Tag: bribery and money laundering scandal

Larry Householder speaks after guilty verdict. Photo by: WEWS/WCPO.

BY: MARTY SCHLADEN – Ohio Capital Journal

Columbus-based utility giant AEP wasn’t at the epicenter of a historic bribery and money-laundering scandal in 2019. But it also wasn’t very far away as a corrupt deal was hatched in the Ohio Capitol to use $61 million in bribes to pass a $1.3 billion bailout.

The name of the nation’s sixth-largest electric utility came up repeatedly in the seven-week criminal trial that ended earlier this month in the racketeering convictions of former Ohio House Speaker Larry Householder and former state GOP Chairman Matt Borges.

Through its dark-money group, AEP provided more than $900,000 that was used to help pass the bailout. And to date, it has received more than $60 million to subsidize aging coal plants that belong to a consortium in which it owns a 40% stake.

Just after the utility bailout was passed and a repeal attempt was thwarted, AEP spent another $500,000 through the same dark money group on an effort that stood to keep Householder in the speakership well into the 2030s. During the trial, a federal prosecutor asked a Householder co-defendant who had pleaded guilty why AEP would spend so much to keep the speaker in power.

“It kind of went without saying that they support anything that’s good for the speaker because anything that’s good for the speaker is good for them,” the aide, Jeffrey Longstreth, testified.

But everything changed when Householder and four others were arrested in July of 2020. Now AEP doesn’t seem interested in talking about its actions prior to that.

Mysterious money

Lobbyists and other wired-in parties on Capitol Square knew that as the battle heated up over the 2019 bailout measure — House Bill 6 — a geyser of cash was financing the effort to pass and protect it from repeal.

It was logical to suspect that the money was coming from a utility industry that stood to benefit. But there was no way to be sure because it was coming through 501(c)(4) dark money groups that don’t have to disclose their donors.

But then the FBI got involved.

Acting on a tip, it launched an investigation. Using subpoenas, wiretaps, confidential informants, forensic accountants and undercover agents, investigators were able to grope their way through the dark money smokescreen and determine who was really behind the push for an unpopular corporate bailout.

By far and away the biggest donor was the biggest beneficiary — Akron-based FirstEnergy. Starting in 2017 it ponied up what would become about $60 million to elect representatives who would vote to make Householder speaker in 2019 and then to pass and protect HB 6. In return, it stood to get about $1 billion of the benefit of the bailout — a return of more than $16 on each dollar it invested.

But AEP is getting an even better return — more than $66 for every one of its dollars that made their way into the dark money group that fueled the HB 6 scheme. And, because the part of the bailout that benefits AEP is the only part of HB 6 that hasn’t been repealed, AEP is continuing to collect that money. That means returns from its dark money expenditure will only improve over time.

AEP hasn’t been accused of wrongdoing in the scandal, and a spokesman denied that it acted improperly.

“AEP participates in legislative and regulatory processes ethically and in compliance with the laws of the states where we operate,” the spokesman, Scott Blake, said in an email. “As we have previously stated, we do not believe that AEP was involved in any wrongful conduct.”

And a board member of the dark money group AEP solely funded, Empowering Ohio’s Economy, claimed it didn’t know its dollars were used for nefarious purposes — even though it was at least partly in on the secret of HB 6’s mysterious funding.

“Obviously, knowing what we know now, we wouldn’t have made the donations,” the board member, J.B. Hadden, told the Dayton Daily News in December 2020.

The company is, however, being investigated by the U.S. Securities and Exchange Commission about its involvement in the passage of HB 6.

Belated transparency

However, AEP didn’t seem all that eager week to discuss its contributions which, until Householder was arrested, were secret. In the wake of the scandal, the company decided to start disclosing what dark money groups it contributes to, but only going forward.

“We adopted a revised political engagement policy in 2021, which is available at ​https://aep.com/investors/governance/politicalengagement,” Blake said. “Under that policy, beginning with contributions made in 2020, AEP has disclosed its contributions of $5,000 or more to 501(c)(4) social welfare organizations as part of AEP’s annual disclosures. Organizations that receive contributions from AEP are subject to their own disclosure requirements.”

But since the company started making such disclosures, Empowering Ohio’s Economy hasn’t appeared on them. AEP was the group’s sole contributor and its top lobbyist, Tom Froehle, was on its board.

The dark money group gave $700,000 to Generation Now, a dark money group controlled by Householder, that has since pleaded guilty to its role in the scandal. It gave another $200,000 to the Coalition for Opportunity and Growth, which ran TV ads supporting House candidates who would back Householder for speaker.

During the Householder trial, two of Householder’s co-defendants and other witnesses testified how money from Generation Now financed savage attacks on opponents of Householder candidates. And, when the recall campaign got underway, it paid for false, anti-China commercials, private eyes and “blockers” — people who harassed and even assaulted petition circulators, witnesses testified.

In an early 2019 text message presented to the jury, Borges described efforts to get AEP on board with a bailout that primarily benefited FirstEnergy.

“Lots of pressure from FE, AEP, renewable standards, setbacks… so thought is to move a comprehensive package and let everyone get a little (bit) of what they want,” Borges said.

Then in testimony, Householder’s fixer, Longstreth, described what AEP got.

“They received a benefit of… there were two coal plants in southwest Ohio,” Longstreth testified. “I’m not exactly sure where. One of them is actually just over the line in Indiana. I’m not sure where the other one is. They had to be created because of the U.S. Department of Defense needed them created 50 years ago (it was actually 68.) I don’t really know all of the details on it, but they received some benefit for running those plants on a continuing basis.”

