The office of Gov. Mike DeWine has for months been saying that connections between the guy he picked to be the state’s top regulator and a utility at the center of an epic bribery scandal were well known around Capitol Square when DeWine nominated him in January 2019.
If the relationship were common knowledge, it might seem more innocent that some in DeWine’s administration knew the utility had paid the regulator $4.3 million just before the governor nominated him. However, the administration has provided scant evidence that the claim is true — and there’s considerable evidence suggesting it isn’t.
Among them is Laurel Dawson, who was chief of staff of the incoming DeWine administration at the beginning of 2019. At the same time, her husband, Mike Dawson, was a lobbyist for FirstEnergy.
A few weeks before, on Dec. 18, 2018, Gov.-elect DeWine and Lt. Gov.-elect Jon Husted had dinner at the Columbus Athletic Club with FirstEnergy CEO Chuck Jones and Vice President Micheal Dowling. At the dinner, they discussed whether Randazzo would be acceptable to head up the Public Utilities Commission of Ohio — the agency that was supposed to regulate the executives’ utility, according to a state indictment of Randazzo, Jones, and Dowling that was filed in February.
After the dinner, the FirstEnergy executives drove about a mile to Randazzo’s condo and negotiated a $4.3 million payment to Randazzo, the indictment said. FirstEnergy later said the payment was a bribe in a deferred prosecution agreement with the U.S. Justice Department.
As PUCO chairman, Randazzo helped draft and lobby for the bailout law and did several other lucrative favors for FirstEnergy. His indictment said it capped off a decade-long relationship in which he was a paid “consultant” for FirstEnergy unbeknownst to his law firm or a group of industrial energy users on whose behalf Randazzo was supposed to be negotiating concessions.
The indictment says at least one person in the DeWine administration — Laurel Dawson — knew that Randazzo had gotten a huge payment from FirstEnergy in the weeks before DeWine nominated him to chair the PUCO at the beginning of February 2019.
Randazzo told “the Governor-elect through his incoming Chief of Staff that he had received $4.3 million from FirstEnergy, which he claimed was final payment of a ‘consulting agreement,’” Randazzo’s indictment said.
For her part, Laurel Dawson is cooperating with the state prosecution, but she isn’t commenting publicly.
Common knowledge?
In the months since the state indictment of Randazzo and the FirstEnergy executives, DeWine Press Secretary Dan Tierney has been saying that Randazzo’s ties to FirstEnergy weren’t news even at the time the governor was considering him in early 2019 to head the PUCO.
Tierney modified that somewhat, telling the Capital Journal earlier this month, “it was well known to our staff that Mr. Randazzo was an energy consultant, and it was well-known to them and many people that Mr. Randazzo was a consultant employed by First Energy.”
However, it appears that Randazzo and FirstEnergy’s top leadership went to great lengths to keep their relationship secret.
Many of the counts Randazzo was charged with have to do with his failure to report income from FirstEnergy on state ethics disclosures while he was PUCO chairman. A bill of particulars accompanying the indictment adds that Randazzo didn’t disclose a 2015 consulting agreement with FirstEnergy to the members of his own law firm, McNees, Wallace and Nurick. Randazzo’s membership agreement in the firm barred barred him from outside employment, the filing said.
Pressed on the matter this week, Tierney said in an email, “Mr. Randazzo testified numerous times at the General Assembly prior to his appointment to the PUCO. In addition, Mr. Randazzo served on the PUCO Nominating Council, which requires ethics disclosures. These were among the reasons Mr. Randazzo’s relationships with utilities and FirstEnergy were well known at the Statehouse and on Capitol Square.”
The Capital Journal obtained Randazzo’s disclosures from the Ohio Ethics Commission for the period he served on the PUCO Nominating Council — 2007 to 2017. “FirstEnergy” doesn’t appear on any of them.
Tierney was informed of that and asked whether DeWine’s office could point to any testimony Randazzo gave to the General Assembly in which he divulged his long, profitable relationship with FirstEnergy. Tierney didn’t answer that question, saying instead, “My understanding is that Mr. Randazzo’s business entities are listed on the ethics form(s), and those business entities not only were well known to be associated with Mr. Randazzo on Capitol Square, but also well known to have First Energy as clients.”
Shell game
The entity that appears on Randazzo’s ethics disclosures is the Sustainability Funding Alliance of Ohio — a group prosecutors accused Randazzo of using as a shell corporation to skim millions in FirstEnergy money earmarked for his industrial clients. The group’s relationship with FirstEnergy was so secret that the corporation’s top executives feared that a partial disclosure would tank Randazzo’s nomination to the PUCO.
FirstEnergy Solutions — a subsidiary Jones and Dowling desperately wanted ratepayers to bail out — was going through bankruptcy. One of its filings mentioned the Sustainability Funding Alliance, which Randazzo had also listed on his ethics disclosures.
The FirstEnergy executives were in a panic about it and their communications show that the connection between their company and Randazzo’s entity was far from well known.
The DeWine administration is “going to be mad at Sam (and hopefully not us) for not disclosing the financial relationship,” Dowling texted Jones on Jan. 30, 2019, less than a week before DeWine nominated Randazzo. “That’s Sam’s responsibility.”
When the nomination went through anyway, Dowling told Jones, “A bullet grazed temple,” to which the FirstEnergy CEO replied, “Forced DeWine/Husted to perform battlefield triage.”
“Secret for-profit entity”
In his email Monday, Tierney also said, “What media has described as the ‘dossier’ regarding Randazzo’s relationship with First Energy, which is a collection of public domain documents from the time in 2019, shows that much of this was colloquially known on Capitol Square and within the energy advocacy community.”
The “dossier” Tierney referred to was a 198-page document from a former aide warning DeWine about Randazzo’s murky relationships. It was delivered to Laurel Dawson on Jan. 28, 2019 — about a week before her boss nominated Randazzo.
Tierney said the document shows that Randazzo’s ties to FirstEnergy were well known. But the first page of the dossier says something quite different.
“Publicly available documents suggest that PUCO applicant Sam Randazzo has opaque, undisclosed financial ties to FirstEnergy that should be fully examined and made public,” it says. “The enclosed evidence demonstrates that Randazzo personally profits from a secret for-profit entity funded by FirstEnergy Solutions.”
Catherine Turcer, executive director of Common Cause Ohio, said that it’s past time for DeWine, Husted and their staffs to be much more forthcoming about their involvement in the bailout and about what DeWine and Husted did to investigate whether any member of the administration acted improperly.
“It makes sense to be as clear as possible about what actually happened,” she said. “And I don’t just want to hear from the governor. I want to hear from the lieutenant governor.”
MARTY SCHLADEN
Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He’s won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.
Ohio Capital Journal is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.
Five have been charged and four have been convicted in a massive bribery and money-laundering scandal, but there were more signs this week that the federal criminal investigation is continuing.
In court documents filed in a separate case on Monday, a special master said that a major player in the conspiracy — Akron-based FirstEnergy — continues to cooperate with federal prosecutors. The same documents order the major beneficiary of the conspiracy, a former FirstEnergy subsidiary, to do more to cooperate in a federal class-action suit.
Former House Speaker Larry Householder, R-Glenford, and former GOP Chairman Matt Borges in June were respectively sentenced to 20 and five years in federal prison for their roles in the conspiracy. Two others have pleaded guilty and await sentencing, while a third who was charged died by suicide.
In the conspiracy, FirstEnergy and its then-subsidiary paid more than $60 million from 2017 to 2019 to make Householder speaker so he could pass and protect a $1.3 billion bailout. Of that sum, the vast majority was intended to prop up two nuclear plants owned by the subsidiary, then called FirstEnergy Solutions.
Over the course of a six-week trial in Cincinnati early this year, prosecutors put on evidence that FirstEnergy found itself in a precarious state because its heavy investments in coal and nuclear-powered generation were being undercut by cheap natural gas. Top executives with the company — including then-CEO Chuck Jones and Vice President Michael Dowling — desperately sought a ratepayer bailout to prop up the nuclear plants so they could spin them off and get most of the liability associated with closing and cleaning them up off their books.
