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Tag: FirstEnergy

  • Defense lawyer boils over in Ohio utility bailout and political bribery racketeering trial

    Defense lawyer boils over in Ohio utility bailout and political bribery racketeering trial

    Former Ohio House Speaker Larry Householder, a Perry County Republican, second from left, with attorneys outside of his racketeering trial. Photo courtesy of WEWS.

    BY: MARTY SCHLADEN – Ohio Capital Journal

    CINCINNATI — The defense of former Ohio House Speaker Larry Householder erupted Thursday in Householder’s epic corruption trial.

    Defense attorney Mark Marein of Cleveland suggested it was because of U.S. District Judge Timothy Black’s unfairness. But it came after a day in which the defense team’s attempts to undermine prosecution witnesses’ credibility might have come to naught.

    The sparks flew in the fourth week of the trial. Householder and former Ohio Republican Party Chairman Matt Borges are accused of racketeering in a scheme to use $61 million in utility money to make Householder speaker and pass a $1.3 billion bailout that mostly benefited Akron-based FirstEnergy, the primary contributor.

    Earlier on Thursday, defense attorney Steven Bradley cross examined Jeffrey Longstreth, who operated as Householder’s right-hand man through his bid for the speakership and the 2019 passage and defense of the bailout law, House Bill 6.

    Longstreth was arrested along with Householder, Borges, and two others in July 2020. He is now cooperating with prosecutors in exchange for a sentencing recommendation of less than six months.

    The dinners

    During direct examination Wednesday, Longstreth described fancy dinners with Householder and FirstEnergy’s top executives during Donald Trump’s inauguration in 2017 in Washington, D.C. 

    At one, Longstreth described being at one end of a long table with FirstEnergy Vice President Michael Dowling in a noisy steakhouse, while Householder sat with company CEO Chuck Jones at the other. Longstreth said he couldn’t hear the conversation at the other end of the table, but at his end Dowling told him FirstEnergy needed help and it wanted to help Householder become speaker.

    Dowling instructed Longstreth to set up an organization to receive FirstEnergy’s millions, Longstreth said. 

    “He said (the money) needed to be undisclosed and unlimited contributions,”  Longstreth testified on Wednesday.

    Apparently seeking to impeach Longstreth’s memory, Bradley on Thursday showed the jury an itinerary indicating that Jones took the FirstEnergy corporate jet to D.C. the morning after the steakhouse dinner. He also produced a credit card receipt showing that Jones attended a dinner at a different restaurant the following night than where a second, more-intimate dinner was described by Longstreth on Wednesday.

    But Assistant U.S. Attorney Emily Glatfelter asked Longstreth if itineraries change. He agreed they often do.

    She then produced credit card receipts and car records that indicated Jones may well have been in D.C and could have attended the first dinner as Longstreth described. She also showed that on the following night, the dinner Bradley said Jones attended ended about 30 minutes before the one Longstreth said he attended began.

    Longstreth testified that it was common at presidential inaugurations to attend multiple receptions and dinners in the same evening. Apparently that’s a major purpose of the quadrennial gatherings: To stay in $600 hotels, eat multiple $200 dinners, and figure out how to split up the taxpayers’ —or  ratepayer’s — money.

    Whistleblower former state Rep. Dave Greenspan

     Former State Rep. Dave Greenspan, R-Westlake. Official photo.

    After Longstreth left the stand, the prosecution called former state Rep. Dave Greenspan, R-Westlake. He said he never voted to make Householder speaker and he never supported House Bill 6. 

    “I didn’t believe in corporate bailouts,” Greenspan said, explaining that this one was especially hard to support because FirstEnergy hadn’t shown that it needed the money and the bill put no restrictions on how it was spent. “There was nothing in the bill that required FirstEnergy to do anything.”

    As a sign of how unpopular the bill was, 17 Republicans voted against it when it passed the House in April 2019. And it’s an important reminder that it would never have become law without the support of Ohio House Democrats.

    Greenspan described the intense pressure he was under from Householder and lobbyist Neil Clark to vote for the bill. He was so disturbed by it that he contacted a member of the U.S. Marshal’s Service, who put him in touch with the FBI.

    During cross examination, Marein, another of Householder’s attorneys, seemed dumbfounded that Greenspan contacted the FBI, which he referred to as the “Federal Bureau of Investigation” in a tone that in many places would pass for shouting.

    Then, as he tried to read lengthy passages of Greenspan’s grand jury testimony, Judge Black repeatedly cut the attorney off and told him to ask a question.

    Another attack at the judge

    On Feb. 1, Marein undertook a risky gambit by accusing the judge of bias, saying that Black had it in for his client because Householder opposed Black’s run for Ohio Supreme Court 22 years ago. After the jury filed out Thursday afternoon, Marein doubled down.

    He started off so loudly that Black admonished Marein to show the same respect for him that Black believed he’d shown Marein.

    A little more quietly, Marein said, “You’re really tying our hands. Overruling our objections. Quite frankly, I don’t know what’s going on.”

    Then he added, “Is there something personal against Mr. Householder?”

    When Marein finished, Black asked, “Is that all?”

    Marein said yes, Black banged his gavel and said, “We’re in recess.”

  • Corruption trial witness: Householder called them “loans” but wouldn’t sign documents

    Corruption trial witness: Householder called them “loans” but wouldn’t sign documents

    Former Ohio House speaker Larry Householder arrives for day two of his racketeering trial. Photo by Morgan Trau, WEWS.

