FirstEnergy to pay $230M penalty in Ohio bribery probe
COLUMBUS, Ohio — Akronbased FirstEnergy Corp., the utility at the heart of a $61 million Ohio Statehouse bribery scandal, has agreed to pay a $230 million penalty for its role in the scheme.
Ohio Gov. Mike DeWine on Thursday issued a statement distancing himself from his one-time appointee as chairman of the Public Utilities Commission of Ohio, Sam Randazzo, who is portrayed in the agreement as having committed improper acts.
“That’s the largest criminal penalty ever collected as far as anyone can recall in the history of this office,” said acting U.S. Attorney Vipal J. Patel at a Thursday news conference.
The corporation has been charged with conspiracy to commit “honest services wire fraud,” devising a scheme to use interstate wiring of monies to engage in bribery of public officials — former Ohio state House Speaker Larry Householder and Mr. Randazzo — and to hide the true purpose of the funds.
However, the charge could be dismissed after three years if FirstEnergy meets its end of the settlement. The filing says the utility has provided “substantial cooperation.”
FirstEnergy admits that it conspired with public officials and others to use nonprofit entities to conceal its actions and the purpose of its cash.
It also admitted to paying $4.3 million to a second public official to act in his official capacity to further FirstEnergy’s interests in connection with two nuclear power plants owned by what was then a subsidiary.
While not specifically named, that individual is Mr. Randazzo, a former utilities lobbyist appointed PUCO chairman by Mr. DeWine, a Republican. FirstEnergy was a major Randazzo client.
Denies wrongdoing
Mr. Randazzo resigned as chairman late last year after the FBI raided his home. He has denied wrongdoing and is not among those who have been charged.
“As I have consistently said, we understood that Sam Randazzo had worked for manufacturing companies, energy companies and consumers, and that he had done work for FirstEnergy. Sam Randazzo was a well-known subject-matter expert in energy issues.
“If, as stated in the court documents, Sam Randazzo committed acts to improperly benefit FirstEnergy, his motives were not known by me or my staff,” the governor said.
“In light of today’s admission by FirstEnergy, the campaign will make a monetary donation to the Boys and Girls Clubs in the amount FirstEnergy contributed to the campaign committee,” according to the governor’s statement. The dollar amount was not reported.
When the other charges were filed a year ago, then-U.S. Attorney David DeVillers said the governor’s office was not a target of the investigation. When asked whether that was still true given revelations affecting people close
to Mr. DeWine, Mr. DeVillers’ successor, Mr. Patel, declined to respond.
FirstEnergy must pay half of its $230 million penalty to the U.S. Treasury and the remaining $115 million to the Ohio Development Services Agency, which must use the funds to benefit Ohio electricity customers. FirstEnergy is barred from passing the cost onto its ratepayers.
‘Meant to hurt’
As for the size of the penalty, Mr. Patel said, “Criminal monetary penalties are meant to hurt. We can’t put corporations in jail. … So the principle here is try to come up with a number that stings but doesn’t annihilate.”
The size of the penalty was reduced in recognition of FirstEnergy’s cooperation to date with the investigation.
Rob Kelter, senior attorney for the Environmental Law and Policy Center, said a $230 million penalty doesn’t “sting” enough for a company that made $1.1 billion last year.
FirstEnergy said it has worked to respond to the investigation and to regain trust.
“Moving forward, we are intently focused on fostering a strong culture of compliance and ethics, starting at the top, and ensuring we have robust processes in place to prevent the type of misconduct that occurred in the past,” said Steven E. Strah, president and chief executive officer of FirstEnergy.
Thursday’s court filing said FirstEnergy paid millions to “Public Official A,” not named but clearly Mr. Householder, through Generation Now, in return for the nuclear legislation.
“Use of [nonprofit] entities was central to the scheme because it allowed certain FirstEnergy Corp. executives and co-conspirators to conceal from the public the nature, source and control of
payments to and for the benefit of [Mr. Householder],” the filing reads.
FirstEnergy pursued the nuclear bailout bill in part because of “decoupling” language that would have allowed the utility to lock in revenues at 2018 levels despite House Bill 6’s elimination of energy efficiency mandates to which those funds were tied.
That’s where Mr. Randazzo came in, prosecutors allege. In November 2019, the Randazzo-led PUCO terminated the requirement that FirstEnergy had to file a new rate case in 2024.
“FirstEnergy believed that the expiration of [its current rate case] and filing of the new rate case in 2024 would result in decreased revenue and negatively impact FirstEnergy Corp.’s financial outlook and, therefore, sought a ‘fix for the Ohio hole,’ ” the filing reads.
Thursday’s filing states certain FirstEnergy executives pushed for Mr. Randazzo’s appointment by Mr. DeWine as chairman. In a text conversation that never mentions Mr. Randazzo by name, he told a FirstEnergy CEO, “I think I said this last night but just in case — if asked by the administration to go for the Chair spot, I would say yes.”
Mr. DeWine announced his appointment of Mr. Randazzo on Feb. 4, 2019.
The filing notes that FirstEnergy specifically sought help from Mr. Householder to add the “decoupling” language and a failed attempt to extend the duration of the nuclear bailout to 10 years. The final law provided for seven, although both the nuclear subsidies and decoupling provision have since been repealed.
The FirstEnergy charge came one day after the oneyear anniversary of the arrest of Mr. Householder, four other individuals and a nonprofit corporation.
The charges were in connection with the bribery scheme with the end goal of enacting the $1 billion bailout of the Davis-Besse plant near Oak Harbor and the Perry plant east of Cleveland.
Mr. Householder and lobbyist and former Ohio Republican Party Chairman Matt Borges have pleaded not guilty and are awaiting trial on federal racketeering charges that could carry 20 years in prison.
In a statement, the Cleveland attorneys representing Mr. Householder — Nick
Oleski, Steve Bradley and Mark Marein — said the utility had contended that its contributions to Generation Now were legal political contributions.
“This reversal presumably amounts to an effort by FirstEnergy to protect its share price,” it said. “It does not change the fact that these contributions were and are protected by the First Amendment.
“Our client, Larry Householder, pleaded not guilty for a simple reason — because he is not guilty,” it said. “He did not enter into a quid pro quo agreement with FirstEnergy, and he has never been bribed. We look forward to our day in court to defeat the government’s allegations.”
Guilty pleas
Two other individuals — Jeff Longstreth, a Columbus political consultant, and Juan Cespedes, a Columbus lobbyist — have pleaded guilty for their roles in the scheme. So has Generation Now, the nonprofit corporation at the scandal’s center.
A fourth individual, Columbus lobbyist Neil Clark, was also charged, but he died by suicide in Florida in February.
According to prosecutors, FirstEnergy and related entities provided the cash that flowed through Generation Now and other nonprofits to help elect lawmakers loyal to Mr. Householder in 2018, help elect him speaker again in 2019, and then get House Bill 6 across the finish line.
The scheme then continued to thwart a petition effort that would have subjected the controversial new law to voter referendum in 2020.
Mr. Householder’s House colleagues took away his speaker’s gavel shortly after charges were filed in July 2020. Last month they voted to remove him from the chamber altogether.
Thursday’s court filing also states that Mr. Householder sought the help of FirstEnergy in February 2020, in funding a ballot initiative that would have changed Ohio’s legislative term-limits, which could have allowed the speaker to stay in office up to 16 more years.
That ballot initiative never came about as Mr. Householder was facing criminal charges months later.
The Block News Alliance consists of the Pittsburgh Post-Gazette, The Blade of Toledo, Ohio, and television station WDRB in Louisville, Ky. Jim Provance is a reporter for The Blade.