Davis Bees Nuclear Power Station with electricity pylons, Ohio. Getty images.
Ohio Attorney General Dave Yost on Wednesday sued the players in a massive scandal that continues to roil state politics.
Yost is seeking to stop a $1.3 billion ratepayer bailout from flowing to a Northern Ohio electric utility after a rate hike to pay for it that is scheduled to start Jan. 1. And he’s seeking to remove the players in the scheme from their respective organizations or to dissolve the organizations altogether.
The attorney general also said that a 501(c)(4) “dark money group” founded and run by a man who is now one of Gov. Mike DeWine’s senior aides was part of a “shell game” through which corrupt money flowed.
“Corruption doesn’t happen on an industrial scale like this without cash,” Yost said in a press conference announcing the suit. “And it’s incredibly important at this moment in our state’s history to send a message that the Ohio political system, the Ohio law-making system, the regulatory environment is not for sale. If you shut off the money spigot, the corruption withers.”
The industrial-scale corruption Yost was referring to was the process used to pass and defend House Bill 6, a $1.3 billion ratepayer bailout of two failing Northern Ohio nuclear power plants owned by a successor company to Akron-based FirstEnergy.
FirstEnergy hasn’t been charged with a crime and a spokeswoman pointed to comments by its CEO that it has acted properly.
U.S. Attorney David M. DeVillers in July charged then-House Speaker Larry Householder and four of his associates in what DeVillers called the largest bribery scandal in Ohio history.
About $60 million from FirstEnergy and associated organizations flowed through dark money groups and other organizations to elect lawmakers who would make Householder speaker, a federal criminal complaint said. Householder, in turn, rammed through the bailout bill while he and his associates feathered their own nests with some of the FirstEnergy money, the complaint adds. Tens of millions more were used in a brutal effort to put down a ballot initiative aimed at repealing HB 6, prosecutors say.
In the civil complaint filed Wednesday, Yost’s office details what it says is the corrupt scheme to pass HB 6, and adds that more investigation needs to be done.
“The acts set forth above are only the beginning,” it says. “The full breadth of the Unholy Alliance (Householder’s team) has yet to be revealed. What has come to light thus far reveals a long running scheme that co-opted Ohio’s legislative and referendum processes through coercion, intimidation, bribery and collusion.”
In laying out the scheme, the attorney general’s filing said that one well-connected dark money group, Partners for Progress, was founded at the very start of the scheme.
“The first step was creating a mechanism that would allow FirstEnergy Solutions and others to contribute money to the effort outside the public’s eye,” the lawsuit says.
It continues: “To that end, on January 26, 2017, Partners for Progress was incorporated in the State of Delaware. Partners for Progress described itself as engaging in activities consistent with Section 501(c)(4) of the Internal Revenue Code. Instead, as Ohio Secretary of State Frank LaRose pointed out in his August 27, 2019 complaint to the Ohio Elections Commission, Partners for Progress turned out to be a political action committee in disguise.”
Such 501(c)(4) “dark money” groups differ from political action committees in that dark money groups don’t have to disclose their donors. That allowed the conspirators to hide who was financing the gargantuan effort to pass and protect the bailout, Yost and federal prosecutors said.
Partners for Progress isn’t a defendant in the AG’s lawsuit. Rather, it’s listed as a “non-defendant entity.”
That appears to be some comfort to Gov. DeWine.
Dan McCarthy, a former FirstEnergy lobbyist, set up and ran Partners for Progress from its beginning until late 2018. During that time, FirstEnergy wired $5 million into the dark money group. Partners for Progress then passed $900,000 to Generation Now, Householder’s dark money group and $300,000 to other entities involved in the bailout, the federal criminal complaint says.
Then, after DeWine became governor in 2019, McCarthy became his legislative affairs director. In that role, McCarthy lobbies the legislature on the governor’s behalf.
After the HB 6 scandal broke, DeWine deplored the scandal but said he didn’t want to repeal HB 6. A day later, he said he wanted to repeal the bill and replace it with something that would keep the Northern Ohio nuclear reactors running. The legislature is considering such a measure, and DeWine this summer wouldn’t rule out having McCarthy lobby on the bill despite his earlier involvement with HB 6.
On Wednesday, DeWine Press Secretary Dan Tierney reiterated the governor’s support for McCarthy.
“The Governor has full confidence in Dan McCarthy and agrees with the U.S. Attorney that there was no wrongdoing by our administration,” Tierney said in an email.
He was referring to a July statement by DeVillers, the U.S. attorney, that investigators hadn’t found evidence of wrongdoing in the governor’s office. DeVillers stressed, however, that his investigation was far from over.
For his part, Yost said outlawing chains of dark money groups such as that between McCarthy’s and Householder’s would be a step toward stifling the massive corruption he said HB 6 amounted to.
“I would love to see a law that prevents one 501(c)(4) from giving to another 501(c)(4),” he said. “That would at least eliminate the shell game that we saw here.”
The attorney general added that, “It’s possible that there may be additional defendants as we go through discovery.”
One of the remedies Yost is asking for could impact executives with FirstEnergy, its subsidiaries and its successors.
The lawsuit requests that “defendant business entity and nonprofit entity named in this complaint be dissolved or reorganized such that no agent, officer or representative found to have engaged in acts in furtherance of retains a position within the defendant business or nonprofit entity.”
Among the defendants are FirstEnergy, FirstEnergy Service Company, FirstEnergy Solutions and Energy Harbor. In an email, FirstEnergy spokeswoman Jennifer Young defended her company.
“While we do not comment on pending litigation as a matter of policy, our CEO, Chuck Jones, said during a recent earnings call that he believes FirstEnergy acted properly in this matter and intends to ensure our Company and our role in supporting HB 6 are understood as accurately as possible,” she said. “Ethical behavior and upholding the highest standards of conduct are foundational values for the entire FirstEnergy family. We strive to apply these standards in all business dealings, including our participation in the political process.”
Young also sought to distance FirstEnergy from First Energy Solutions, the FirstEnergy spinoff that owned the nuclear power plants until it went through bankruptcy and emerged this year as Energy Harbor.
“It’s important to understand that both of the nuclear power plants in Ohio supported by HB 6 are owned and operated by Energy Harbor, a former subsidiary of FirstEnergy known at the time as FirstEnergy Solutions,” Young said. “FirstEnergy leadership has not had any decision-making power regarding the strategic direction of FES since November 2016, and FirstEnergy and Energy Harbor are now separate, unaffiliated companies. Additionally, FirstEnergy does not receive any revenues from the operation of these nuclear plants nor any of the nuclear funding provided through HB 6.”
However, Yost’s lawsuit points to strong connections — including potentially strategic ones — between the entities.
For example, it says that Jones served as CEO of both FirstEnergy Corp. and its subsidiary FirstEnergy Service Company last year. That’s when FirstEnergy Service Company provided FirstEnergy Solutions with “administrative, management, financial, compliance, ethical, external affairs, and political and regulatory advocacy services.”
Ohio’s consumer advocate, the Office of Ohio Consumer Counsel, is asking state regulators to commission an independent investigation into whether FirstEnergy improperly used ratepayer money to fund the scheme to pass HB 6. Yost on Wednesday said he wouldn’t tell the Public Utilities Commission how to do its job.
“If they choose not to do so, that could well end up being part of the discovery that is undertaken in this lawsuit,” he said.
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