    Former House speaker received $500K in bailout scandal and called them loans, but never paid any of it back

    BY: MARTY SCHLADEN – Ohio Capital Journal

    CINCINNATI — In Washington, D.C. during Donald Trump’s January 2017 inauguration, then-Ohio Rep. Larry Householder had a dinner meeting with the top executives with Akron-based FirstEnergy. The executives stressed their likely need for a state bailout — and their need for a way to make unlimited, untraceable contributions to Householder’s bid for speaker, Householder’s top lieutenant testified Wednesday.

    By late 2019, scores of millions in FirstEnergy dollars had passed through the 501(c)(4) “dark money” account that had been set up at the executives’ request. Householder had won the speaker’s gavel. And the state had passed a $1.3 bailout that mostly benefited a FirstEnergy subsidiary. 

    In addition, Householder had gotten more than $500,000 for personal expenses that had originated with the utility. The speaker agreed to call them “loans,” but he never quite got around to signing legal documents that were prepared — much less to paying back any of the money, the witness, Jeffrey Longstreth, testified Wednesday.

    If true, it and other events described Wednesday illustrate widespread ratepayer-financed malfeasance that threatened to make Householder speaker in alliance with Ohio utilities almost indefinitely.

    Four weeks into the blockbuster corruption trial, Longstreth’s testimony could prove crucial. Because he set up the dark money group and handled much of Householder’s political business, Longstreth is likely to have had one of the best views into whether the former speaker enriched himself in exchange for championing the bailout.

    Showing that Householder personally enriched himself as he rammed through an unpopular corporate bailout could go a long way to convincing the jury that the former speaker participated in an illegal conspiracy. 

    He and former Ohio Republican Party Chairman Matt Borges are being tried on charges of racketeering. Federal prosecutors have said the $61 million in utility money that was used to pass the billion-dollar bailout is likely the largest bribery and money laundering scandal in Ohio history.

    Longstreth, who functioned as Householder’s political strategist and general fixer, has pleaded guilty and is cooperating with prosecutors in exchange for a favorable sentencing recommendation. On Wednesday, he explained to jurors that by the time of the dinner meeting during Trump’s inauguration, it was clear to him that Householder was well familiar with then-FirstEnergy CEO Chuck Jones and what Jones wanted for his company.

    Meetings with FirstEnergy executives

    In late 2016, as Householder captured a House seat that he held in the early 2000s, FirstEnergy was drowning in debt from its money-losing nuclear and coal plants. The company was laying the groundwork to send the subsidiary that owned the plants into bankruptcy, and executives calculated that state or federal subsidies would make it attractive to buyers.

    In December 2016, the newly elected Householder hired Longstreth to spearhead his plan to elect enough sympathetic Republicans in 2018 that they would make Householder speaker at the start of 2019.

    A month later, Householder and Longstreth were in D.C. for Trump’s inaugural — and to meet with Jones and FirstEnergy Vice President Michael Dowling. At one steakhouse dinner, Longstreth was seated at the end of a long table with Dowling, and Jones and Householder were seated at the other.

    Dowling “said they were going to get going, get your organization set up,” Longstreth testified, explaining that he understood “organization” to mean a limited liability corporation or a dark money group that could receive FirstEnergy money. “He said (the money) needed to be undisclosed and unlimited contributions.”

    The next night, the dinner at another D.C. steakhouse was more intimate, with just Householder, Jones, Dowling, Longstreth and maybe one other in attendance. Jones, the FirstEnergy CEO, explained the company’s financial woes and that they were working on a federal solution to them.

    “They said, ‘If not, we’re going to need something on the state level,’” Longstreth quoted Jones as saying.

    He added that Householder mostly sat quietly through that part of the discussion because he “already knew everything that was being said, it seemed to me.”

    Longstreth said he didn’t know about all of Householder’s previous dealings with Jones, but said the men were well enough acquainted that they attended a World Series game together in Cleveland the previous October.

    The political strategist testified that it was clear to him that FirstEnergy’s enormous contributions were expressly in exchange for a bailout.

    “I knew their donations were (predicated) on the expectation that something like House Bill 6 would happen,” Longstreth said.

    Money for Householder

    Householder didn’t just get money from FirstEnergy to advance his political ambitions, Longstreth said.

    In spring of 2017, Householder called Longstreth into his office to complain of financial problems. He was head of a group of investors in an Alabama coal mine that had defaulted on a loan, he was having problems with his Perry County farm and he had a house in Florida that was badly in need of repair.

    Longstreth said Householder told him that he needed to solve some of those problems or he’d be forced to drop his bid for speaker. And, he said, because Householder was his only client, that would be a big problem for Longstreth, too.

    Using money out of an account that was funded by the dark money group that FirstEnergy paid into, Longstreth said he paid lawyers, settled the Alabama lawsuit and financed the repair of Householder’s Naples, Fla., home.

    Longstreth had a loan agreement drawn up, but Householder never signed the papers, he said.

    “We had multiple discussions, but it was a kick-the-can-down-the-road type of scenario,” Longstreth said.

    In late 2019 when the issue came up, Householder “asked me in the course of our conversation, ‘Are you whole?’” Longstreth said, explaining that he interpreted the question to mean that Householder wanted to know if somebody other than Longstreth had ultimately paid Householder’s debts. 

    “It was one of those hair-on-the-back-of-your-neck situations,” Longstreth said, adding they both knew the arrangement the speaker was suggesting was illegal. 

