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FirstEnergy to pay $230M in agreement in Ohio bribery case

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Copyright 2021 The Associated Press. All rights reserved.

Acting U.S. Attorney Vipal J. Patel, center, accompanied by FBI Special Agent in Charge Chris Hoffman, speaks during a news conference in Cincinnati, Thursday, July 22, 2021. Federal authorities say Akron-based FirstEnergy Corp. would pay a $230 million penalty and fully cooperate as part of an agreement announced Thursday to settle federal charges against the company in a sweeping bribery scheme in Ohio. (AP Photo/Farnoush Amiri)

CINCINNATI – The energy giant at the center of a $60 million bribery scheme in Ohio admitted Thursday to using dark money groups to fund the effort, and agreed to pay $230 million and other conditions so prosecutors won't forge ahead with a criminal case against the company.

Authorities charged Akron-based FirstEnergy Corp. with conspiracy to commit honest services wire fraud, alleging payoffs to public officials to back a $1 billion subsidy that would have had taxpayers helping the company prop up two aging nuclear plants.

That charge could be dropped in three years if the company complies with the terms of the deal, such as continuing to cooperate with investigators looking into the kickbacks to officials, who included the Ohio House speaker and a lobbyist who would become the state’s top utility regulator.

The deal, signed off by FirstEnergy's president and CEO, comes in a scandal that has affected business and politics across Ohio since the arrests a year ago of then-Ohio House Speaker Larry Householder and four associates. Government officials say Householder orchestrated a plan to accept corporate money for personal and political use in exchange for passing nuclear bailout legislation and scuttling an effort to repeal the bill.

“I hope that today’s announcement serves as a stern warning to other corporations and corporate executives who would sell their integrity to a public official, a group of public officials,” said FBI Special Agent in Charge Chris Hoffman, calling the probe a historic public corruption investigation that “deserves historic remedies.”

Acting U.S. Attorney Vipal J. Patel called the $230 million penalty probably the largest ever secured by his office.

FirstEnergy is one of the largest investor-owned electric systems in the nation with an annual revenue last year of $10.8 billion. Patel rejected suggestions that the sum was too lenient.

“So the principal here is try and come up with a number that stings, okay, but doesn’t annihilate,” Patel said, asserting that decimating the company's finances would hurt employees and customers and diminish FirstEnergy's incentive to cooperate.

Half of the $230 million penalty will go to the federal government and the other half will be paid to a program that benefits Ohio’s regulated utility customers, Patel said. FirstEnergy also has to forfeit about $6 million seized from the accounts of one of the dark money groups, Partners for Progress.

Under the agreement, FirstEnergy also must make public any new corporate payments it’s aware of that were intended to influence a public official and continue an internal makeover of its ethics practices. It also must issue a public statement describing that it intentionally used dark money groups to hide the scheme.

Prosecutors say the company used the groups “as a mechanism to conceal payments for the benefit of public officials and in return for official action.”

The settlement gives the public some justice, Ohio Consumers’ Counsel Bruce Weston said.

"But justice is also a longer road that requires state reforms to curb the utilities’ political influence that is costing Ohioans money on their utility bills,” he said.

New details in Thursday's court filings said Partners for Progress appeared to be independent while actually being controlled by FirstEnergy. FirstEnergy admitted to hand-picking the organization’s three leaders, who included Republican Gov. Mike DeWine’s now-top lobbyist Dan McCarthy, and funneling $15 million in FirstEnergy cash through the nonprofit to Generation Now, which has also pleaded guilty in the case.

That represented a portion of the $60 million that FirstEnergy now admits it paid Generation Now, which it knew was also not independent but rather controlled by Householder, the statement of facts said.

That statement of facts filed Thursday also said Householder approached FirstEnergy officials in February 2020 to fund a ballot initiative to increase term limits for public officials. Had it passed, the measure potentially could have added up to 16 more years to the Perry County Republican’s House term. FirstEnergy paid Partners for Progress $2 million the next month, which the dark money group transferred to the Householder-controlled Generation Now.

Patel stopped short of saying whether any of the dark money group's activities detailed in the government's Thursday filings was illegal, though the statement prosecutors required FirstEnergy to issue was clearly intended to shine a light on the vast political influence that such entities are able to keep secret.

“They were a tool and they were used as part of a game,” Patel said. “It would be no different if you had written Partners for Progress on a kitchen brown paper bag and stuffed a bunch of cash in and slid it across the table.”

FirstEnergy Nonexecutive Board Chair Donald Misheff said in a statement that the settlement builds on steps the company already had under way, including to “significantly modify our approach to political engagement as we work to regain the trust of our stakeholders.”

Patel said the settlement does not preclude prosecutors from pursuing any individuals whose actions are described in detail in settlement documents, though without being named.

The company also paid a public official $4.3 million through his consulting company to further the company’s interests while he worked as Ohio’s top utility regulator, “relating to the passage of nuclear legislation,” according to the prosecutor's statement of facts. That official is known to be former utilities commission chair Sam Randazzo.

Randazzo resigned from the commission in November after FBI agents searched his Columbus townhome and FirstEnergy revealed the payment to end a consulting agreement with his company.

He said in a statement released through his attorney that he executed his duties as commission chair “conscientiously, lawfully, and mindful of striking the right balance between competing interests.”

“At no time prior to or after my appointment to the PUCO was I asked or did I agree to exercise authority as a public official or perform any official action in my capacity as Chair to further FirstEnergy’s legislative, regulatory or other interests,” he said.

In the last year, FirstEnergy has fired six high-ranking executives, including then-CEO Chuck Jones.

Messages seeking comment were left with Jones and Householder.

DeWine, who appointed Randazzo to the utilities commission, reiterated in a statement Thursday that his office knew Randazzo had done work for FirstEnergy.

“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,” it said.

Neither Randazzo nor Jones have been charged criminally.

DeWine also announced his re-election campaign will make a donation to the Boys and Girls Club in the amount that FirstEnergy donated over the years to his campaign. He did not disclose the amount.

In a statement Thursday, FirstEnergy President and CEO Steven Strah said, “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.” He also detailed the agreement in a video message to employees.

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This story was first published July 22, 2021. It was updated July 23, 2021, to make clear that FirstEnergy Corp. was charged with conspiracy to commit honest services wire fraud, which means there’s an accusation of defrauding people of services, not of property or money.

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Gillispie reported from Cleveland and Carr Smyth reported from Columbus. Farnoush Amiri is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.