A U.S. bankruptcy court has again delayed the final payment in a $67 million legal bill that a national law firm charged FirstEnergy Solutions in its restructuring case.
Judge Alan Koschik appeared to be troubled Tuesday by the responses of lawyers and lobbyists with Akin Gump Strauss Hauer & Feld in an open court hearing. They were defending about $2.8 million in fees for, among other things, the work of a lobbying team the firm sent to Ohio to help engineer the passage of the now infamous Ohio H.B. 6, passed in July 2018.
Koschik deferred a final ruling on the fees until a Nov. 16 hearing, when he will announce his decision from the bench. The court has delayed approval of the final payment for months as Koschik awaits the outcome of an ongoing Justice Department investigation into the passage of H.B. 6.
That investigation has so far led to the indictment of former Ohio Speaker Larry Householder (R) and four associates on federal racketeering charges, and the dismissal of FirstEnergy’s (NYSE:FE) former chief executive and four others over the company’s $61 million in dark money to bankroll Householder’s multiyear campaign engineering passage of the bailout. FirstEnergy paid a $230 million fine as part of a three-year deferred prosecution agreement that dropped wire fraud charges if the company continues to cooperate.
The Akin lobbying team admitted in affidavits filed earlier this month and in testimony Tuesday that it worked hand-in-glove with Juan Cespedes, principal of the Oxley Group, a Columbus firm and FES lobbyist at the heart of the federal probe
Cespedes and political strategist Jeff Longstreth pleaded guilty to a racketeering conspiracy charge in October 2020 but have not been sentenced, pending their cooperation with the ongoing probe. Householder has pleaded not guilty and awaits trial.
“I have to think about all of this but … my biggest concern with all of this — and I don’t know what I’m going to do with it is … we had a major law firm with a lobbying wing representing the debtors during the course of this case, heavily involved, a lot of fees involved because of a lot of work was being involved,” Koschik said following nearly an hour of questioning Akin’s lobbyists and two top trial lawyers who have handled the bankruptcy case in court since March 2018.
“And somehow yet … while this case is pending in this court, it has found itself to be … indictment-adjacent,” Koschik said. “There are people that [Akin] was doing work with, some of them were being paid pursuant to an order from this court, namely an ordinary course [of business].”
Koschik noted that some of the Ohio operatives that Akin’s lobbying team worked with have been indicted “in connection with an effort that was driven in large part to get a subsidy for the nuclear plants that were very much a part of this case.”
“And it’s a little irksome to me that while I’m supervising this case, that happened. What do I do with that? Why should I include that? [Why should] all of the fees for the lobbying effort, $2.8 million … be allowed or allowed in full, when what has happened, has happened?
H.B. 6 created a $1.1 billion public bailout of two unprofitable Ohio nuclear plants that FES, now called Energy Harbor, continues to operate, though the state legislature rescinded the subsidies earlier this year amid the ongoing Justice Department investigation into what it described as the worst corruption scandal in the state’s history.
Akin has portrayed the efforts of its public policy team on the ground in Columbus as standard operating procedure, not unusual in any way and legally permissible.
Koschik on Tuesday questioned four members of the Akin lobbying team who worked in Ohio on H.B. 6 and each said they were surprised by the indictments, though one admitted that he was aware at some point that the dark money group, Generation Now, was tied to Householder.
Abid Qureshi, one of the Akin attorneys who has represented the company during the bankruptcy proceedings, said all the parties — including creditors who were owed significant amounts of money — were aware of the decision to field a lobbying team in Columbus and the decision to fund those efforts.
“With respect to all of the … creditor constituencies, when these decisions were being made to have FES, to have the debtors make these political contributions, to have the debtors use their efforts to get H.B. 6 passed, to have the debtors assist in the effort to defeat the referendum that followed the passage of H.B. 6, there was continuous dialogue with all of the stakeholders in the bankruptcy case,” he told the court.