In 2019, as Householder was shepherding the bailout through the legislature, FirstEnergy Solutions was in bankruptcy and emerged in February 2020. It had a new name, Energy Harbor, and it was no longer a subsidiary of FirstEnergy.
Five months later, the FBI arrested Householder and the others. Then large pension and investment funds sued FirstEnergy, saying the reckless, undisclosed conduct of its top executives caused investors to lose billions when that conduct hit the public fan.
FirstEnergy signed a deferred prosecution agreement admitting wrongdoing and agreeing to pay a $230 million penalty to the government. But that didn’t get it off the hook in the multiple civil suits it’s faced, including the class action filed in the Southern District of Ohio by large investors.
As part of the suit, those investors have been battling FirstEnergy for communications and other information that might implicate officials other than Jones and Dowling, who were fired.
They’re also battling Sam Randazzo. He isn’t named in the suit, but FirstEnergy said he took a $4.3 million bribe from Jones and Dowling just as Gov. Mike DeWine nominated Randazzo to chair the Public Utilities Commission of Ohio at the beginning of 2019. The class-action plaintiffs say Randazzo might be sitting on text messages and other communications relevant to the conspiracy.
Jones, Dowling and Randazzo deny criminal wrongdoing in the scandal, but U.S. Attorney Kenneth L. Parker in June said that the investigation was continuing. On Monday, Special Master Shawn Judge also said in a court filing that the investigation continues — and that FirstEnergy is cooperating.
“During this jury trial, the government highlighted Jones’s and Dowling’s purported relationships with Householder and involvement in the conspiracy,” Judge wrote, referring to the criminal trial earlier this year. “And multiple representations before the Court suggest that FirstEnergy’s cooperation with government investigations is ongoing.”
Judge is helping to referee the numerous discovery disputes in the class-action case. In this instance, he ordered Energy Harbor to provide almost everything the FirstEnergy investors wanted.
As a now-independent company, Energy Harbor said it’s not a defendant in the civil case, so it shouldn’t be put to the trouble and expense to provide the information the pension and investment funds are demanding.
But Judge noted that while it was still a FirstEnergy subsidiary, the company “contributed $43 million of the $60 million paid to Householder and his affiliates in exchange for the official action of passing (the bailout law) and defending it from a repeal referendum.”
In addition, Judge wrote, the subsidiary’s lobbyist, Juan Cespedes, helped direct some of those funds and pleaded guilty to his role in the racketeering conspiracy.
Judge then ordered Energy Harbor to provide the plaintiffs with the information they requested, but reduced the time period the required documents span by several months.
MARTY SCHLADEN
Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He’s won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.
FBI agents remove boxes of materials from PUCO Chairman Sam Randazzo’s condo in Columbus Nov. 17, 2020. Photo courtesy of Daniel Konik/Statehouse News Bureau.
In early 2019, news of financial ties between Akron-based FirstEnergy and the man incoming-Gov. Mike DeWine had named to lead the Public Utilities Commission of Ohio began to spread. And as it did, FirstEnergy’s top executives feared they wouldn’t have a regulator they could control, according to documents filed in federal court late last week.
“Great. Now we have none on the list” of nominees, then-CEO Chuck Jones texted Vice President Michael Dowling. Jones later added, ruefully, “Always need a backup plan.”
As it happened, the nominee, Sam Randazzo, ended up being appointed to the commission after being paid $4.3 million by FirstEnergy. He proceeded to help draft a law providing the utility with a $1.3 billion bailout. The company spent another $60 million to pass and then to protect it from a citizen-initiated repeal in what law-enforcement officials have called one of the biggest bribery and money-laundering scandals in state history.
Randazzo, Jones and Dowling haven’t been charged in the scandal, but after a jury trial that convicted two others, two guilty pleas, and a suicide, the three men could be the next targets as federal authorities continue their probe.
If authentic, the communications filed on Friday indicate that the three met in Randazzo’s Columbus condo in December 2018. And they appear to show that the FirstEnergy executives agreed to pay Randazzo a large sum in exchange for favors when Randazzo became the state’s chief regulator.
Another communication 23 months later — just after the FBI searched the condo in November 2020 — shows Randazzo providing a friend “the number for my home which the FBI does not have.”
Demanding records
Lawyers for Randazzo, Jones and Dowling didn’t immediately respond to requests for comment Monday, but attorneys for the former executives have said in separate court filings that they believe the feds are investigating their clients.
The documents filed in federal court on Friday are part of a huge class-action suit against FirstEnergy, Jones, Dowling and a number of other defendants.
In a deferred prosecution agreement, FirstEnergy in 2021 agreed to pay $230 million and admitted wrongdoing, including by bribing Randazzo. But the class-action plaintiffs — large pension and investment funds — are arguing that the company violated securities law by not disclosing its corrupt conduct. And, they argue, the company lost much of its value when that conduct came to light, leaving investors holding the bag.
Randazzo has denied wrongdoing and he isn’t a defendant in the case, but the class-action plaintiffs want him to produce all communications relating to how he spent the $4.3 million he got from FirstEnergy just as he was poised to become its most powerful regulator.
The plaintiffs have been accusing Randazzo since April of foot-dragging. They obtained the messages they filed Friday from a third party and are pointing to them as examples of Randazzo’s lack of cooperation.
Early arrangements
The earliest of the messages was on Dec. 18, 2018, and it appears that the three men had recently met in the residence that the FBI later searched.
“Got it, Sam,” Dowling, then the FirstEnergy vice president, texted Randazzo. “Good seeing you as well. Thanks for the hospitality. Cool condo.”
The “got it” was in response to a column of numbers Randazzo sent that appear to indicate that he was expecting payments from FirstEnergy through 2024:
2019 — 1,633,333
2020 — 600,000
2021 — 600,000
2022 — 600,000
2023 — 600,000
2024 — 300,000
A seventh entry said “Total 4,333,333” — an amount equal to what FirstEnergy said was a bribe.
The following day, Jones, the CEO, told Randazzo that he wouldn’t have to wait that long for the money, according to the filings. Jones also made it clear that he expected access to Randazzo.
“We’re going to get this handled this year, paid in full, no discount,” the message says. “Don’t forget about us or Hurricane Chuck may show up on your doorstep! Of course, no guarantee he won’t show up sometime anyway.”
Randazzo’s response seemed to be meant to reassure — and he linked the money to favors.
“Made me laugh — you guys are welcome anytime and anywhere I can open the door,” he said. “Let me know how you want me to structure the invoices. Thanks.”
Connections
But on Jan. 30, 2019, problems popped up with Randazzo’s nomination.
FirstEnergy’s nuclear-owning subsidiary, FirstEnergy Solutions, was going through bankruptcy and it had listed the Sustainability Funding Alliance of Ohio on one of its disclosures. Randazzo controlled the group and FirstEnergy had paid him millions through it in the past. Now the press was on to the matter.
“Chuck — Sam Randazzo is going to pull out of the PUCO process ASAP and it’s related to a disclosure on a (FirstEnergy Solutions) bankruptcy filing,” Dowling texted Jones, according to the documents filed Friday. “Reporters called (FirstEnergy) today inquiring about the relationship between (FirstEnergy Solutions) and a group called the Sustainability Funding Alliance of Ohio. You can guess the rest.”
That’s when Jones lamented not having a “backup plan” in the event that Randazzo was not seated on the utility commission. Dowling agreed.
“This is awful,” he wrote. “The FirstEnergy Solutions bankruptcy filing names that group and Sam names the same group on a financial disclosure statement. Unreal. I don’t know why it was listed in the (FirstEnergy Solutions) bankruptcy filing. The payments we made year-end ’18 came from (FirstEnergy) Corp. Services.”
Dowling was ready to throw Randazzo under the bus if the connection proved to be an embarrassment to the incoming DeWine administration.
“They’re going to be mad at Sam (and hopefully not us) for not disclosing the financial relationship,” Dowling wrote. “That’s Sam’s responsibility.”
A day later, however, the financial connection between FirstEnergy and Randazzo apparently wasn’t sufficiently embarrassing and he was picked to head up the PUCO.
“A bullet grazed the temple,” Dowling told Jones, according to one of the texts filed last week.