    At another meeting at the Buckeye Lake AMVETS post, Householder requested help with credit card bills, Longstreth said. Earlier in the trial, prosecutors displayed bank records showing that the debt was about $20,000.

    Longstreth said he stressed to Householder that they needed to stay on the right side of the law. 

    “I said it had to be something we can do legally because you can’t get something for nothing,” Longstreth said.

    Testimony on widespread corruption

    Wednesday’s testimony about Householder’s loans was against a backdrop of widespread corruption that threatened to become endemic.

    Before Longstreth took the stand, Pat Tully testified that within weeks he moved from a senior position at the state’s utility regulator, the Public Utilities Commission of Ohio, to being a senior advisor to the House Republican Caucus. In early 2019, Tully said, Householder met with him, Rep. Nino Vitale, R-Urbana, and Sam Randazzo, Gov. Mike DeWine’s nominee to chair the PUCO — and who around that time received a $4.3 million payment from FirstEnergy.

    Tully described how he worked with Randazzo to help draft the utility bailout, House Bill 6, and to reconcile it with draft legislation submitted by FirstEnergy. He wasn’t asked about the propriety of a current and very recent regulator writing a law in which one of the state’s largest utilities had such an obvious interest.

    In Longstreth’s testimony, he said that after HB 6 passed in 2020, he and Householder mounted an effort that could make him speaker for the foreseeable future in a kind of permanent alliance with Ohio’s big utilities.

    Earlier in the trial, prosecutors played recordings of Householder ally Neil Clark saying that thanks to dark money, utilities like FirstEnergy could contribute vast sums to politicians and keep their origin secret. In that way, Clark said, supposedly regulated utilities could exercise huge influence behind the scenes.

    Ohio law currently limits lawmakers to eight years in either house, but they’re free to run for the other chamber after that — and can do so as long as they like. So Householder’s speakership would at least have been interrupted in 2024.

    But Longstreth found that the idea of passing a law limiting lifetime service to 16 years polled well. And it had a huge silver lining for Householder — it would reset the clock so the speaker was free to stay in the House and be its leader for the next 16 years if he could keep getting the votes.

    Longstreth estimated that it would cost $15 million to $20 million to buy ads selling the idea to voters. For the money, Householder and Longstreth decided to turn to utilities FirstEnergy and AEP, both of which reaped millions from the bailout. Their interest in keeping Householder in the speaker’s chair was clear, Longstreth said.

    “It kind of went without saying that they would support anything that was good for the speaker because anything that was good for the speaker was good for them,” Longstreth said.

    After meetings with top executives with both companies in February 2020, Householder secured pledges of support from each, Longstreth said. Then reality intervened.

    “COVID started in March and then we were arrested in July,” Longstreth said.

  • Ohio’s billion-dollar bailout bribery trial showcasing rampant arrogance, corruption, and enabling

    Ohio’s billion-dollar bailout bribery trial showcasing rampant arrogance, corruption, and enabling

    by David DeWitt

    Every day more details emerge from Ohio’s billion-dollar bailout bribery trial showcasing gargantuan levels of arrogance, corruption, and enabling among energy executives and Ohio’s most powerful Republican politicians.

    Yesterday in federal court, prosecutors played recordings of late Ohio right-wing lobbyist Neil Clark that showed in extravagant detail how dirty Ohio politicians and power players really are.

    Pointing to the U.S. Supreme Court’s disastrous Citizens United ruling, Clark described to undercover FBI agents how to make dark money contributions in a way calculated to get a public official’s attention, saying those should come in chunks of $15,000, $20,000, $25,000 or more.

    “Based on a Supreme Court decision, businesses can do this and nobody can do anything about it,” Clark said. “Politicians can get a bunch of money and say, ‘I didn’t know.’”

    And that exactly how many Ohio politicians have been operating, this trial is showing: Selfish, reckless, greedy, amoral, large-scale, pay-to-play grift.

    The scope of corruption at every turn in Ohio is a bit staggering, so let’s take a look at all we’ve learned so far, all together in one place:

     Indicted former Ohio House Speaker Larry Householder. Official photo.

    Executives from financially struggling FirstEnergy flew Ohio House speaker aspirant Larry Householder and associate Jeff Longstreth to D.C. on the FE corporate jet in January 2017 for some swanky steakhouse dinners.

    Two weeks later, Longstreth opened a bank account for a dark money group called Generation Now and that same day emailed then-FirstEnergy Vice President Michael Dowling “wiring instructions” so the company could put money in the account. A day later another dark money group was opened, Partners for Progress, which was funded exclusively by FirstEnergy, an FBI agent testified.

    Partners for Progress was the dark money project of then-FirstEnergy lobbyist Dan McCarthy. It received $5 million from FirstEnergy within a few weeks of when McCarthy founded it.

     Juan Cespedes. Photo provided.

    During a meeting between Householder and FirstEnergy lobbyists in October 2018, a lobbyist named Robert F. Klaffky slid an envelope containing a check for $400,000 across the table and under Householder’s hand as they discussed a $1.3 billion ratepayer bailout of failing nuclear and coal plants, former FirstEnergy lobbyist Juan Cespedes testified.

    “Our client cares very much about this issue,” Klaffky told Householder.

    “Well yes they do,” Householder replied after peeking into the envelope.

    Cespedes has testified that the campaign checks were “specifically tied” to the bailout.

    “We were trying to establish the fact that our support was specifically tied to the legislation,” Cespedes said.

    All told, Householder’s dark money political machine amassed $61 million in utility company contributions to elect a legislature that would make him speaker and pass the bailout.

