FirstEnergy spent $61 million in bribes and “dark money” campaign contributions and advertising to elect the speaker of the Ohio House of Representatives and allies, who won $1.5 billion in subsidies for the company’s struggling nuclear plants, federal officials charged Tuesday.
House Speaker Larry Householder, FirstEnergy lobbyist Juan Cespedes, lobbyist Neil Clark, former state Republican Party Chair Matt Borges and Householder political strategist Jeff Longstreth were arrested on racketeering charges in a three-year scheme that resulted in the passage of House Bill 6, which authorized zero-emission credits for FirstEnergy Solutions’ (FES) money-losing Perry and Davis-Besse nuclear plants.
FirstEnergy no longer owns the nuclear plants: FES emerged from bankruptcy in February as Energy Harbor. But the utility’s CEO, Charles Jones, and others may face legal jeopardy, based on the 81-page affidavit that accompanied the complaint, which said the CEO of “Company A” — as FirstEnergy was referred to in the document — was in regular contact with Householder.
In a Tuesday afternoon press conference, U.S. Attorney David M. DeVillers of the Southern District of Ohio smiled when asked whether FirstEnergy officials might face charges. He said investigators would pursue evidence “wherever it leads, whoever they work for.”
While not naming “Company A” cited in the affidavit, DeVillers said that “everyone in this room knows who Company A is,” alluding to the main beneficiary of H.B. 6.
He said it was vital to the conspiracy that no one knew Company A’s $61 million would be used to “further the affairs of the enterprise” with Householder, so a 501(c)(4) nonprofit organization called Generation Now was created to filter much of the money.
The money was used first to elect Householder and other legislators who backed him for speaker. It also funded television advertisements and mailers supporting the bill. Finally, money was used to defeat a ballot referendum that sought to overturn the law — including bribes to those working for the referendum.
DeVillers called the case “likely the largest bribery money laundering scheme ever perpetrated within the state of Ohio.”
FirstEnergy issued a statement Tuesday saying it had “received subpoenas in connection with the investigation surrounding Ohio House Bill 6. We are reviewing the details of the investigation, and we intend to fully cooperate.”
“We are reviewing the complaint and will cooperate fully with the government’s investigation,” said a spokesman for Energy Harbor, which was not directly implicated in the case.
Shares of FirstEnergy fell almost 18% on the New York Stock Exchange Tuesday. Energy Harbor, traded over the counter, dropped 14%.
“Make no mistake, these allegations are bribery, pure and simple,” DeVillers said. “This was a quid pro quo. This was pay-to-play. And I use the term ‘pay-to-play’ because that’s the term they used.”
Private Flight to Inauguration
The affidavit sets the stage at FirstEnergy’s first-quarter earnings call in 2016, when Jones told analysts the company’s “top priority is the preservation of our two nuclear plants in the state, and legislation for a zero-emission nuclear program is expected to be introduced soon.”
The government said the conspiracy began two months after Householder flew to President Trump’s inauguration on FirstEnergy’s private jet in January 2017. Beginning in March, the government said, Householder began receiving quarterly $250,000 payments through Generation Now.
Householder had served as House speaker from 2001 to 2004, leaving office because of term limits. The FBI launched an investigation in 2004 into allegations that he and his aides took kickbacks from vendors and traded legislation for campaign contributions, but the investigation ended in 2006 with no charges filed.
By 2017, Householder was plotting a comeback — with FirstEnergy’s help.
In 2017 and 2018, Generation Now received $2.9 million from FirstEnergy, which was used to support the campaigns of Householder and 14 allies in the primary election and six additional candidates in the general election. All who won voted for Householder as speaker, and all but two supported H.B. 6.
H.B. 6 was introduced three months after Householder was elected speaker in January 2019. FirstEnergy’s payments to Generation Now increased after the bill was introduced, with $9.5 million being wired into its accounts in April and May.
Generation Now used the funds in part for mailers and media ads to pressure legislators to support the bill, which passed the House on May 29, 2019, and the Senate about two months later.
But shortly after the bill was signed into law, opponents announced a petition drive to put a question on the November ballot overturning the legislation. From late July through October, FirstEnergy wired another $38 million to Generation Now to defeat the initiative.
The affidavit said Borges used $15,000 of the cash to bribe a worker at the company conducting the petition drive to provide the Householder team inside information on the company’s efforts. Borges was unaware that the worker agreed to go along with the scheme after contacting the FBI.