“Forced DeWine/Husted to perform battlefield triage,” Jones responded, referring to Lt. Gov. Jon Husted. “It’s a rough game.”
A still rougher game
In a trial held in Cincinnati from late January to mid-March, prosecutors put on witnesses and displayed communications describing Randazzo’s 2019 role in drafting House Bill 6, the bailout bill. Not only did it provide $1 billion to prop up two failing nuclear plants FirstEnergy was spinning off, it charged ratepayers about $100 million a year to insulate the company from an economic downturn. For FirstEnergy, it was easy money, in other words.
By November of 2019, HB 6 was on the books after FirstEnergy and a subsidiary plowed $36 million into a brutal, dishonest effort to turn back a citizen-initiated repeal. But the FirstEnergy executives weren’t done with Randazzo.
On Nov. 10, 2019, Jones texted a coal executive that another cloud loomed for FirstEnergy.
“And the (FirstEnergy) rescue project is not over,” Jones said, according to documents filed as part of the class-action suit. “At (Edison Electric Institute) financial conference. Stock is gonna get hit with Ohio 2024. Need Sam to get rid of the ‘Ohio 2024’ hole.”
That was an apparent reference to a requirement that FirstEnergy file a “rate case” with the PUCO in 2024. In such a proceeding, regulators assess a utility’s operations and make a judgment about whether its rates and revenues are reasonable.
FirstEnergy was apparently afraid they wouldn’t be. On Nov. 21, 2019, just 11 days after Jones expressed his concerns, the PUCO under Randazzo’s leadership issued an order saying it was “no longer necessary or appropriate” to require FirstEnergy to file a rate case.
The next day, Jones wanted to express his appreciation to Randazzo. He did so by sending the erstwhile regulator a list of prices for six energy stocks that day. FirstEnergy stocks were up 1.5%. The next highest was Avangrid, which was up 0.86%.
“Thank you!!” Jones wrote.
Randazzo replied, “Ha — as you know, what comes up may come down… Thanks for the note. Spoke to Mike (Dowling) last night.”
Then Jones said, “My Mom taught me to say Thank you.”
Flying high
By the start of 2020, things seemed to be going well for those who orchestrated the bailout.
FirstEnergy Solutions would emerge from bankruptcy in February as a separate company, Energy Harbor. The class-action plaintiffs argue that one of FirstEnergy’s major goals in the scheme was to prop up the nuclear plants, get them off their books and shed the liability of having to pay for a decades-long process to close and clean up after them.
At the same time, FirstEnergy was funneling millions more dark-money dollars into an effort to get the state’s legislature to put a constitutional amendment on the ballot. It would change the state’s term-limits so Householder could stay speaker for another 16 years — and presumably continue to do the utilities’ bidding.
FirstEnergy fired Jones and Dowling the following October. And then in November, 2020, Randazzo was forced to resign from the PUCO after the FBI searched his condo.
“Pretty stressful few days which started Monday at 6:00 when 10-12 FBI agents with their guns drawn announced their arrival at our home,” Randazzo emailed a friend on Nov. 21, according to the documents filed by the class-action plaintiffs. “But, Carol and I are handling it and doing better each day. Neighbors, friends (like you) family, PUCO staff and people I have worked for over the years have been great. Roger Sugarman (his attorney) is my new hero. So onward!”
Then Randazzo encouraged the friend to call him on the number he believed that the FBI didn’t have.
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MARTY SCHLADEN
Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He’s won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.
CINCINNATI — Former Ohio House Speaker Larry Householder spent possibly his last moments as a free man around 2:30 p.m. Thursday and they couldn’t have been pleasant.
U.S. District Judge Timothy Black gave the Glenford Republican the maximum possible sentence of 20 years and then ordered blue-shirted U.S. Marshals to immediately take him into custody. He rose, put his hands behind his back, the marshals cuffed him and led the once-powerful pol away.
But before that humiliation, the judge blistered Householder for being the ringleader of a racketeering scandal in which Akron-based FirstEnergy paid him more than $59 million in bribes in exchange for a $1.3 billion bailout, most of which was intended to save two failing nuclear plants in Northern Ohio.
Ratepayers could have used that money for things like education, health care or to start businesses, the judge said.
“You handed that money to suits in private jets,” Black said.
The judge made the speech and imposed the sentence after saying Householder clearly perjured himself during his criminal trial, which lasted from late January until mid-March.
In it, Householder claimed to barely know FirstEnergy executives as federal prosecutors put on a mountain of evidence that Householder flew on their corporate jets, sat in their luxury boxes and dined in fancy restaurants as they plowed tens of millions of the corporation’s dollars into dark-money accounts.
“You conned the people of Ohio and you tried to con the jury, too,” Black said in his gravely voice as Householder, clad in a gray suit and red tie, slumped his bulk back in his chair.
The money from FirstEnergy and one of its subsidiaries was used to elect fellow Republicans in 2018 who would vote to make Householder speaker in early 2019. More than $500,000 of it was used to pay off Householder’s credit card bills, settle a lawsuit and to repair a house he owned in Florida.
Tens of millions more went to pass the corrupt bailout — House Bill 6 — and to fund a thuggish campaign to thwart a citizen-initiated repeal.
Earlier in the hearing, Assistant U.S. Attorney Emily Glatfelter said Householder used FirstEnergy’s dark money to crush a “citizen veto” and “because of this House Bill 6 remains in effect today.”
That’s also because Republican supermajorities in Ohio’s gerrymandered legislature have refused to repeal the corrupt law even after arrests were made, and as they try to make it virtually impossible for citizens to initiate amendments to the Ohio Constitution.
Also arrested in the scandal were lobbyists Juan Cespedes and Jeffrey Longstreth — who cooperated with prosecutors within days of their arrests — and Neil Clark, who died by suicide. Former Ohio GOP Chairman Matt Borges is slated for sentencing at 11 a.m. today, Friday.
Steven Bradley, Householder’s attorney, sought leniency for his client. Referring to the possibility of a 20-year sentence, he said “That is effectively a life sentence for Larry Householder given his age and health situation.”
Householder is 64 and overweight.
Bradley argued that his client was around 60 when the racketeering conspiracy began in late 2016 and that prior to that, Householder did “innumerable” good deeds “for decades.” A 20-year sentence would “effectively give no consideration” to those good deeds, Bradley said.
But when he spoke on his own behalf, Householder appeared to do more to harm his case than to help it, just as he did at trial.
“My greatest commitment is to my creator… My next commitment is to my family,” he read from a prepared statement as he stood at the podium.
Householder said that in the course of 38 years of marriage, “I can count on one hand” the number of nights he spent away from his wife, Taundra. Householder also described the crushing pain they suffered when they lost a four-year-old daughter.
But then he pushed his claims past the point of plausibility.
He said Taundra was planning to retire from her teaching position and next year, when he turns 65, he wanted to retire as well, saying he planned to “hang up my suit and tie.”
Householder made that statement in the same courtroom where, only three months earlier, prosecutors put on testimony and displayed bank records and written messages from early 2020 that showed FirstEnergy and AEP putting money into dark money groups intended to fund an effort to change the state’s term limits so Householder could stay in office for as long as 16 more years.
The former House speaker also implied that he wanted a lenient sentence not for himself, but for his family. Taundra, he said, would be alone while “I’ll be in a cold cell hours away.”
But what might really have set Judge Black off was Householder’s profession of selfless public service.
“My life has been a total and full dedication to making life better for those I serve,” he said.
Black described voters who put out Householder yard signs, donated their hard-earned money to his campaigns, and pushed a button for him in the voting booth.
“I’m not talking about some corporation or the (former FirstEnergy CEO) Chuck Joneses of the world,” Black said. Householder’s constituents who supported him “were saying, ‘I’m choosing to trust you,’ and you betrayed that trust,” the judge said.
Black used Householder’s own words to give the lie to his claims. He quoted several recordings of Householder that were surreptitiously made during the conspiracy and played at trial.
“If you’re going to fk with me, I’m going to fk with your kids,” Householder said in one of them.
“Bottom line, you were a bully,” the judge said.
