After being embroiled in scandal, FirstEnergy Corp. made expected moves to recover - ranging from firing the top executives to hiring a new ethics officer. However, in a sudden turn, FirstEnergy Corp. is legally defending itself, asserting that the $60 million in bribes to then-Ohio House Speaker Larry Householder were campaign donations.
The big utility company is taking this legal defense strategy, despite the nonprofit who received the money pleaded guilty. To learn more, check out the excerpt below from John Caniglia:
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“In the past seven months, FirstEnergy Corp. appeared to follow the playbook of how to move beyond a political scandal.
It fired top executives, dropped its longtime lobbyists in Columbus and brought in a new ethics officer. It even studied its process of political giving.
The company also said it was cooperating with the Justice Department over House Bill 6, a $1.3 billion bailout of two nuclear plants once owned by a subsidiary. Federal authorities have accused the utility and its affiliate of paying $60 million in bribes to then-Ohio House Speaker Larry Householder and a clique of allies to prime the legislative pump.
Despite its work over the months, the company appeared to veer from the playbook when its attorneys filed documents Tuesday to fend off a legal attack from investors. In those filings, the company insists the payments for Householder weren’t bribes; they were campaign contributions shipped through a nonprofit that collected them and doled them out to whip up support for the bill’s passage.
The filings came at an interesting point in the case’s timeline. The company has admitted that it is working with federal attorneys in the criminal investigation in a move that could force it to pay a hefty fine in a deferred prosecution agreement. Meanwhile, its lawyers in a civil suit have stressed that the payments were perfectly legal.
“The inconsistency in those positions is so glaring that it is insulting,” said Lewis Katz, a professor emeritus at the Case Western Reserve University School of Law.
He said what appears troubling is that the nonprofit that collected the payments, Generation Now, already has pleaded guilty to racketeering in the case.
“It shows the absurdity of the argument,” Katz said. “[FirstEnergy and its affiliates] knew what that money was going to be used for. They did whatever it took to get the Legislature to pass their special-interest bill.”
Some see the strategy differently. They said the company is simply attempting to handle shareholders’ lawsuits, prosecutors and regulators, from the U.S. Securities and Exchange Commission to the Federal Energy Regulatory Commission.
“It’s a very delicate dance,” said J. Dean Carro, a professor emeritus at the University of Akron School of Law. “[FirstEnergy officials] don’t want to implicate themselves in the civil case, but they do want to cooperate in the criminal case. The company is being attacked on multiple fronts, and it is trying to defend itself.”
Brett Kappel, a Washington, D.C., attorney who focuses on campaign finance and lobbying laws, said such moves are common for companies seeking to limit their liability from shareholders and investors.
“What looks like inconsistent positions is the company’s attempt to protect itself,” Kappel said. “At this stage, it can make that argument.”
The utility and its affiliates have not been charged, and no current or former employees are accused. Authorities, however, say the investigation continues.
Already, Householder and four others have been indicted on racketeering charges. Two of them, Householder’s political strategist Jeffrey Longstreth and lobbyist Juan Cespedes, have pleaded guilty. Through its guilty plea, Generation Now must surrender nearly $1.5 million.
The FBI alleges that FirstEnergy and its affiliate, FirstEnergy Solutions, moved $60 million from 2017 to 2019 to pass House Bill 6. FirstEnergy Solutions, which had owned the plants, gave $56.6 million, records show.
The money went to Generation Now, which served as a bank account for Householder, according to federal documents. Longstreth helped control the nonprofit, records show, and the money flowed to Householder’s legislative allies and the push to fight off a ballot challenge against HB6.
In filings in U.S. District Court in Columbus, attorneys representing FirstEnergy and its former top officers called the money “issue-advocacy contributions” to Generation Now. Under federal law, the donations are legal, though they are concealed by the cover of a nonprofit, hence the term “dark money.”
Unlike contributions to a candidate’s campaign fund, there are no limits on how much a person or corporation can give to a nonprofit.
Attorneys have argued that the company and its affiliate simply contributed to the nonprofit, and there was no corrupt intent for the donations. The lawyers argued what happened after the payments streamed into Generation Now had nothing to do with FirstEnergy or its companies.
“That FirstEnergy made contributions to Generation Now does not establish a return promise from Householder or anyone else as to any specific official act,” the attorneys wrote.
They asserted that neither the companies nor any of their current or former officers are identified in the charges involving the nonprofit.
“What Generation Now and Longstreth said in their plea agreements also does not show with particularity that any [FirstEnergy official] knew about their purportedly illicit acts,” the filings said.
The plea agreement for Generation Now indicated that the racketeering charge encompassed several instances of bribery. Those allegations, however, are not spelled out in the document.
“Those admissions show only that Generation Now and Longstreth thought it would be in their own self-interest to make the admissions sought by the government in exchange for favorable treatment,” the FirstEnergy attorneys said.
Robert Krapenc, an attorney for the nonprofit and Longstreth, could not be reached for comment.
Catherine Turcer, the executive director of Common Cause Ohio, a government watchdog group, said FirstEnergy’s argument sounds reasonable, “but we live in the real world.”
“It’s a lot like giving your kid money, and he spends it all on candy and gets sick,” Turcer said. “And then you step back and say, ‘I had nothing to do with it.’
“It doesn’t pass the smell test that [FirstEnergy and its affiliates] were giving money to Generation Now out the goodness of their hearts. We can’t pretend that they weren’t trying to buy public policy.”
Katz, of Case Western Reserve University, agreed: “If it walks like a bribe, if it quacks like a bribe, if it smells like a bribe, it probably is a bribe.”
The arguments over the contributions come months after FirstEnergy had begun to move beyond the scandal.
For instance, the day before Householder’s arrest, the company’s price per share of stock closed at $41.26. For months, it hovered at about $29 but slowly began to tick upward. It rose to $38 Friday.
In October, it fired Charles Jones, its chief executive officer, and replaced him with Steve Strah. It also dropped Michael Dowling, the leader of governmental affairs, and top Statehouse lobbyists, including Ty Pine and Joel Bailey. Earlier this year, it hired Antonio Fernández as the chief ethics officer. He replaces Ebony Yeboah-Amankwah.
The moves came amid an attempt by the company to study “how it engages in the political process to ensure alignment with our corporate values, behaviors and strategies.”
Householder and lobbyist Matt Borges have denied the allegations. A trial date has not been set. The fifth person charged, lobbyist Neil Clark, died in March of an apparent suicide.”
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