that it accurately and fairly remeasured these assets in accordance with 

GAAP. 

 

 

 

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FIRST CLAIM FOR RELIEF 
(Violation of Exchange Act Books and Records Requirement) 

45. The SEC realleges and incorporates by reference here the allegations in all the 

foregoing paragraphs. 

46. As an issuer of securities registered with the SEC, Entergy was required to make 

and keep books, records, and accounts, which, in reasonable detail, accurately and fairly 

reflected the transactions and disposition of the assets of Entergy.  By the conduct described 

above, Entergy failed to do so, in violation of Section 13(b)(2)(A) of the Exchange Act [15 

U.S.C. § 78m(b)(2)(A)]. 

SECOND CLAIM FOR RELIEF 
(Violations of Exchange Act Internal Controls Requirements) 

47. The SEC realleges and incorporates by reference here the allegations in all the 

foregoing paragraphs. 

48. As an issuer of securities registered with the SEC, Entergy was required to devise 

and maintain a system of internal accounting controls sufficient to provide reasonable assurances 

that Entergy’s corporate transactions were recorded as necessary to permit the preparation of 

financial statements in conformity with GAAP and maintain accountability for assets pursuant to 

Exchange Act Section 13(b)(2)(B) [15 U.S.C. § 78m(b)(2)(B)]. By the conduct described above, 

Entergy failed to do so, in violation of Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 

78m(b)(2)(B)].  

 

 

 

 

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PRAYER FOR RELIEF 
 

 WHEREFORE, the SEC respectfully requests that this Court: 

I. 
 

 Enter an order permanently enjoining Entergy from directly or indirectly violating the 

applicable provisions and rules of the federal securities laws as alleged and asserted above.  

II. 
 

 Enter an order requiring Entergy to: (1) retain, at its own expense, the services of a 

qualified Independent Consultant not unacceptable to the Commission staff, to (a) conduct a 

comprehensive assessment of Entergy’s system of internal accounting controls related to the 

remeasurement of surplus materials and supplies,  (b) make recommendations concerning 

Entergy’s system of internal accounting controls related to the accounting for surplus materials 

and supplies, and (c) provide the SEC staff with a report documenting the review and 

recommendations not more than six months after being retained  (the “Independent Consultant’s 

Report”); (2) adopt and implement the recommendations in the Independent Consultant’s Report 

within three months of the issuance of the report.    

III. 
 

Enter an order requiring Entergy to pay penalties pursuant to Section 21(d) of the 

Exchange Act [15 U.S.C. § 78u(d)].  

IV. 
 
 Retain jurisdiction of this action in accordance with the principles of equity and the 

Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and 

decrees that may be entered, or to entertain any suitable application or motion for additional 

relief within the jurisdiction of this Court.  

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V. 
 

Grant such other and further relief as this Court may determine to be just and necessary. 

 

Dated: December 20, 2024 Respectfully submitted, 
 

U.S. SECURITIES AND EXCHANGE COMMISSION 
 
/s/ Carina A. Cuellar_____________________  
Carina Cuellar, Esq. (DC Bar No. 1012127) 
Ada Fernandez Johnson (DC Bar No. 463296) 
Katherine H. Stella (NY Bar No. 4893723) 
 
100 F Street, NE 
Washington, DC 20549 
(202) 551-6414 (Cuellar) 
(202) 551-4604 (Johnson) 
(202) 551-2113 (Stella) 
[email protected] 
[email protected] 
[email protected] 
 
Attorneys for Plaintiff  

 
Of counsel: 
  
Christopher M. Bruckmann 
Lisa Deitch 
Stacy Bogert  

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