    This included allocating millions in dark money for ads promoting Householder that called dark money “dirty.”

    In its deferred prosecution agreement, FirstEnergy admitted that it funneled those millions into the operation through the entities to make Householder speaker and to beat back attempts to repeal the bailout he championed, House Bill 6.

    Why did it go through the dark money groups like that? It was thought to be bad optics if the struggling company were publicly giving the money, Cespedes said in testimony.

    An FBI agent testified that hundreds of thousands in FirstEnergy money went to Householder personally for expenses ranging from paying off his credit card bills to cleaning the pool at a home he owned in Florida and settling a coal mine lawsuit for him.

     Ohio Lt. Gov. John Husted. Official photo by Vivien McClain Photography.

    Text messages between FirstEnergy executives show that Householder and FirstEnergy officials expected help from the administration of Gov. Mike DeWine and Lt. Gov. Jon Husted in passing House Bill 6 through the Ohio Senate.

    Starting in 2017, FirstEnergy donated more than $1 million to nonprofit groups and political campaigns to help elect DeWine.

     Vivien McClain Photography

    In the Neil Clark recording played at trial, he pegs FirstEnergy contributions toward DeWine at around $3 million.

    “The governor got about $3 million from FirstEnergy,” Clark said on June 6, 2019, explaining that even so, Mike DeWine was an inconsistent supporter of the bailout.

    “The governor, when he knew Larry (Householder) didn’t have the votes, he ran away from him,” Clark said. “Now he wants to come back.”

    Clark also said that DeWine is highly influenced by campaign contributions.

    “I don’t want to say he’s a pay-to-play guy, but (DeWine is) clearly influenced by people who have money,” Clark said.

    After winning election, DeWine and Husted dined with FirstEnergy executives in December 2018.

    In early 2019, DeWine appointed the FirstEnergy lobbyist operating Partners for Progress, Dan McCarthy, to be his legislative affairs director, meaning McCarthy was in charge of representing DeWine’s interests before the General Assembly.

    DeWine also appointed as chairman of Ohio’s utility watchdog a former FirstEnergy consultant who FirstEnergy said they bribed $4.3 million just before he took his seat on the Public Utilities Commission of Ohio.

    Even though he was supposed to be regulating the utility, the official, Sam Randazzo, played a role in writing the bailout legislation, according to documents released by the Ohio House.

    While it was under consideration in the legislature, 2019 text messages show then-FirstEnergy VP Dowling telling then-CEO Chuck Jones that Husted was working on extending the timeline for the subsidies: “Just had long convo with JHusted…JH is working on the ten years, he’s afraid it’s going to end up being eight.”

     Former FirstEnergy CEO Charles “Chuck” Jones. Source: FirstEnergy, via Flickr

    Text messages shown at trial indicate that former Ohio Republican Party Chairman Matt Borges was assigned to try to enlist Ohio Attorney General Dave Yost’s help with the bailout. Borges, a FirstEnergy lobbyist after leaving his post as Ohio GOP chair, had previously served as Yost’s campaign manager and a political advisor.

    The texts showed that in June of 2019, Yost thought the proposed utility bailout was a bad law, but he didn’t publicly oppose it because of $24,000 in campaign support he’d received from FirstEnergy.

     Ohio Attorney General Dave Yost. Official photo.

    In a text to Cespedes, Borges said “Don’t repeat this,” but Yost believed the bailout was a bad law.

    Yost “‘would be out front (in opposition) if not for (FirstEnergy) support and your involvement,’” Borges quoted Yost as saying.

    DeWine signed House Bill 6 the same day it was passed by the legislature.

    Also that same day, Jones sent a photo-shopped image of Mount Rushmore to the bribed utility watchdog, Randazzo.

    The faces of Mount Rushmore were replaced with Randazzo, two FirstEnergy executives and another utility company executive with the caption: “HB6 F— ANYBODY WHO AIN’T US.”

    An effort to repeal the bill was soon mounted.

     Sam Randazzo, then a private sector attorney, testifies before the PUCO in March 2018. Source: The Ohio Channel.

    During the repeal effort, FirstEnergy executives were fighting it. Jones texted Dowling to say, “DeWine’s on board. I talked to him on Wednesday.” A DeWine spokesperson said the governor has no recollection of his conversation with Jones.

    As the repeal battle raged, FirstEnergy’s Dowling worked to keep the name of a senior aide to DeWine — McCarthy — off of a $10 million infusion of corporate cash into the fight. He did so even after an assistant told him it would violate IRS rules to not list McCarthy on the transaction, according to text messages presented in court.

    Borges paid $15,000 off the books in 2019 in an attempt to gather inside information about the campaign to repeal the $1.3 billion utility subsidy, Cespedes testified.

    Borges and Cespedes also texted about protecting Ohio Secretary of State Frank LaRose if he faced pressure to recuse himself as chair of the Ohio Ballot Board over the repeal effort.

     Center, former Ohio Republican Party chair, and statehouse lobbyist, Matt Borges with his attorneys outside of the federal courthouse. Photo courtesy of WEWS.

    “He’s going to be a friend in this process,” Borges texted to Cespedes. “So let’s be prepared to speak up for him.”

    Cespedes responded, “We will support him more than anyone.”

    Additional texts said Borges was in touch with LaRose.

    “LaRose is expecting us to be publicly supportive of him,” Borges wrote in a July 2019 text.