Householder’s group also spent $450,000 to hire other leading signature collection companies so they would have conflicts of interest and could not take part in the referendum drive.
Generation Now also wired $23 million to a group called Ohioans for Energy Security — which the affidavit called “Front Company” — for expenses, including advertising opposing the referendum.
The referendum campaign failed on Oct. 21, 2019, and H.B. 6 became law. (See Ohio Nuke Petition Misses Signature Deadline.)
In addition to funding Householder’s campaign and bankrolling the efforts behind H.B. 6, FirstEnergy’s spending also personally benefited Householder, the government said, citing almost $102,000 spent on his Florida residence and $300,000 to pay off a lawsuit and legal fees.
Regular Contacts with Jones
The affidavit said Company A’s CEO had 87 phone contacts with Householder from February 2017 until July 2019, when H.B. 6 was signed into law, including 30 contacts between January to July 2019. Householder also had 188 contacts with FirstEnergy’s Ohio director of state affairs, and Longstreth was in regular phone contact with FirstEnergy’s vice president of external affairs and FES’ [identified as Company A-1] vice president of government affairs.
In May, FirstEnergy announced that Jones would be relinquishing his title as president to Steven E. Strah as part of a succession plan. Jones remained CEO and a member of the board.
As a 501(c)(4), DeVillers said, Generation Now did not have to disclose its donors. But under IRS rules, it is a “social welfare” entity that cannot financially benefit a shareholder or individual and cannot intervene in political campaigns.
“Not a dime of the money of the $61 million that was filtered to Generation Now by Company A went to any social program,” DeVillers said. “There were no members that donated to this 501(c)(4) — $61 million was completely donated by Company A. … Make no mistake, this is Larry Householder’s 501(c)(4).”
DeVillers said the investigation began more than a year ago after being brought forward by a whistleblower. He called it a “covert investigation” that was critical to fully investigate without individuals knowing what was happening.
He said it was an “extremely complicated, extremely complex” investigation that has already involved thousands of hours of manpower combing through “millions of pages” of documents, including bank records and financial transactions.
“It took me months to really get a grasp of what we’re dealing with,” DeVillers said. “And we’re still learning more information every day on this case.”
DeVillers wouldn’t comment on any future charges for individuals or entities involved in the case, saying only that no one from Company A has “as of yet” been charged and that there are “a lot of FBI agents knocking on a lot of doors” after Tuesday’s arrests.
“We are not done with this case,” he said. “There are things we couldn’t do before; people we couldn’t interview; people we couldn’t subpoena; documents we couldn’t subpoena; search warrants we couldn’t execute – because if it got back to the enterprise, everything would have shut down.”
Chris Hoffman, the Cincinnati-based FBI special agent in charge of the investigation, said public corruption is the top criminal priority for the bureau.
Hoffman said the case is the first time a racketeering charge has been used on a public official in the Southern District of Ohio and that RICO cases are reserved for the most “egregious” instances.
“Public corruption erodes public confidence and undermines the strength of our great democracy,” Hoffman said. “The federal complaint charging those arrested today details a shameful betrayal of public trust. … Our state deserves to have an honest system of government that isn’t hijacked by greed or corruption.”
DeVillers was asked about the “unprecedented” nature of the case and how it has personally affected him. He said what has made him “angry” is the limited resources among investigators who could be working on other cases having to be diverted to public officials elected to be responsible to the voters.
“We have cases with real victims, and we have to take our resources away from those real victim cases and investigate and prosecute some politicians who just won’t do their damn job,” DeVillers said. “That’s what makes me angry. And everything begins and ends with rule of law. And if we have legislatures or leaders passing laws that they themselves are corrupt in, those laws themselves are corrupt.”
Former Ohio Public Utilities Commission Chair Todd Snitchler, now CEO of the Electric Power Supply Association, called on the legislature to repeal H.B. 6, noting it was the second utility bribery scandal in less than a week. (See How ComEd Got its Way with Ill. Legislature.)
“When politically powerful interests can pay to have their favored policies passed into law or ensure that specific resources are preselected to profit, we undermine energy and environmental progress,” he said in a statement. “These kinds of situations have played out in multiple states just this week, and we urge voters, legislators and regulators to keep a close watch and protect transparency and competition. When policymakers do the bidding of special interests, consumers lose.”