If the federal racketeering statute didn’t cap sentences for a single count at 20 years, sentencing guidelines would have recommended life for the former House speaker, Black said. One reason for that is because Householder’s use of a mountain of hidden corporate money to elect a legislature, pass an exponentially bigger bailout for the company, and to crush a citizen repeal is “an assault on democracy,” the judge said.
Black explained the special harm done by public corruption like that committed by Householder and his co-conspirators. To do so, he quoted former President Theodore Roosevelt, who ironically advocated the citizen-initiated amendment process in Ohio that Householder’s former Republican colleagues in state government are now trying to gut.
“There can be no crime more serious than bribery,” Roosevelt said in a 1903 message. “Other offenses violate one law while corruption strikes at the foundation of all law.”
When Borges, the former GOP chair, is sentenced today, it’s unclear what he’ll face. His involvement in the conspiracy was considerably less than Householder’s, but Judge Black showed that he’s not much in the mood for leniency when it comes to Ohio’s corrupt political culture.
Also uncertain is when — or if — others might be charged.
Former FirstEnergy CEO Chuck Jones and Vice President Micheal Dowling — as well as former FirstEnergy Solutions President John Kiani — directed the flood of corporate dollars into the Householder-controlled dark money groups, according to prosecutors.
And FirstEnergy admitted in a deferred prosecution agreement that it paid a $4.3 million bribe to Sam Randazzo just as Gov. Mike DeWine was appointing him to chair the Public Utilities Commission. Randazzo the helped draft the corrupt bailout law, according to trial testimony.
On the steps of the Potter Stewart U.S. Courthouse just after the sentencing, U.S. Attorney Kenneth Parker was asked when or whether those men or others might be charged.
“We continue to look through evidence and we continue to listen to recordings and speak to individuals, so if something’s there we’re going to go there, too, and address it,” he said.
MARTY SCHLADEN
Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He’s won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.
Secretary of State Frank LaRose announces the referral of 117 cases of alleged voting and voter registration fraud stemming from the 2020 elections. Photo courtesy The Ohio Channel.
Ohio Secretary of State Frank LaRose on Wednesday offered another rationale for making it much more difficult for voters to amend the Ohio Constitution. Now he’s saying it’s needed to fight a possible power grab like one that grew out of a massive bribery and money-laundering scandal.
But LaRose didn’t mention in his op-ed that his name came up repeatedly in a criminal trial related to the scandal and that he appeared to be in close communication with some of its central figures.
Nor did his office respond when asked whether LaRose ever spoke out against the corrupt utility bailout before the FBI started arresting people in July 2020.
Slippery explanations
The secretary of state — who is said to be eyeing a run for U.S. Senate next year — has been pushing to increase the portion of votes needed for a citizen-initiated amendment from 50% to 60%. As he and his allies have, they’ve given a shifting set of reasons for why that’s needed.
Last November, during a lame-duck session of the legislature, LaRose and state Rep. Brian Stewart, R-Ashville, held a press conference saying that the change was necessary to prevent wanton amendments to the Ohio Constitution by monied special interests. But they didn’t point to any examples of how that had happened in the past.
Many suspected an ulterior motive.
LaRose sat on a Republican-dominated redistricting commission that last year ignored seven Ohio Supreme Court rulings saying that the legislative and congressional maps the commission produced violated anti-gerrymandering amendments overwhelmingly approved by Ohio voters. That prompted Maureen O’Connor, the outgoing Republican chief justice, to urge Ohioans to pass new, more-tightly written amendments this year.
Ohio was also roiled when a highly restrictive abortion law took effect last June just after the U.S. Supreme Court overturned Roe v. Wade and horror stories poured out of abortion clinics and hospitals. An effort quickly started to get an amendment on the ballot protecting abortion rights after other protections easily passed in other states.
But at last year’s presser, LaRose denied that his goal was to block anti-gerrymandering or abortion-rights amendments. The constitutional change he was advocating was a long-term, fundamental one that he didn’t seek to block such short-term disputes, he claimed.
Just weeks later, however, Stewart, LaRose’s sidekick at the presser, sent a letter to his GOP colleagues in the House explaining the real reasons for making it harder for Ohioans to amend their constitution: to stop abortion-rights and anti-gerrymandering amendments that appear to be favored by strong majorities of Ohioans.
[/vc_column_text][vc_raw_html]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[/vc_raw_html][vc_column_text]The attempt to rush a bill through lame duck last year failed.
Now Stewart, LaRose and their allies are trying to pass it through Ohio’s now-unconstitutionally gerrymandered legislature. If it passes, it would put the measure requiring 60% of the vote to amend the state constitution on the ballot. And, since the vote would be under the existing rules, it would require just 50% of the vote to pass.
Also on the pile of accusations that it’s a naked power grab is that LaRose, Stewart and their allies want to put the measure on the ballot in a low-turnout August election. They’re doing so just months after passing a bill that had LaRose’s support to eliminate such elections as costly and unnecessary — and three months before the abortion amendment is expected to hit the ballot.
A new reason
While he’s being accused of attempting a power grab, LaRose says he’s trying to stop them.
On Tuesday, The Columbus Dispatch published an op-ed in which he furnished yet another reason to make it harder for voters to change the state Constitution. He cited an attempt by former House Speaker Larry Householder to pass an amendment changing the state’s term limits so Householder could stay speaker for another 16 years.
It was part of a breathtaking scheme in which Householder and his allies took more than $61 million from Akron-based FirstEnergy and other utilities, used the money to make him speaker in January 2019, and then pass and protect a $1.3 billion ratepayer bailout that mostly went to FirstEnergy.
Fresh off the passage of the bailout, Householder raised millions in early 2020 from FirstEnergy and AEP for his scheme that would allow him to stay longer in office. But it died with his arrest that July.
It might seem ironic that LaRose would use a corruption scandal to gut a 1912 reform measure that was aimed at curbing corrupt, unresponsive government, but that’s what he argued. He said all it takes to change the Constitution now “is a well-funded, dishonest political campaign and a simple majority vote.”
LaRose added that Householder planned to call his tenure-extension scheme “Ohioans for Legislative Term Limits, a deceptive name for a constitutional amendment that would more than double his term in office. It should come as no surprise that FirstEnergy Corporation, the company at the center of Householder’s racketeering scandal, agreed to bankroll the amendment campaign.”
Significant omissions
While he accused his opponents of “hysterical hyperbole” as he tries to make it 20% harder for voters to succeed in the already difficult process to amend the Ohio Constitution, there were some important things LaRose didn’t say in his Op-Ed.
For starters, FirstEnergy didn’t only bankroll Householder in 2018 as the now-convicted former speaker elected a team of lieutenants who would hand him the speaker’s gavel. The utility also bankrolled LaRose to the tune of $25,000 that year as he ran for secretary of state.
It was part of nearly $50,000 that the energy company — which signed a deferred prosecution agreement in the Householder scandal — has given LaRose, the campaign-finance tracker FollowTheMoney.org reports.
And while LaRose is decrying the bailout now that there have been arrests and convictions, there was reason to know there was something wrong with it well before they took place.
Insiders knew that somebody was burying Capitol Square in cash throughout the 2019 passage of House Bill 6, the corrupt utility bailout. That was especially true as FirstEnergy dumped what the FBI later determined was $36 million into a blatantly-dishonest-but-successful fight to beat back a repeal.
Because the funds were non-disclosable 501(c)(4) dark money, it was impossible for the public to know exactly where they were coming from until the feds stepped in and used subpoenas and other special powers to find out.
But HB 6 was such bad legislation and the campaign to stop the repeal so over-the-top that there was plenty of reason to suspect that somebody was being bought off to pass it. It was a massive corporate bailout that Householder and others were trying to officially declare a tax. Republican lawmakers who didn’t want to cast such a damaging vote described withering pressure from House leadership.
Former friends
LaRose’s office didn’t answer Wednesday when asked if the secretary of state ever spoke out against HB 6 before the FBI started making arrests.
In the Cincinnati corruption trial that ran from late January to mid-March, federal prosecutors presented several communications to the jury that might indicate that LaRose was actually sympathetic to the effort to pass and protect the corrupt bailout.