    In another text, Borges wrote that LaRose wanted to meet with John Kiani, now chair of Energy Harbor (then FirstEnergy Solutions).

    Kiani reportedly stood to make $100 million personally from the $1.3 billion swindle of Ohio ratepayers, by selling the power plants after enticing buyers with the bailout.

    That same chairman in an email referred to Borges’ scheme to spy on the repeal effort as a “black op” and said he was prepared “to do whatever it takes” to defeat it, Cespedes testified.

     Ohio Secretary of State Frank LaRose. Official photo.

    Kiani had plans to operate the two FirstEnergy Solutions nuclear power plants in Ohio for a short period, get a government bailout and then sell the power plants in a deal in which he stood to make $100 million, Cespedes testified.

    Kiani remains the executive chairman of Energy Harbor.

    Randazzo has not been charged and denies wrongdoing. McCarthy has also not been charged, but did resign from the DeWine administration.

    DeWine has steadfastly defended McCarthy as well as his selection of Randazzo.

    DeWine and Husted, as well as Yost and LaRose, were reelected to second four-year terms in 2022.

    Husted, Yost, and LaRose are all poised to continue to seek political advancement in Ohio.

    Generation Now, Cespedes, and Longstreth have pleaded guilty.

    FirstEnergy entered into its deferred prosecution agreement.

    Neil Clark died by suicide in 2021, nine months after being indicted by federal prosecutors.

    The federal racketeering trials of Householder and Borges are ongoing and expected to last until March.

    Jurors will review all the evidence and decide their fate.

    It will be up to Ohioans to decide how long we will continue to allow our politicians to rob and abuse us in service to themselves and private interest profiteering.

    Every day we learn more about how Ohio government has really been operating under the design of unscrupulous thieves and grifters, rotting the institutions of our state into a national joke and embarrassment: a grotesque totem to pay-to-play corruption; a decayed and decrepit husk of representative democracy.

  • Former associate testifies that ex-Ohio GOP Chair Borges paid to spy on bailout repeal effort

    Former associate testifies that ex-Ohio GOP Chair Borges paid to spy on bailout repeal effort

    BY: MARTY SCHLADEN – Ohio Capital Journal

    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.”

  • FirstEnergy exec tried to keep DeWine aide’s name off of $10M transaction

    FirstEnergy exec tried to keep DeWine aide’s name off of $10M transaction

    BY: MARTY SCHLADEN – Ohio Capital Journal

    In October 2019, as a battle raged over an attempt to repeal a $1.3 billion utility bailout, a FirstEnergy executive worked to keep the name of a senior aide to Gov. Mike DeWine off of a $10 million infusion of corporate cash into the fight. 

    The executive, Vice President Michael Dowling, did so even after an assistant told him it would violate IRS rules to not list the DeWine aide on the transaction, according to text messages presented Tuesday in the federal corruption trial of former Ohio House Speaker Larry Householder and lobbyist Matthew Borges. The men are accused of racketeering in a scheme to use $61 million from FirstEnergy in exchange for the massive bailout, most of which went to prop up the company’s failing nuclear and coal plants in order to make them attractive to buyers.

    DeWine has denied involvement in the arrangement even though he met with FirstEnergy executives and visited one of its nuclear plants in 2018 as he was seeking the governorship and FirstEnergy was lavishly funding Householder’s effort to elect sympathetic Republicans who would then vote to make him speaker. For his part, DeWine received $23,000 from the Akron-based utility for his campaign and his inaugural celebration, according to Ohio Citizen Action. He vowed to donate the money to charity following revelations of the scandal.

    The governor appointed as chairman of the Public Utility Commission of Ohio a former FirstEnergy consultant who was paid $4.3 million by the utility just before taking his seat on the commission. Even though he was supposed to be regulating the utility, the official, Sam Randazzo, played a role in writing the bailout legislation, according to documents released by the Ohio House. 

    In early 2019, DeWine also appointed FirstEnergy lobbyist Dan McCarthy to be his legislative affairs director, meaning McCarthy was in charge of representing DeWine’s interests before the General Assembly.

    In early 2017, while McCarthy was still working for FirstEnergy, Householder and his son, along with FirstEnergy CEO Chuck Jones and others, flew corporate jets to Washington, D.C. for fancy dinners and Donald Trump’s inaugural. 

    Just after that, McCarthy formed a 501(c)(4) group called Partners for Progress. Also known as a “dark money” group, it received $5 million from FirstEnergy within a few weeks of when McCarthy founded it.

    In an affidavit supporting Householder’s arrest, FBI Special Agent Blane Wetzel said Partners for Progress was “designed to conceal the nature, source, ownership, and control of the payments” from FirstEnergy and associated companies. Through the rest of 2018, McCarthy continued as president of Partners for Progress as it pumped FirstEnergy money into a Householder-controlled dark money group and funded the effort to make Householder speaker.

    The following year, McCarthy resigned that role to work for DeWine in the legislature as Householder shepherded the bailout legislation, House Bill 6. When a final version passed in July 2019, DeWine signed it the same day.

    But opponents quickly started a campaign to circulate petitions to put a repeal on the ballot. That prompted FirstEnergy to pump even greater sums into a “decline to sign” campaign aimed at thwarting the petitions.

    It funded xenophobic mailers and broadcast ads claiming without evidence that the repeal effort was a Chinese plot.

    “Who is knocking at your door?” began a mailer read in court Tuesday. “Foreign enemies have infiltrated our energy grid,” it added and said, ominously, that circulators of repeal petitions “are asking for your information.”

