Further scuttling a proposed settlement for FirstEnergy’s shareholders, a federal judge demanded their lawyers, within 24 hours, answer his question about which company officials ordered what has been described as the largest political bribery scheme in Ohio history.
Both FirstEnergy and its shareholders were on the cusp of a settling the shareholders’ derivative lawsuit, announcing an agreement in February pending judicial review. It calls for FirstEnergy’s insurers to pay the company $180 million for damages incurred in the scandal. The proposed settlement also would force out six members of the board of directors when their terms expire and require corporate reforms related to “political and lobbying activities.”
U.S. District Judge John R. Adams, however, has refused to approve anything until plaintiffs’ counsel answer one critical question: Who at FirstEnergy ordered the $64 million in political bribes?
Adams threatened to hold plaintiff’s attorney Jeroen Van Kwawegen in contempt for ducking the question earlier this month. Adams’ March 11 threat ranged from professional sanctions to removal of their role as attorneys for the shareholders.
On Tuesday, Adams gave plaintiffs “one final opportunity” to answer his question in a sworn affidavit by noon Wednesday. In his order, Adams emphasized the public’s interest in the case: FirstEnergy, a publicly traded company, admitted to bribing public officials. The public cannot trust or even evaluate any corporate reforms from FirstEnergy if the company is allowed to leave such gaping holes in the plotline, he said.
“It is not only the trust of FirstEnergy that must be rebuilt,” Adams wrote. “This bribery scheme has undoubtedly shaken whatever trust that Ohioans may have had in the political process used by their elected officials. The public has a right to know how it is that the political process was so easily corrupted.”
During the bribery campaign, some of the defendants named in the lawsuit received $105 million in compensation, according to Adams. (Adams did not offer specific dates but prosecutors roughly chart events between 2017 and 2019.)
The settlement deal was announced the same day those executives were slated to begin their depositions, providing them an escape hatch from answering questions under oath. None of them have been criminally charged. Adams’ order even lists their specific compensation, including:
- Former FirstEnergy CEO Charles Jones: $55 million
- Former FirstEnergy Vice President and Treasurer James Pearson: $23 million
- Current FirstEnergy CEO Steven Strah: $17 million
- Former FirstEnergy CEO and Senior Vice President Robert Reffner: $2.5 million
“As a result, those persons that received over $100 million in compensation were not required to sit in a room, swear under oath, and answer honestly about the actions they took,” he said. “The settlement also reveals that none of these alleged wrongdoers will be required to contribute even $1 to the ultimate settlement.”
The settlement calls for deducting from the $180 million any court-ordered attorney’s fees and costs for the plaintiffs. According to Adams, the settlement agreement allows Plaintiffs’ counsel to seek up to approximately $48 million in attorney fees and costs.
A FirstEnergy spokeswoman declined comment. Kwawegen did not immediately respond to an email, nor did a spokeswoman for the U.S. Attorney for the Southern District of Ohio.
Last week, attorneys for both FirstEnergy and its shareholders argued they can’t answer Adams’ question, because to do so would violate confidentiality agreements associated with pre-trial proceedings and settlement talks. The shareholders’ lawyers said their obligations are to make the shareholders whole, not advance the public interest in transparency.
In July 2021, FirstEnergy as a company entered into a deferred prosecution agreement with the U.S. Department of Justice. The company agreed to cooperate in the government’s criminal investigation and pay a $230 million penalty to possibly avert a charge of wire fraud against it.
In a lengthy statement of facts attached to the agreement, FirstEnergy admitted to paying $60 million into a “dark money” nonprofit secretly controlled by former House Speaker Larry Householder to pass House Bill 6, energy policy overhaul legislation worth an estimated $1.3 billion to the company. The company also admitted to paying Sam Randazzo, formerly the state’s top utility regulator, $4.3 million as a bribe just before Randazzo was appointed for the post by Gov. Mike DeWine.
The company’s admissions, Adams said, are not conclusive as to the guilt of the implicated parties, but “they provide a clear and concise road map to litigate this matter fully and fairly.”
Householder has pleaded not guilty and awaits trial scheduled for January 2023. Randazzo has not been charged and denied wrongdoing.
Two Householder allies, a lobbyist and political adviser, have pleaded guilty to their role in the scandal. The central nonprofit Householder allegedly controlled to further the scheme has pleaded guilty as well.
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