On July 23, 2019, as the repeal effort got underway, text messages flew between two prominent figures in the scandal: Matt Borges, the former Ohio Republican Party chairman who was convicted along with Householder; and Juan Cespedes, a lobbyist who pleaded guilty and cooperated with prosecutors.
Borges told Cespedes he had received “a message from the secretary of state on the ballot-measure issue.”
The men were hoping for help from LaRose. He’s chairman of the Ohio Ballot Board, which, along with Attorney General Dave Yost, has to approve the language of constitutional amendments before they’re circulated for the hundreds of thousands of needed voter signatures — and before they’re placed on the ballot.
In the case of the HB 6 repeal, Yost initially sent the language back for revisions, then he and the ballot board approved it. But that wasn’t before the original 90 days opponents had to gather the signatures was whittled down to 53.
In the end, time ran out before opponents could gather them. But at the beginning of the effort, Borges seemed to be talking to LaRose about what LaRose needed in exchange for his help.
“LaRose is expecting us to be publicly supportive of him,” Borges said. “Apparently petitioners (for the repeal of HB 6) are going to call on him to step down from the ballot board because of ‘conflicts.’ He can be our friend in this process, so let’s be prepared to speak for him.”
Continuing communication
Later in the repeal fight, FirstEnergy’s two top executives discussed asking LaRose’s help with Yost. In addition to hamstringing the petition effort, supporters of the corrupt bailout wanted to have it officially declared a tax, and thus legally exempt from repeal.
“I’ve been asked by (subsidiary FirstEnergy Solutions) to call Frank LaRose to get Frank to call Dave Yost,” Vice President Michael Dowling texted CEO Chuck Jones, according to messages put into evidence by prosecutors. “If Frank tells Yost that he believes HB 6 is a tax, Yost will come out publicly and say it, which (FirstEnergy Solutions) thinks helps with the Supreme Court. Frank is reluctant to make the call. I have a call in to Frank and I will ask him to do it.”
LaRose may have been reluctant about making that call. But he apparently wasn’t reluctant to keep talking to the people who funded the scandal he’s now condemning and using as a reason to make it harder for voters to amend the Ohio Constitution.
In October 2019 — shortly before the repeal effort failed — Jones sent a text to John Kiani, the chairman of the FirstEnergy subsidiary that was to receive $1 billion of the bailout. It indicated that both LaRose and Householder had been providing the FirstEnergy CEO with “private” information on the repeal effort.
“For what it’s worth, LaRose and Householder think it’s game over,” Jones told Kiani. “But that is a private conversation unless they’ve told you the same thing. And Householder has a ‘quick fix’ anyway.”
And then in November 2019 — just after the repeal failed — other messages indicated that LaRose wanted to cement a relationship with Kiani, the hard-charging former Enron executive whom Cespedes testified stood to make $100 million off the sale of FirstEnergy’s bailed-out nuclear and coal plants.
Borges texted Cespedes that LaRose, “told me he wants to get to know Kiani, and I said, ‘Are you sure about that?’”
Cespedes replied, “He will live to regret that.”[/vc_column_text][/vc_column][/vc_row]
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MARTY SCHLADEN
Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He’s won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.
CINCINNATI — Former Ohio Republican Party Chairman Matt Borges paid $15,000 off the books in 2019, a witness testified Tuesday. It was in an attempt to gather inside information about the campaign to repeal a $1.3 billion utility subsidy that had just been passed by the legislature, a Borges associate said.
In addition, the chairman of the company that benefited most from the subsidy in an email referred to the scheme as a “black op” and said he was prepared “to do whatever it takes” to defeat the repeal effort, the witness, Juan Cespedes, said. Coincidentally, the chairman, John Kiani, started his career at Enron, a Houston Energy company that collapsed under a wave of unmet contracts and accounting scandals in 2001.
It was the 11th day in the federal court trial of Borges and former Ohio House Speaker Larry Householder, R-Glenford. Borges is accused of assisting Householder and others in a scheme to use $61 million from Akron-based FirstEnergy to make Householder speaker and pass the massive bailout.
The bulk of the bailout was intended to benefit money-losing nuclear and coal plants owned by FirstEnergy subsidiary FirstEnergy Solutions. It was going through bankruptcy proceedings and executives with the parent company and the subsidiary desperately wanted the bailout to complete the bankruptcy, spin off FirstEnergy Solutions and possibly sell the nuclear plants.
Gov. Mike DeWine signed the bailout the same day it passed in 2019, but a repeal effort started amid reports that it was “the worst energy bill of the 21st century.” Not only did it prop up 70-year-old coal plants under the guise of being a “Clean Air Program,” it also gutted the state’s renewable energy standards.
Borges was part of a team of lobbyists who worked to pass and protect the bailout, House Bill 6. And, because of his long experience in Ohio politics, he was asked to make use of some of his relationships in the effort, Cespedes, another member of the team, testified.
Cespedes was also charged with racketeering, but he pleaded guilty and is cooperating with prosecutors.
The off-the-books payment
One of the primary acts Borges is charged with has to do with a $15,000 payment he made during the repeal effort to Tyler Fehrman, who was helping manage the campaign to gather enough valid signatures to get the repeal on the ballot.
Inside information was valuable to the pro-H.B. 6 team because it enabled them to gauge the strategy and likelihood of success of the repeal effort.
Cespedes testified that he tried to keep the plan to recruit Fehrman from Kiani, the FirstEnergy Solutions chairman whose company financed a big portion of the fight against the repeal. Kiani was a hard-charging executive and Cespedes believed that once he learned of the spying effort, he would press the operatives relentlessly.
However, Cespedes said, Borges told Kiani about it, and it seems Cespedes’s worries were well founded.
In an Aug. 31, 2019 text, Kiani asked “what happened to the black ops?” in a reference that Cespedes said was to the spying effort. Then, in a Sept. 2, 2019 text, Cespedes told Borges that Kiani, “reiterated to do whatever it takes to get this information.”
It appears that Fehrman was paid, but it’s unclear what he was paid for.
In taped conversations played earlier in the trial, Borges discussed paying Fehrman, but he claimed to Fehrman that it was for work Fehrman might do some time in the future. But Borges made other statements that seemed to show that he knew the two were doing something wrong.
“It would be bad for both of us if the story came out,” he told Fehrman in a recording that Fehrman made with the help of the FBI. “But it would be worse for you.”
On Tuesday, Cespedes testified that he roughed out a budget at the time of the repeal campaign. He made an entry in it to pay $25,000 to an “employee.” Cespedes said the money was intended for Fehrman.
Asked why he used “employee” to label the entry, Cespedes said, “I wasn’t going to write ‘bribe.’ I wasn’t going to write anything nefarious.”
Prosecutors displayed a photograph of what they said was a contemporaneous budget that Borges roughed out in a notebook that Cespedes had photographed. Cespedes testified that when he asked Borges why a payment to Fehrman wasn’t in it, Borges “simply said it wasn’t something he wanted to write down.”
Cespedes testified that Fehrman later went quiet on Borges and Cespedes assumed that their deal had fallen through. But after the repeal campaign had failed, an accounting showed that the $15,000 had been paid, Cespedes said.
When he asked Borges about it, “He said, ‘I just wanted to keep him quiet,’” Cespedes testified.
Earlier in the HB 6 fight, Borges and Cespedes were struck by Kiani’s connections to Enron, which ceased to exist after one of the biggest corporate scandals to that point in American history.
“The shocking thing last night was learning that Kiani came from Enron,” Borges said in a text.
Kiani went from there to work as a hedge fund manager and then he made his way onto the FirstEnergy Services board as an activist investor. Cespedes testified that a Kiani aide told him that Kiani would make $100 million from the sale of FirstEnergy Solutions’ nuclear plants.
Regardless of whether that’s accurate, Kiani clearly was willing to spend lots of corporate money to win subsidies for them. To fund a statewide, eight-week media campaign for the bailout, bankrupt FirstEnergy Solutions approved a $15 million budget, Cespedes testified.
That amount would grow after the bill passed and the repeal fight got underway.