    In October 2019, executives with FirstEnergy and its generation-owning subsidiary seemed panicked that the repeal effort might succeed and they were planning to pump $10 million more into the effort to stop it — through Partners for Progress, the dark money group started by McCarthy, who was now a DeWine aide.

    Dowling, the FirstEnergy vice president, seemed to think it wouldn’t be a good look for the name of a DeWine official to show up on paperwork accompanying the huge transaction.

    “Please make sure Dan McCarthy’s name is not on the filing,” Dowling said in a text message to Partners for Progress Treasurer Michael Vanburen that was presented in court Tuesday.

    Vanburen replied that even though McCarthy was no longer president of the dark money group, IRS rules required that his name be on the filing. Dowling didn’t accept that.

    “There must be a creative way to handle this,” he said. “It’s important that (McCarthy’s) name not be listed.”

    Asked if DeWine asked that McCarthy’s name not be used in paperwork regarding the money transfers, Press Secretary Dan Tierney in an email said, “No. Dan McCarthy resigned from Partners for Progress in December 2018. Dowling’s comments, as you have relayed them to me, do not match the timeline of McCarthy’s affiliation with Partners for Progress.”

    DeWine seems to have been in touch with FirstEnergy executives around the time of the repeal effort. Later in October 2019, FirstEnergy CEO Jones texted Vice President Dowling to say, “DeWine’s on board. I talked to him on Wednesday.”

    According to Jones, they talked about whether the repeal HB 6 effort would gather enough valid signatures to get the measure on the ballot.

    “He said their valid rate was less than 30%,” Jones said of DeWine.

    For his part, Tierney said, “The Governor does not have any recollection of such a conversation.”

    In a later text conversation, Jones said he’d received similar assurances from Secretary of State Frank LaRose.

    After arrests were made in the House Bill 6 scandal, DeWine staunchly defended McCarthy and kept him in his administration for more than a year, until Sept. 24, 2021.

    “As far as I know, Dan McCarthy has been well-respected for many, many years, long before he started working for me as our legislative director and I have faith in his integrity,” DeWine said in early 2021 as questions about the role McCarthy’s dark money group played in the bribery and money laundering scandal continued.

    In another trial-related matter, U.S. District Judge Timothy Black on Tuesday said that he had released a second juror, this time for testing positive for COVID. An earlier juror had been released for refusing to wear a mask.

    That brings the number of alternate jurors to two for a trial that is expected to last into early March.

  • Corruption trial texts: OH AG Yost didn’t speak out against bailout because of utility support

    Corruption trial texts: OH AG Yost didn’t speak out against bailout because of utility support

    BY: MARTY SCHLADEN – Ohio Capital Journal

    CINCINNATI — In June of 2019, Ohio Attorney General Dave Yost thought a proposed utility bailout was a bad law, but he didn’t publicly oppose it because of support he’d received from the bailout’s primary beneficiary, FirstEnergy, according to lobbyists’ text messages displayed in court on Friday.

    Prosecutors displayed the messages as part of the racketeering trial of former House Speaker Larry Householder and Matt Borges, a former Ohio Republican Party Chairman who was acting as a lobbyist at the time the utility bailout was debated and passed. They are accused in a scheme to use $61 million to make Householder speaker in 2019 so he could pass and protect a $1.3 billion bailout that mostly went to protect FirstEnergy’s failing nuclear and coal plants.

    At the time of the men’s July 2020 arrest, federal prosecutors said it was likely the biggest bribery and money laundering scheme in Ohio history. Two months later, as he announced a civil suit against FirstEnergy, Yost echoed those sentiments.

    “Corruption doesn’t happen on an industrial scale like this without cash,” he said in a press conference. “And it’s incredibly important at this moment in our state’s history to send a message that the Ohio political system, the Ohio law-making system, the regulatory environment is not for sale. If you shut off the money spigot, the corruption withers.”

    But behind the scenes 15 months earlier — according to text messages between Borges and lobbyist Juan Cespedes — Yost was pulling his punches on the bailout. Borges said Yost was doing so partly because of $24,000 he received from FirstEnergy and Borges in the cycle leading up to the 2018 election and the subsequent legislative session during which the bailout was passed. 

    Cespedes has pleaded guilty in the scandal and is expected to testify soon in the Householder trial.

    After the scandal broke, Yost announced that he would donate his FirstEnergy-related contributions to charity. 

    But according to Borges, who had run earlier campaigns for Yost, the FirstEnergy money spigot helped guide the attorney general’s conduct as the bailout was making its way through the legislature. Text messages indicate that Borges was assigned to try to enlist Yost’s help with the bailout.

    The legislation, House Bill 6, passed the Ohio House on May 29, 2019, and by the time of the June 26, 2019, text conversation between Borges and Cespedes, opposition to the bailout was growing as it was being debated in the Senate.

    One source of opposition was from outside groups that were planning a ballot initiative to repeal HB 6 if it passed. Borges and Cespedes discussed trying to make it exempt from repeal by treating it as a revenue bill and calling it a tax — based on a $1 subsidy built into the measure. 

    Cespedes asked Borges what the attorney general thought.

    “He’s sympathetic, but he wants to go back and look at the law,” Borges replied.

    As they discussed the matter further, Borges said “Don’t repeat this,” but Yost believed the bailout was a bad law.

    Yost “‘would be out front (in opposition) if not for (FirstEnergy) support and your involvement,’” Borges quoted Yost as saying.

