Evidence: Corrupt bailout sprung out of fertile ground
Editor’s note: This story was originally published in the Ohio Capital Journal.
CINCINNATI — When Akronbased Firstenergy made huge contributions between 2017 and 2019 to get a giant bailout from the Ohio government, the deal was developed in a corrupt ecosystem, secret recordings and other evidence presented in federal court Wednesday showed.
Multiple players on Capitol Square had conflicted interests and seemed to be acting out of self interest as they made policy and spent billions of Ohioans’ dollars.
Former House Speaker Larry Householder and former Ohio Republican Party Chairman Matt Borges are on trial for alleged racketeering in a scheme where Firstenergy paid $61 million in exchange for a $1.3 billion bailout of its failing nuclear and coal plants. But the surreptitious recordings and other testimony showed that the rot spread far more widely.
FBI Special Agent Nathan Holbrook explained to jurors how he oversaw three undercover agents posing as businessmen wanting to build a Cincinnati hotel that offered sports betting — something for which the U.S. Supreme Court cleared the way in May of 2018. In that pose, the agents hired Neil Clark to lobby for an Ohio bill that would allow sports betting in their fictional hotel in early 2019.
Clark was charged along with Householder and Borges and two others with racketeering, but he died by suicide in March 2021 — nine months after their arrest. The two other defendants — Householder strategist Jeff Longstreth and lobbyist Juan Cespedes — have pleaded guilty and are cooperating with prosecutors.
While Clark can’t testify in person, prosecutors played numerous surreptitious recordings of phone calls and meetings in which he participated that served the same purpose.
In some, Clark gave what amounted to coaching sessions on how to make dark money contributions in a way calculated to get a public official’s attention, saying those should come in chunks of $15,000, $20,000, $25,000 or more. He explained that thanks to the Supreme Court’s 2010 Citizens United decision, torrents of such money was flowing into 501(c)(4) groups that don’t have to disclose their contributors.
“Based on a Supreme Court decision, businesses can do this and nobody can do anything about it,” Clark said on a July 23, 2019 recording. “Politicians can get a bunch of money and say, ‘I didn’t know.’”
Clark also explained to an undercover agent that if he wanted Householder to support the gambling legislation the agent said he wanted, he likely would have to contribute to Generation Now, a dark money group the speaker controlled that was being used to bankroll the utility bailout and thwart an attempt to repeal it.
IRS rules say that less than half the money raised by such groups can be spent on politics and the rest has to be spent on “social welfare.” But Clark and other operatives interpreted that to mean “public education” campaigns such as the one he was helping to wage against repealing the bailout.
He told one of the FBI agents that his group had $17 million to spend on such ads, which falsely claimed that the repeal effort was really a Chinese attempt to take over the Ohio power grid.
In the recordings, Clark was prone to long, self-referential speeches, at one point saying “every politician has to have somebody who’s a hit man.”
And he explained to the erstwhile businessmen that they had a problem with their casino bill because its sponsor was state Rep. Dave Greenspan, R-westlake, who had voted against the bailout. Clark said the bill wasn’t moving “because the sponsor pissed off the speaker.”
That testimony could prove important because Householder’s attorneys are arguing that the speaker only supported the bailout because he thought it was good for Ohio. Prosecutors want to show that Householder moved or obstructed legislation based on whether he was getting paid.
Clark, who claimed to be Householder’s “proxy” on the bailout, set up a dinner at a private Columbus club on Sept. 23, 2019. It was to be an introduction between Householder and two undercover agents, and Clark instructed them to bring a $50,000 check for Generation Now — the dark money group that Householder controlled that supported the bailout.
That was at the height of the battle over the bailout repeal and Householder and Firstenergy were spending millions on commercials, private detectives, and even alleged bribes to block it. Clark did most of the talking during the dinner, but at one point Householder explained his public stance on the funding for the fight.
“I said it’s simple. It’s a company that wants to stay in Ohio,” Householder said.
By contrast, he added, the repeal campaign seemed reluctant to admit that some of its funding was coming from out of state.
Householder said his public stance was to say, “I’ll show you mine if you’ll show me yours.”
Then he said, “It’s back to the broads in junior high: I’ll show you mine if you show me yours.”
The dinner went on for more than three hours and Clark never did give the undercover agents an opening to present their check to Householder.
In a phone conversation the next day, Clark told one of them that he had spoken to the speaker earlier that morning. Clark said Householder enjoyed the dinner, but he didn’t want that check just yet.
Instead, those funds might be used for another dark money group supporting a separate effort — a constitutional amendment changing Ohio legislative term limits to a lifetime maximum of 16 years.
Instead of bouncing lawmakers out of or between chambers every four years, the amendment would cap total service at 16. And, because it would reset the clock for everyone, it would allow Householder to remain speaker for the foreseeable future if he could keep leveraging enough money to help elect supportive House members.
By early 2020, Householder was also pressing Firstenergy to contribute dark money to the effort, according to earlier testimony.
Householder’s wasn’t the only questionable conduct alleged on Wednesday.
“The governor got about $3 million from Firstenergy,” Clark said on June 6, 2019, explaining that even so, Mike Dewine was an inconsistent supporter of the bailout.
“The governor, when he knew Larry (Householder) didn’t have the votes, he ran away from him,” Clark said. “Now he wants to come back.”
Clark also said that Dewine is highly influenced by campaign contributions.
“I don’t want to say he’s a pay-to-play guy, but (Dewine is) clearly influenced by people who have money,” Clark said.
And while the bailout legislation was billed as the “Ohio Clean Air Program,” one part of it created subsidies for 70-year-old coal plants and another part gutted energy efficiency standards. Environmentalists have accused utilities of wanting to cut such standards in order to keep usage — and revenue — high.
“The Republicans really don’t want any energy efficiency at all,” Clark said in a Nashville meeting with undercover agents on July 23, 2019.
Earlier Wednesday, there was testimony indicating that conflicted interests and self interest in the utility bailout went beyond the legislature.
There was more testimony about Pat Tully — who was working for the state’s utility regulator when he sent a resume to a Firstenergy lobbyist in January 2019 as legislative work on the corrupt bailout began. As an employee of the House Republican Caucus, Tully worked with Sam Randazzo to draft the bailout, House Bill 6.
Problem was, Randazzo was chairman of the regulator — the Public Utilities Commission of Ohio — at the time. In addition, he’d taken a $4.3 million payment from Firstenergy as Dewine was appointing him to the regulatory post.
There was also testimony that more than preserving clean energy or saving Ohio jobs sparked the bailout — if those factors were considered at all.
Juan Cespedes, a lobbyist who has pleaded guilty in the case, testified that there were plans to sell off money-losing coal and nuclear plants quickly after bailout money started flowing in. Firstenergy Solutions, the subsidiary that owned the plants, wanted to hire Cespedes to assuage what were sure to be bitter feelings among lawmakers who had taken a political hit to support the bailout.