Kiani continues to be executive chairman of Energy Harbor, the new name for FirstEnergy Solutions after it emerged from bankruptcy. His company bio credits him with “the successful operational and financial turnaround of Energy Harbor into a leading, carbon free power infrastructure and energy supply company.”
A billion-dollar nuclear subsidy was the subject of an intense fight in 2019 and great controversy since. But the president of the Ohio Senate this week predicted that a repeal will make it through the House, Senate and that Gov. Mike DeWine will sign it.
The reason: The company that owns the nuclear reactors no longer wants the money, he said. And that raises serious questions about whether the subsidies were needed in the first place.
The subsidy was the product of House Bill 6. The legislation was passed in 2019 after a nasty fight which led to federal criminal charges against then-House Speaker Larry Householder, four associates and a dark-money group.
Prosecutors said $61 million from Akron-based First Energy and associated groups was used in the corrupt effort to pass the bailout. Two of Householder’s associates and the dark money group have pleaded guilty, FirstEnergy’s CEO was fired and Gov. Mike DeWine’s appointee to chair the Public Utility Commission of Ohio has resigned as part of the scandal.
Despite intense calls for a full repeal of HB 6, it remains in place — although a Franklin County Judge has temporarily stopped collection of the money by the owner of the nuclear plants, FirstEnergy successor Energy Harbor.
DeWine and others have said they want a repeal, but they want to continue to subsidize the Northern Ohio nuclear plants for environmental reasons.
“We were for nuclear power,” he said Tuesday, referring to his initial support for HB 6. “Nuclear power was the only way in this state, today, that we can have very much non-carbon production. It’s the only way we can do it.”
But early this month, Sens. Jerry C. Cirino, R-Kirtland, and Michael Rulli, R-Salem, introduced legislation, Senate Bill 44, to get rid of the subsidies. On Wednesday it received a hearing by the Senate Energy and Public Utilities Committee.
Despite the governor’s statements, Senate President Matt Huffman, R-Lima, said he expects the repeal legislation to become law.
“I think that provision will likely get passed out of the Senate and I think it will pass out of the House and get signed by the governor,” Huffman told the governing board of the Ohio Consumers’ Counsel, the state’s official utility watchdog. “When I say the House and the governor, I’m not speaking for them, nor have I spoken to them about this. But if a large company that got a subsidy in a dubious way… says ‘We don’t want it,’ that seems to me to be a pretty easy call.”
Energy Harbor, the owner of the plants, didn’t respond to requests for comment on Wednesday. But Huffman was apparently referring to a December 2019 ruling by the Federal Energy Regulatory Commission and Energy Harbor’s response to it.
The ruling said, in essence, that the company that would become Energy Harbor would have to cut its prices if it was going to sell its subsidized nuclear energy onto the massive grid that serves all or part of 13 states, including Ohio.
It would “threaten the competitiveness” of the long-term, or “capacity,” marketplace if companies like Energy Harbor could sell subsidized power on the same basis as power that wasn’t subsidized. So Energy Harbor and the others have to discount it according to a formula, the ruling said.
Recent developments appear to be a sharp reversal from 2019.
As proponents pushed HB 6, they threatened that closure of the Ohio nuclear plants was imminent if they didn’t get a bailout — and quickly. But Huffman’s statements on Tuesday indicate that Energy Harbor has no plans to shutter the plants even now that it isn’t getting the money.
“I don’t want the nuclear power plants to close,” he said. “However, it’s been made clear to me that the plants will not close if this subsidy is removed. In fact, they’re better off because of machinations at another level. In fact, these subsidies will likely harm these power plants.”
There’s other evidence that Energy Harbor’s pre-bankruptcy predecessor, FirstEnergy Solutions, might not have been as broke as it claimed in 2019.
Shortly after emerging from bankruptcy in early 2020, it did an $800 million stock buyback. Such buybacks typically raise stock values, in this case enriching shareholders just months after pleading poverty and winning a $1 billion bailout from Ohio ratepayers.
The federal ruling also raises questions about whether it was wise even to start the bailout fight, which has caused so much damage in Ohio. On June 29, 2018, more than a year before DeWine signed HB 6 into law, FERC issued a ruling strongly foreshadowing what it later did: effectively erase the subsidies bailout supporters had gained if they wanted to sell power into the long-term market.
The arrest of former Ohio House Speaker Larry Householder and others in July revealed how the use of dark money organizations enabled an alleged $60 million conspiracy to sway elections and provide costly bailouts to noncompetitive nuclear and coal plants.
As federal and state court cases move forward, questions remain about what can be done to restore confidence in the legislature and to prevent similar situations in the future.
“Dark money is really how special interests win right now,” said Jay Costa, executive director at Voters’ Right To Know. When corporations use shell groups to hide their political spending, they “gain a level of credibility they wouldn’t otherwise have,” he explained. “I like to think of it as the ‘Wizard of Oz’ effect.”
In other words, voters don’t get to see who’s behind the curtain.
Two months after the federal government’s criminal complaint and indictment in July, Ohio Attorney General David Yost has filed a state court lawsuit. The complaint alleges a “pattern of corrupt activity,” and seeks injunctive relief to prevent FirstEnergy, FirstEnergy Solutions, Energy Harbor and others from reaping benefits from the bailouts under House Bill 6. A hearing on a preliminary motion for that relief is currently scheduled for Friday, Oct. 2.
Meanwhile, it’s unclear whether Ohio lawmakers will actually repeal House Bill 6, the bailout law passed as a result of the alleged conspiracy. Both Democratic and Republican lawmakers called for a swift repeal in late July and early August. However, leadership in the Ohio House has so far refused to allow a full House vote on any pending repeal bills.
‘Dragging their feet’
Rep. David Leland, D-Columbus
“They’re just dragging their feet,” said Rep. David Leland, D-Columbus. “We have 58 members of the legislature who are willing to repeal HB 6 right now.”
Instead, Speaker Robert Cupp, R-Lima, has referred the bill to a House Select Committee on Energy Policy and Oversight. So far, those hearings have largely been a general review of the pros and cons of HB 6, rather than a focused oversight of the alleged corruption that led to its passage and whether it should be repealed in order to repair any claimed harm to public trust in the legislature’s integrity.
“The only way that we can prove that Ohio is not for sale is by repealing HB 6,” Leland said. “The polling we’ve seen shows that people by an overwhelming margin are going to punish those people who have voted for HB 6 and have done nothing to repeal it.” Early and absentee voting in Ohio begins on Oct. 6.
“Our legislators are supposed to act in the public interest,” said political scientist Leah Stokes at the University of California at Santa Barbara. Corporations’ interests may sometimes conflict. But, she adds, “it’s really politicians’ and regulators’ job not to be listening to those special interests. That basic responsibility of democracy has failed in Ohio with House Bill 6.”
A straight repeal would mostly restore Ohio energy law to before HB 6 became effective, subject to some follow-up regulatory matters before the Public Utilities Commission of Ohio. A quick replacement could potentially reenact all or much of the law, which also gutted the state’s clean energy standards.
Advocates say that rushing to ram through anything more than a simple repeal this year would either just repeat bad policy or create more problems, even aside the alleged conspiracy’s past influence on the current makeup of the Ohio House of Representatives. Even at that, a repeal bill would now need either an emergency clause or an injunction sought by the state attorney general in order to stop the nuclear subsidies slated to start in January. The committee adjourned on Sept. 30 and no additional meetings are currently scheduled.
HB 6 “is so questionable at this moment. The vehicle itself and the way it was sold is all just a pack of lies,” said Rachael Belz, executive director of Ohio Citizen Action. “We need them to repeal it, and then we need to go from there.” And that second step will take time, she said.
“It’s complicated and complex legislation and policy. And we have to get it right,” said Chris Neme, a principal and co-founder of Energy Futures Group. “Passing a bill in less than a couple of months like the way HB 6 was just leads us down the road of unintended consequences.”
Shining a light on dark money
The bigger question is how to prevent similar abuses in the future. Utilities and fossil fuel interests have given heavily to Ohio political campaigns since the state enacted a 1999 law calling for competition in electricity generation. And the level of giving went up dramatically once a competitive market actually began to develop in the state.
