FirstEnergy’s CEO and SVP ordered $64 million bribery scheme, shareholders say
FirstEnergy’s headquarters in Akron. Source: Google Maps.
FirstEnergy’s CEO and senior vice president “devised and orchestrated” a $64 million bribery scheme to pay a top legislative leader and utility regulator in exchange for official action, according to a sworn declaration Wednesday from shareholders’ lawyers who are suing the company.
While CEO Charles “Chuck” Jones and senior vice president for external affairs Michael Dowling were both suspected central characters in the operation — both were fired after initial FBI arrests in the case and matched identifying details in court documents — Wednesday’s filing marks the first time the two were personally identified.
The company’s shareholders filed a derivative lawsuit, alleging the bribery operation and subsequent legal and political fallout damaged FirstEnergy and violated company policy. Lawyers for the shareholders said the pre-trial exchange of evidence would have shown Jones and Dowling as the engines of the payments.
FirstEnergy as a company entered into a deferred prosecution agreement with the U.S. Department of Justice last summer. In it, the company admitted to a $60 million payment to a nonprofit secretly operated by former GOP Speaker of the House Larry Householder, and another $4.3 million payment to the state’s top utility regulator, Sam Randazzo. However, the company didn’t specify which executives ultimately controlled the payments.
Householder has pleaded not guilty to a charge of racketeering and awaits trial set for January. Two of his alleged co-conspirators have pleaded guilty and await sentencing. Randazzo has not been charged with a crime.
The shareholders’ declaration specifies Jones as “executive 1” and Dowling as “executive 2” in the deferred prosecution agreement. The arrangement calls for FirstEnergy to cooperate with prosecutors, admit to a roughly 40-page statement of facts, and pay a $230 million penalty to possibly avert a criminal charge of wire fraud.
Attorneys representing Jones and Dowling did not respond to emails Wednesday.
“While we can’t comment on the court filing today, FirstEnergy continues to take steps to rebuild trust with stakeholders and position the company for the future,” said company spokeswoman Jennifer Young. “This includes, among other proactive steps, strengthening the leadership team, enhancing its compliance program, implementing more robust oversight of government affairs engagement, and resolving multiple regulatory proceedings.”
FirstEnergy said it paid the bribes to help pass House Bill 6 in 2019, a sweeping energy policy overhaul worth an estimated $1.3 billion to the company. The legislation bailed out nuclear plants owned at the time by a company subsidiary, effectively guaranteed company revenues at a high level via a “decoupling” provision, gutted requirements that it generate renewable energy, and others.
The disclosure adds new heat to Gov. Mike DeWine, who appointed Sam Randazzo to the PUCO and signed HB 6 within hours of lawmakers passing it.
For instance, Jones and Dowling met with Randazzo on Dec. 18, 2019, to discuss payments to him and his candidacy for a seat on the state Public Utilities Commission of Ohio, according to FirstEnergy. That same day, DeWine and Lt. Gov Jon Husted dined together at a Columbus restaurant.
The shareholders’ disclosure came to fruition after an unusual set of circumstances. In February, as depositions of former company officials like Jones and Dowling were set to commence in the shareholders lawsuit, the two parties announced a proposed settlement. Pending judicial review, it would call 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.”
However, U.S. District Judge John R. Adams refused to sign off on anything until he gets an answer to his question of who at the company ordered the bribes. He abruptly cut off a hearing earlier this month as counsel for the shareholders evaded answering him, citing confidentiality agreements associated with pre-trial procedure and settlement talks. He eventually demanded answers in an order, threatening to hold lawyers in contempt or eject them from the case. This prompted Wednesday’s hearing.
“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.”
The proposed settlement, meanwhile, has not yet been approved by any judge.
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