$4M consulting payment investigated
Looks to be heart of Firstenergy firings
A $4 million consulting payment with apparent ties to a state regulator looks to be at the heart of why FirstEnergy senior executives, including its chief executive, were fired last month, according to a Firstenergy regulatory filing late Thursday.
The firings are tied to the ongoing federal investigation into the $61 million Larry Householder bribery scandal. As part of that investigation, the FBI earlier this week took records from the home of Sam Randazzo, chairman of the Public Utilities Commission of Ohio. Randazzo has resigned from the post, Ohio Gov. Mike Dewine’s office announced Friday.
“... Certain former members of senior management violated certain Firstenergy policies and its code of conduct related to a payment of approximately $4 million made in early 2019 in connection with the termination of a purported consulting agreement, as amended, which had been in place since 2013,” Firstenergy said in the filing. “The counterparty to such agreement was an entity associated with an individual who subsequently was appointed to a full-time role as an Ohio government official directly involved in regulating the Ohio companies, including with respect to distribution rates.
“At this time, it has not been determined if the payments were for the purposes represented within the consulting agreement,” Firstenergy said. “The matter is a subject of the ongoing internal investigation related to the government investigations.”
The filing does not name specific individuals; it says the Akron utility continues with its internal investigation and is cooperating with federal investigators. The document Firstenergy filed was its latest quarterly financial report, called a 10-Q. The utility previously announced that it would be late filing the report because of matters related to the Householder investigation.
Firstenergy said in the SEC filing that former senior managers, including former CEO Chuck Jones, “did not maintain and promote a control environment
with an appropriate tone of compliance in certain areas of Firstenergy’s business, nor sufficiently promote, monitor or enforce adherence to certain Firstenergy policies and its code of conduct.
“Furthermore, certain former members of senior management did not reasonably ensure that relevant information was communicated within our organization and not withheld from our independent directors, our Audit Committee, and our independent auditor,” the company said.
The “control deficiency” did not result in a material misstatement of Firstenergy’s annual or interim consolidated financial statements, the filing said.
Also in Thursday’s filing, Firstenergy said that Robert Reffner, senior vice president and chief legal officer, and Ebony Yeboah-amankwah, vice president, general counsel, and chief ethics officer, “were separated from Firstenergy due to inaction and conduct that the board determined was influenced by the improper tone at the top. The matter is a subject of the ongoing internal investigation as it relates to the government investigations.”
Reffner and Yeboah-amankwah left Firstenergy on Nov. 8, the company said.
Firstenergy issued a statement while saying it will not make specific comments beyond what is in the 10-Q, including identifying unnamed individuals. Firstenergy’s statement reads: “Firstenergy takes violations of company policies and our code of conduct very seriously. The board will continue to take decisive action to address this matter and ensure we have effective processes and procedures in place to uphold our standards and values going forward.
“In addition to the leadership changes that have already been made, the audit committee of the board has established a sub-committee to, together with the board, oversee the assessment and implementation of potential changes to Firstenergy’s compliance program,” the statement concluded.
Federal investigators are looking into whether former Ohio House Speaker Householder and others took part in a bribery scheme tied to the passage of House Bill 6. The bill, now law, provides more than $1 billion in subsidies to the Davis-besse and Perry nuclear plants now owned by former Firstenergy subsidiary Energy Harbor, previously known as Firstenergy Solutions.