Utilities’ political spending has continued during this election season. FirstEnergy spokesperson Jennifer Young said that its political action committee has since canceled campaign donations it had originally reported as going out in July shortly before Householder’s arrest.
Campaign donations shown for August have in fact been sent out, Young said. FirstEnergy has denied any wrongdoing in connection with its political donations or the alleged Householder scandal.
Meanwhile, a 2010 Supreme Court case, Citizens United, “really opened up the floodgates of fossil fuel and electric utility influence over politics,” Stokes said. Utilities’ political spending is “particularly pernicious,” in her view, because customers “have to buy from these companies” to get electricity delivered to their homes.
At the same time, reporting requirements currently apply only to immediate spenders on political issues and campaigns. They don’t reach all the way up the chain to the original source of the money.
“It’s basically this Russian nesting doll scenario, where you have one donor giving to another donor, giving to another donor, to get to the person who finally spends the money to influence the voters,” Costa explained.
In the case of HB 6, money flowed into Generation Now from multiple sources, with a lion’s share allegedly originating with Company A — understood to be FirstEnergy — and its subsidiaries, according to the federal complaint.
Some of the money in turn then went to a political action committee. Or, it went to other organizations that directly funded pro-HB 6 ads. One such ad claimed a debunked Chinese conspiracy was behind last year’s failed effort to put a referendum on the law on the ballot this fall. A for-profit group called Ohioans for Energy Security paid for that ad. When asked last year, lawyers at the firm that set up the corporation, Isaac Wiles, would not answer questions about the source of its funding.
“The notion that dark money is something some people don’t like is not part of the elements of the crime,” Mark Weaver, an attorney at that firm, said at a Columbus Metropolitan Club forum after news broke about the Householder arrest.
Asked if there was too much money sloshing around at the statehouse, he said it’s “a lot of money, no doubt,” but it “pales in comparison” to the amount that Americans spend on Halloween candy and costumes every year. And he said that the First Amendment protects the right to conduct political speech anonymously.
“Of course, state and local governments may (depending on how they draft) pass additional 501(c)4 disclosure requirements that could meet constitutional scrutiny,” Weaver later added.
Ian Vandewalker, Ian PHOTO CREDIT: Courtesy of Brennan Center for Justice
“There is no absolute right to anonymous speech,” said attorney Ian Vandewalker at the Brennan Center for Justice at New York University School of Law. Elections are treated differently from general speech, because of the overriding interest in making sure elections function properly, he explained at a panel organized by the League of Women Voters of Ohio.
“That requires informed voters. And it requires policies to not be able to cheat the public,” Vandewalker said. “And so those interests require that there be a level of transparency.”
“No regulation, no law, no set of ethical rules substitutes for American voters paying attention to who’s running for office — pressing them hard on what they stand for, looking closely at the issues, and going into the ballot box having done your homework,” Weaver said.
“The reason that information is important and transparency is important is so that voters are educated,” said Catherine Turcer, executive director of Common Cause Ohio. “You can’t make the argument that voters need to be better educated but you shouldn’t give them actual education. It doesn’t make any sense.”
Moreover, disclosure needs to be timely, said Heather Taylor-Miesle, executive director for the Ohio Environmental Council. In the case of HB 6, Generation Now didn’t report its 2017 spending to the Internal Revenue Service until late 2019. By then, millions more had been spent to influence the 2018 elections, the passage of HB 6, and the failed referendum effort against it.
Pending bills
Several bills introduced by Democratic and Republican lawmakers could make a strong start toward improved disclosure, including HB 737, HB 739, and SB 347. Those bills should be broadened to include digital media, as well as more traditional campaign spending, Turcer said.
The bills should also call for disclosure not only of the name of an organization, but the identity of the top three original donors of funding, Turcer added in her Sept. 16 testimony in support of SB 347. “Otherwise, wealthy special interests will attempt to avoid disclosure by creating pop-up shell groups,” she said.
And while Ohio voters won’t know who’s behind all the groups funding attack ads or other political spending this election season, information is available about how lawmakers voted on HB 6. The Akron Beacon Journal has also compiled some information on how some funds were used in the 2018 Ohio House campaigns.
“People should contact their legislators about HB 6” if they want to speak out about the issue, Stokes said, noting that the law passed with support from a mix of both Republicans and Democrats.
“When the public is outraged about an issue and really shows up, these issues get reversed,” Stokes added. “There’s a lot of leverage right now.”
[Note: the original version of this story took additional comments made by Mr. Weaver and summarized them to help the story flow better and to highlight the most relevant points. Mr. Weaver contacted Eye on Ohio and the Energy News Network after publication expressing his concern that the summary was not an accurate representation of his public comments. While we do not share that view, we are happy to share the full text from which that summary was taken. We know our readers are smart and can draw their own conclusions regarding their meaning. Beneath this article is that text, as well as a link to the entire video.]
Mark Weaver: Blaming Citizens United for this I think is wrongheaded. The New York Times, it’s sort of been proven that their collusion story about Russia has fallen completely apart and yet I don’t blame the First Amendment for the right to print what they printed. I think they had a right to print all that. I think it was substantively wrong, but I wouldn’t go after their ability to print that stuff.
And so what the Supreme Court said in Citizens United was, if a few of us get together and want to form a group to communicate, we ought to have a right to do that under the First Amendment.
And a lot of donors are looking at what’s happening in America right now with the doxxing, or the releasing of personal information and targeting people for shame. So that’s why some donors don’t want to give. Now some may have less noble notions for wanting to keep their money and their name private. But we saw what happened to Amy Acton for example where her personal home was targeted by protesters– that’s just wrong.
The notion that- I disagree with you so I’m going to personally vilify you and show up at your house where your family or your children are- so many donors see that as part of 2020 current affairs and so many of them want to avoid that. And I know not everyone has that reason.
Mike Thompson: But the problem comes in not just that somebody gives $500 to a candidate or a cause they believe in. It’s that somebody gives– $61 million or $35 million, let’s be conservative, and we don’t know that’s happening. Is there a middle ground where we can say, okay I can protect your identity, your First Amendment rights, but you can’t have THAT much influence?
Weaver: Well, not Constitutionally, no. It’s not just Citizens United. There was a case out of Ohio called McIntyre vs. the Ohio Elections Commission. This is the 7-2 Supreme Court case that said it’s legal to keep yourself anonymous when spending politically, based out of Ohio, in Westerville, Mrs. McIntyre. I used to teach the case. This morning I looked at it again and I had forgotten about this quote. This is not a close call. 7-2. This is Supreme court on anonymous speech: “It’s not a pernicious, fraudulent practice but an honorable tradition of advocacy and of dissent.”
And they pointed to the Federalist Papers that were written anonymously, to avoid scrutiny of the authors and focus on the ideas. So this notion of anonymous speech is one that’s protected by Supreme Court precedent.
Thompson: Laura, there are efforts at the statehouse to make it more transparent. Is it just lip service or are they serious efforts?
Laura Bischoff: You know it’s interesting. I do think the conditions are probably better now for reform than they were six months ago. So, there’s a couple of different bills pending. One is House Bill 737, which is sponsored by Gayle Manning, a Republican from North Royalton, and Jessica Miranda, a Democrat from Cleveland. And it’s got the support of the Ohio Secretary of State, Frank LaRose. And it would require, if you’re going to have a 501c(4) that’s spending in Ohio on political matters then it would require reporting through the state. Louis Brandeis said that the best disinfectant is sunshine. And so, this kind of works on that premise– transparency and disclosure will help clean it up.
Thompson: Derrick, It comes down to the Supreme Court. And the courts have said money equals speech. How much money? We have unlimited amounts of Free Speech. We can stand on a street corner, 24 hours a day, 7 days a week, and as long as we don’t yell fire in a crowded theatre we can do all we want. Should that same apply to the amount of money someone can give to a campaign? Or to a political cause?
Derrick Clay: Well you know if you have the money to give it, that’s your discretion whether you want to give that money to a c(4). You know, right now we’re under the law from that Citizens United case where people can give unlimited amounts of money to a c(4) nonprofit. So until that court case is overturned or challenged, then that’s the law of the land that we all have to abide by unfortunately.