    As attorney general, Yost also would have to approve any repeal language before it went on the ballot. The AG also wanted to help with that if he could, Borges said.

    “If there’s any way the law will allow him to reject the language, he will do it,” Borges texted.

    Yost has been subpoenaed in the case, and his spokeswoman on Friday declined to comment on the text messages.

    “He was subpoenaed to potentially be a witness in this case,” the spokeswoman, Bethany McCorkle, said in an email. “At this time it is inappropriate for him to comment.”

  • Angling for appeal? Householder attorneys go after judge in corruption trial

    Angling for appeal? Householder attorneys go after judge in corruption trial

    Former Ohio House Speaker Larry Householder, a Perry County Republican, second from left, with attorneys outside of his racketeering trial. Photo courtesy of WEWS.

    BY: MARTY SCHLADEN – Ohio Capital Journal

    CINCINNATI — There has been speculation since the start of a massive public corruption trial that lawyers for the main defendant — former Ohio House Speaker Larry Householder — were banking on getting any conviction tossed out on appeal.

    There might have been evidence of that on Tuesday when one of the attorneys took the rare step of accusing the judge in the case of bias against his client. The attorney also suggested that the judge harbored a political grudge against Householder going back more than 22 years.

    Testimony resumed Tuesday in the case after repeated delays — first because of weather and then because a juror tested positive for covid. 

    When it did, federal prosecutors continued presenting extensive evidence to support allegations that Ohio utilities paid $61 million into Householder-controlled 501(c)(4) dark money groups and Householder used the money to elect friendly Republicans to make himself speaker in early 2019. Householder is accused of pushing through a $1.3 billion ratepayer bailout that primarily benefited his primary benefactor — Akron-based FirstEnergy — in return.

    Prosecutors have said it was likely the largest bribery and money-laundering scheme in Ohio history.

    Federal prosecutors are known to usually file charges only when they’re almost certain to get a conviction. That’s perhaps even more true when the case is against an elected official.

    And over the course of testimony so far, Assistant U.S. Attorney Emily Glatfelter has introduced reams of evidence in the form of emails and text messages, as well as transcripts of wiretaps and witness testimony — including that of co-defendants who have pleaded guilty.

    Householder’s attorneys have argued that their client raising money and electing candidates who would support his speaker’s bid was just politics as usual. They also argue that Householder only wanted to prop up failing nuclear and coal plants because he wanted to save jobs and protect the tax bases of the communities where they were located.

    Householder also is alleged to have pocketed $500,000 in utility money himself, but his lawyers say those were loans he fully intended to repay.

    However, the attorneys’ conduct on Tuesday might indicate that they’re looking past the jury trial.

    Before the jury entered the courtroom, Householder attorney Mark Marein rose to complain to U.S. District Judge Timothy Black  — about the conduct of Black himself.

    “We all collectively believe that the court holds animosity toward us,” Marein said, referring to Householder’s legal team. He added, “I question whether (Judge Black) should be presiding over this.”

    Black scolded Householder’s lawyers last week for muttering and making faces during Glatfelter’s opening statement. Among his criticisms, Black called the conduct “bush league.”

    The judge also dismissed a juror who refused to wear a mask in court. That prompted speculation that Householder’s lawyers were displeased because such a juror might be more sympathetic to their client, a pro-Trump Republican.

    But Marein gave a wholly different reason for suspecting that the judge was biased against Householder. He said that Black might be holding a grudge from 2000, when Black ran for the Ohio Supreme Court and Householder worked against the candidacy. 

    Both Marein and Black acknowledged that Marein was making the statements simply to get them into the record — presumably so they would be there in the event of an appeal. 

    There is some precedent for overturning public corruption convictions over complaints of judicial bias and prosecutorial misconduct. 

    In 2009, the conviction of former Alaska Senator Ted Stevens was thrown out after the FBI was found to have withheld exculpatory evidence and other misconduct. And in 2016, the U.S. Supreme Court unanimously overturned the conviction of former Virginia Gov. Bob McDonnell, ruling that the trial court judge allowed prosecutors to use an overly broad definition of bribery.

    But accusing a judge of bias in the middle of a trial has risks. Lawyers have said that if one genuinely believes a judge is biased, accusing that person of it in open court could simply make things worse. And in some instances, such accusations have resulted in professional sanctions against the lawyers making them.

    There were a few other developments of interest Tuesday:

    • Prosecutors played a recording of a wiretapped phone conversation between Householder and political operative Neil Clark in December 2017. Clark was also charged in the corruption scandal, but later died by suicide. In a laughing, profanity-strewn passage, the two talked about how Republicans legislators in 2010 drew a portion of Columbus into former U.S. Rep. Pat Tiberi’s district. “Tiberi wanted a safer district,” Householder said, later adding, “He doesn’t like me because he thinks I f*****d with him.” The maps drawn in 2011 were said to have some of the most gerrymandered in the country. Last year, a Republican-controlled panel repeatedly refused orders from the state Supreme Court to draw them more evenly.
    • Householder allies and FirstEnergy officials in August 2017 discussed a third tranche of $250,000 from the company to a Householder-controlled dark-money group at the posh Greenbrier resort in West Virginia, where that state’s Coal Association was holding its annual meeting. The money flowed soon thereafter. That meeting follows a round of swanky dinners in Washington, D.C., involving Householder and FirstEnergy officials the previous January during former President Donald Trump’s inauguration. Two dark-money groups were set up within weeks and one quickly received the first $250,000 from FirstEnergy, even though was hemorrhaging money.