Longstreth, who pleaded guilty to his involvement in the conspiracy, was referring to the Ohio Valley Electric Corporation, or OVEC, in which AEP holds a 40% interest. According to the Office of Ohio’s Consumers’ Counsel, the corporation so far has received about $152 million in ratepayer subsidies as a consequence of the corruptly passed HB 6.

But Blake, the AEP spokesman, didn’t respond directly when asked if the HB 6 arrests in July 2020 had anything to do with its decision to report dark-money contributions going forward.

“The decision to list contributions over $5,000 to 501(c)(4) organizations was made in the second half of 2020, and the reporting began with contributions made that year,” he said. “AEP has not made a contribution to Empowering Ohio’s Economy since 2019.”

In addition, Blake wouldn’t comment on the misleading way Empowering Ohio’s Economy described itself in 2019 as it made huge, secret contributions of AEP money that ended up being used in a bribery and money-laundering scandal. On its IRS Form 990, the group blandly described its purpose as:

“Promoting Ohio as well-suited to host and support major conventions or similar events and as an attractive destination for travel, business meetings and vacations. The methods of achieving these purposes include funding and hosting major conventions and meetings via internet, professional organizations, and social media education to the general public.”

Even though AEP was the dark money group’s sole contributor and its top lobbyist sat on its board, Blake said it wasn’t AEP’s job to answer for the misleading description.

“501(c)(4) organizations are subject to their own reporting requirements and any questions about what they reported would need to be addressed by them,” he said.

Subsidizing coal in a warming world

The Intergovernmental Panel on Climate Change earlier this month warned that greenhouse gas emissions must be cut swiftly and dramatically to spare future generations from the worst consequences of global warming. So subsidizing two coal plants built during the Eisenhower administration might not seem the best use of ratepayer resources.

It also might seem important to avoid rewarding corporate attempts to secretly buy ratepayer subsidies for their regulated monopolies.

But legislative attempts to end the HB 6 coal subsidies so far have been unsuccessful and Blake cited last year’s jumps in natural gas prices as a reason for keeping the $130,000-a-day subsidies in place.

“The recent increase in natural gas prices has shown that (the Ohio Valley Electric Corporation) offers customers price stability,” he said. “As we transition to cleaner resources, power from the OVEC plants offer security from rising natural gas prices and can provide power when renewables like wind and solar are unavailable.

Blake added, “Having reliable generation resources is critical to providing the reliable power our customers need. Customers receive a credit when OVEC outperforms the energy market. The current mechanism supports only the actual costs of providing secure, reliable energy.”

Indeed, default rates for customers of AEP, FirstEnergy and other Ohio utilities are all jumping this month to reflect high wholesale rates last year, when gas prices were high — partly as a consequence of disruptions caused by war in Ukraine. But keeping the dirty, coal-fired plants spinning now might make less sense because natural gas prices are down dramatically, and closer to their 10-year average.

Householder’s friend

While AEP might have wanted to distance itself from secret spending supporting Householder just after his arrest, it showed no such compunction in the months immediately before the feds broke up the racketeering scheme.

Householder’s fixer, Longstreth, testified how — fresh off his HB 6 success — the speaker turned his sights to even bigger game. He’d used tens of millions in secret utility dollars to create a political juggernaut that made him speaker and that enabled him to pay off his financial backers. Now he sought to keep his juggernaut dominating Ohio politics — possibly until 2036.

Longstreth had discovered that the idea of reforming Ohio’s legislative term limits polled well and he and his boss figured they could push one with an important catch. It would limit lifetime service to 16 years, but if it would reset the clock on everybody. That would mean the then-61-year-old Householder could serve until he was 77.

To fund the scheme, Householder and his aides again turned to businesses that stood to gain the most from having close allies in the government — the utilities whose monopoly subsidiaries’ revenues were controlled by it.

After he was approached in early 2020, then-First Energy CEO Chuck Jones in a text message described Householder as “an expensive friend.” But FirstEnergy quickly agreed to secretly spend $2 million on Householder’s tenure-enhancement scheme.

On the witness stand in the Householder trial, Longstreth described a similarly warm reception from AEP’s then-CEO Nick Akins. Longstreth said he attended a meeting in early 2020 at AEP’s Columbus headquarters with Householder, Akins and two lobbyists.

Longstreth testified that Akins’ reception to the plan that stood to make Householder speaker well into the next decade was “very positive.”

“It was probably a 30-minute meeting,” Longstreth said, according to a transcript of the trial. “Fifteen minutes of it, you know, exchanging pleasantries and talking about anything that they had going on and then 15 minutes of us explaining it, and they said sounds great, we’ll get back to you and they did get back to us and said they would be supportive.”

Shortly thereafter, AEP contributed $500,000 to the dark money group Householder set up for the initiative through AEP’s own dark money group, Empowering Ohio’s Economy.

But then forces struck that were beyond the control of even Householder and Ohio’s largest utility companies. Neither can be counted on to intervene in the future.

Asked why the term-limits initiative didn’t get off the ground, Longstreth referred to a Feb. 29, 2020 email he sent to FirstEnergy providing instructions on how to wire money into Householder’s new dark money organization.

“COVID hit like two weeks later, and then we were arrested in July,” Longstreth testified. “So it never happened.”

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