Thompson: Is it too much money sloshing around at the statehouse? And you guys [points at Weaver and Clay] have both advocated for groups, and helped raise money and spent money that’s been raised. I mean, you’re part of the system-
Weaver: It’s a lot of money, no doubt. But when you look at what America spends on Halloween candy and costumes every year it pales in comparison. There’s lots of money done for lots of things.
Halloween candy and costumes don’t have the protection of the First Amendment. Remember, the Supreme Court has been very clear: the speech that aggravates us the most gets the most protection. And when you’re laying out what’s protected, political speech is the highest. And so whatever laws get passed, and I’m interested to read the details, and I’m interested in whatever laws are being put out there, they will have to withstand First Amendment scrutiny just like the news organizations represented today.
This article first appeared on Eye on Ohio and is republished here under a Creative Commons license.
Make no mistake – the $61 million came from Company A’s ratepayers and ultimately extorted from every residential and commercial electrical utility user in Ohio. The racketeering scheme of lies and deception corrupted Ohio citizen’s ability to overturn corrupt legislation at the ballot box. – David Miller, Loveland Magazine Publisher
By Marty Schladen The Ohio Capital Journal and David Miller/LovelandMagazine
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Cincinnati, Ohio – Ohio House Speaker Larry Householder, four political operatives and a dark-money group were charged Tuesday in a criminal complaint that an Ohio energy company paid them $61 million to get a $1.5 billion nuclear bailout from taxpayers.
Read the Press Release issued by the Department of Justice
Neil Clark, a lobbyist who owns Grant Street Consulting – Photo from Grant Street Consulting who exclaim, “Clark’s decades of experience and role in shaping Ohio’s political landscape makes him an indispensable resource to Ohio’s elected leaders, to whom he often serves as a trusted and highly sought after campaign advisor.”
All are charged with racketeering, which carries a prison sentence of up to 20 years.
David M. DeVillers, U.S. Attorney for the Southern District of Ohio
The alleged conspiracy, which revolved around the bailout of two failing nuclear plants in Northern Ohio, is “likely the largest bribery and money-laundering scheme ever in the state of Ohio,” David M. DeVillers, U.S. Attorney for the Southern District of Ohio, said at a Tuesday afternoon press conference.
Shortly after the press conference, Ohio Gov. Mike DeWine called on his fellow Republican to step down.
“I am deeply concerned about the allegations of wrongdoing in the criminal complaint issued today by the U.S. Attorney’s Office,” DeWine, who last year signed the bailout into law, said in a written statement. “Every American has the presumption of innocence until proven guilty. Because of the nature of these charges, it will be impossible for Speaker Householder to effectively lead the Ohio House of Representatives; therefore, I am calling on Speaker Householder to resign immediately. This is a sad day for Ohio.”
The criminal complaint says that “Company A,” the former FirstEnergy Solutions of Akron, worked to save its failing nuclear plants by funneling $61 million into Generation Now, a 501(c)(4) “dark money” group controlled by Householder.
On September 9, 2019, President Donald Trump nominated DeVillers for the United States Attorney in the Southern District of Ohio. The Senate confirmed the nomination in October, and DeVillers took his oath on November 1, 2019.
“Make no mistake, this is Larry Householder’s 501(c)(4),” the U.S. attorney said.
The money was used for three general purposes, the complaint said. First it was used to build “Team Householder” through campaign contributions and other measures that helped Householder win the speakership in 2019.
“In exchange for payment from Company A, Householder’s enterprise helped pass House Bill 6, legislation described by an enterprise member as a billion-dollar ‘bailout’ that saved from closure two failing nuclear power plants in Ohio affiliated with company A,” the complaint said
The money was also used for the personal benefit of Householder and the other conspirators, DeVillers said. Householder got about $500,000, he said.
Despite the companies claims of poverty, the interests behind the bailout spent millions — much of it in the form of hard-to-trace dark money on campaign contributions, a xenophobic ad campaign and then on an aggressive effort to stymie a petition drive to repeal the bailout DeWine signed into law a year ago.
And the money was used to fend off a petition effort to repeal HB6, going so far as to buy plane tickets for and pay $1,000 each to people circulating it to get out of town, DeVillers said.
The federal prosecutor said that it was crucial to keep the investigation secret until Tuesday. Now it begins a new phase that might be causing some lawmakers, energy executives and some others to lose sleep.
“We are not done with this case,” he said. “There were things we couldn’t do before. People we couldn’t interview. People we couldn’t subpoena. Documents and search warrants we couldn’t execute.
“As of this morning there are a lot of FBI agents knocking on a lot of doors asking a lot of questions, serving lots of subpoenas. That’s going to go on for days.”
“It takes courage for citizens to assist law enforcement in the ways detailed in the affidavit,” U.S. Attorney David M. DeVillers said. “We are grateful to those who felt a moral duty to work together with agents in bringing to light this alleged, significant public corruption.”
House Bill 6 is adding $1.5 billion in additional taxpayer bailouts to the $10.2 billion that Akron-based FirstEnergy Solutions and its former parent company, FirstEnergy Corp, have received from taxpayers since 1999. Most of the funds have gone to prop up the Davis-Besse and Perry nuclear power plants in Northern Ohio.
The company that owns the plants was renamed Energy Harbor after emerging from bankruptcy earlier this year.
Despite the companies claims of poverty, the interests behind the bailout spent millions — much of it in the form of hard-to-trace dark money on campaign contributions, a xenophobic ad campaign and then on an aggressive effort to stymie a petition drive to repeal the bailout DeWine signed into law a year ago.
The interests behind the nuclear bailout also contributed heavily to the effort at the beginning of 2019 to elect Householder speaker. He ended up winning the support of 26 Republicans and 26 Democrats, His opponent, Ryan Smith, R-Bidwell, got the votes of 34 Republicans and 12 Democrats.
The Ohio Republican Party didn’t respond Tuesday to requests for comment.
The Ohio Democratic Party didn’t respond when asked about the fact that Householder wouldn’t have worn the speakership without Democratic votes. However, the party chairman, David Pepper called on Householder to step down as speaker.
“As the U.S. attorney indicated, this investigation is ongoing, and we will wait to hear all the facts as they emerge. However, given what was revealed in today’s complaint and the taint of corruption over Ohio legislative activity, we believe Speaker Householder should step down from leadership immediately as he avails himself of his due process rights,” Pepper said in a written statement.
House Bill 6, which passed 51-38, was quickly signed into law by Gov. Mike DeWine. Under the bill, from 2021 until 2027, every Ohio electricity customer will have to pay a new monthly surcharge that ranges from 85 cents for residential customers to $2,400 for large industrial plants. Ratepayers around the state would also have to chip in up to $1.50 monthly (and up to $1,500 per month for commercial and industrial users) to subsidize coal plants in Ohio and Indiana run by the Ohio Valley Electric Corporation.- cleveland.com
Starting next January, ratepayers around the state would also have to chip in up to $1.50 monthly (and up to $1,500 per month for commercial and industrial users) to subsidize coal plants in Ohio and Indiana run by the Ohio Valley Electric Corporation.
This isn’t Householder’s first encounter with federal law enforcement.
In 2006, the Justice Department told the FBI that it wouldn’t pursue charges against Householder. The FBI had been told two years earlier that Householder had used his post as head of the House Republican Campaign Committee to overpay some vendors in exchange for kickbacks from them.
Nor is Householder, 61, of Glenford, the first Ohio House speaker to find himself in the FBI’s crosshairs. In 2018, Speaker Cliff Rosenberger, a Republican, resigned amid an FBI probe of his overseas travel. He has not been charged, but the investigation remains open.
Read about the local ramifications and : “ORIGINS OF REPULSIVE BILL”
Vindicator Editorial
July 19, 2019
The Ohio Senate’s passage Wednesday night of one of this state’s most odious anti-consumer bills in history toward almost certain passage in the state House deals a mean blow to Ohioans in their pocketbooks and sets the Buckeye State on a regressive path toward environmental irresponsibility.
MARTY SCHLADEN
