Firstenergy to settle lawsuits
In one sense, embattled Firstenergy Corp. won the lottery.
The Akron utility says it will collect $180 million, minus legal fees, from insurance as a result of settling three shareholder derivative lawsuits tied to the ongoing House Bill 6 bribery scandal and federal and state investigation.
Firstenergy announced the settlement Thursday afternoon, saying it will lead to a shakeup on its board of directors, force changes in its political activities and oversight — and that it will collect insurance money. Executives discussed the issue Friday morning during a conference call with industry analysts on the utility’s just-released fourthquarter earnings.
The settlement, including the payment, awaits court approval.
Firstenergy will get the money because shareholder derivative lawsuits are filed on behalf of companies, a spokeswoman for the utility said.
“The shareholders are basically saying the company has been harmed,” spokeswoman Jennifer Young said. The lawsuits against board members and former executives sought restitution on behalf of Firstenergy.
The settling of the three lawsuits means in this instance that an insurance payment will be made to Firstenergy in addition to the utility having to take specific actions, she said.
How much money Firstenergy will get after legal fees are deducted has yet to be seen. Young said she did not know if there will be any restrictions on how Firstenergy can use the insurance money.
The settlement, announced Thursday after the stock market closed, came out of the ongoing investigations and lawsuits into Firstenergy’s involvement in the $60 million HB 6/Larry Householder bribery and racketeering scandal.
As part of the settlement, six longtime members of the Firstenergy board will not be reelected at the utility’s upcoming annual shareholders meeting. In addition, the Firstenergy executive team will be reviewed by a special board committee, the company’s political and lobbying activities will get more oversight, and executive pay and compensation will be aligned with the compliance measures, the company said.
Firstenergy Chief Executive Officer
Steven Strah on Friday said the utility is exploring how to reduce the size of its board of directors, which added seven members in 2021, with an eighth member to be added this year.
Directors with five or more years on the Firstenergy board who will not be reelected are Michael J. Anderson, Donald T. Misheff, Thomas N. Mitchell, Christopher D. Pappas, Luis A. Reyes and Julia L. Johnson.
Two board members who are employees of activist investor Carl Icahn remain on the board. Icahn, known for hostile takeovers and shaking up corporate boards, became one of Firstenergy’s five largest shareholders last year.
Firstenergy last year paid a $230 million fine as part of a deferred prosecution agreement in which it admitted it bribed Householder, the former speaker of the Ohio House, and others to pass and support House Bill 6. The bill, signed into law, in part provided subsidies to two former Firstenergy-owned nuclear power plants in Ohio. The scandal broke in the summer of 2020.
Householder, who has been expelled from the government, is accused of running a criminal enterprise that took $60 million funneled through dark money groups to pass the bill. Four other men in addition to Householder have been charged with racketeering.
Firstenergy said it had 2021 fourthquarter net income of $427 million, or 77 cents per share, on revenue of $2.7 billion. That compares to net income of $242 million, or 45 cents per share, on revenue of $2.5 billion a year ago.
For fiscal 2021, Firstenergy reported earning $1.3 billion, or $2.35 per share, on revenue of $11.1 billion. That compares to 2020 earnings of $1.1 billion, or $1.99 per share, on revenue of $10.8 billion.
Firstenergy said it expects 2022 earnings to range from nearly $1.4 billion to $1.49 billion, or $2.41 to $2.61 per share.
Shares were up 37 cents, or 0.9%, to $41.78 as of about 12:30 p.m. Friday. Over the past 52 weeks, shares have ranged from a low of $31 to a high of $42.69.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@ thebeaconjournal.com. Follow him @Jimmackinnonabj on Twitter.