    The trial resumes Wednesday. It’s expected to last into March.

  • Fate of former Ohio House speaker could hinge on whether he took an “official act”

    Fate of former Ohio House speaker could hinge on whether he took an “official act”

    Larry Householder addresses reporters after lawmakers voted to expel him from the General Assembly. He has pleaded not guilty to a racketeering charge and awaits trial. Photo by Jake Zuckerman, OCJ.

    BY: MARTY SCHLADEN – Ohio Capital Journal

    It appears that federal prosecutors have a mountain of evidence they want to present to the jury in their racketeering case against former Ohio House Speaker Larry Householder and former Ohio GOP Chairman Matt Borges. 

    They have emails, text messages, wiretap transcripts, and the testimony of undercover agents and confidential informants. They have so much material that U.S. District Judge Timothy Black said prosecutors and defense attorneys labored mightily before the trial even started to agree on what could be presented to the jury. The process was meant to avoid bogging down what’s already expected to be a six-week ordeal.

    But all that evidence could miss the mark if none of it shows that Householder undertook an “official act” in exchange for all the millions Akron-based FirstEnergy funneled into 501(c)(4) dark money groups to support the effort to elect friendly Republicans who would vote to make Householder speaker. The U.S. Supreme Court overturned a public corruption conviction on that basis just six years ago.

    Householder is accused of masterminding a conspiracy to use $61 million from FirstEnergy and other utilities to make himself speaker and in return ramming through a $1.3 billion ratepayer bailout of failing nuclear and coal plants. His trial began last week, but after two days of testimony it was delayed — first because of weather and then because a juror was diagnosed with COVID.

    But last week, FBI Special Agent Blane Wetzel testified about conduct that made both Householder and FirstEnergy look pretty bad.

    Householder is accused of using about $500,000 from the dark money groups to pay off credit card debt, settle a lawsuit, and repair a Florida home. Meanwhile, FirstEnergy was losing so much money on its nuclear and coal plants that in 2016 it started the process that would send the subsidiary that owned them into bankruptcy.

    But even as the company and Householder were swimming in red ink, he and the company’s CEO flew to Washington, D.C., on private jets in January 2017 for three days of dinners and drinks at some of the city’s swankiest bars and restaurants, Wetzel said. 

    Within two weeks, FirstEnergy money was flowing into Householder-controlled dark-money accounts. In November of 2018, enough Householder-friendly Republicans were elected — many with the help of money from those accounts — to make him speaker the following January. Less than six months later, on May 28, 2019, the House passed its first version of the billion-dollar bailout, House Bill 6. The body passed a final version on July 23, 2019 and Gov. Mike DeWine signed it the same day.

    When former U.S. Attorney David M. DeVillers announced Householder’s arrest almost exactly a year later, he called the scheme with FirstEnergy “likely the largest bribery and money-laundering scheme ever in the state of Ohio.”

    But did Householder undertake an official act in exchange for money corruptly received from FirstEnergy and other Ohio utilities? The answer might not be as straightforward as you think.

    For their part, Householder’s attorneys are arguing that their client was merely raising money like any effective politician would and that he only wanted to subsidize the power plants to save Ohio jobs and the tax bases of school districts.

    In addition, the Supreme Court in 2016 threw out the conviction of former Virginia Gov. Bob McDonnell even though he and his wife took more than $170,000 worth of loans and gifts from a businessman in exchange for hosting him at functions, recommending his product to state agencies, and trying to persuade state universities to study it.

    At issue was whether any of those were “official acts.”

    In that case, Jonnie Williams, CEO of Star Scientific, supported the Virginia Republican’s successful 2009 campaign. Once in office, the gifts really started to flow — including $20,000 worth of designer clothing for McDonnell’s wife, Maureen McDonnell, and a Rolex watch that Maureen gave Bob for Christmas.

    Williams was peddling a compound found in tobacco as a nutritional supplement called Anatabloc. In 2011, the McDonnells hosted an event at the Governor’s Mansion that Williams testified was intended to launch the product. He wanted scientists at the state’s universities to research it, but neither he nor the McDonnells could interest them in the supplement.

    The governor also told the state secretary of administration and the director of the Virginia Department of Human Resources that it would be a good idea for all state employees to take Anatabloc like he was. The officials apparently didn’t take the hint. 

    Investigators caught wind of the McDonnells’ arrangement with Williams and charged them with numerous crimes related to bribery.

    In 2014, they were convicted in federal court and Bob and Maureen were sentenced to two and one year in prison, respectively. They appealed, but the 4th U.S. Circuit Court of Appeals in Richmond upheld the conviction.

    However, when the case made it north to the U.S. Supreme Court, in Washington, D.C., it was overturned. Unanimously.

    Chief Justice John Roberts, the author of the ruling, said that the court took up the case expressly “to clarify the meaning of ‘official act.’” 

    In his trial, “Governor McDonnell had requested the court to further instruct the jury that the ‘fact that an activity is a routine activity, or a ‘settled practice,’ of an office-holder does not alone make it an ‘official act,’ and that ‘merely arranging a meeting, attending an event, hosting a reception, or making a speech are not, standing alone, ‘official acts,’ even if they are settled practices of the official,’ because they ‘are not decisions on matters pending before the government.’” Roberts wrote.

    Instead, McDonnell’s lawyers argued, an official act must be intended to “influence a specific official decision the government actually makes — such as awarding a contract, hiring a government employee, issuing a license, passing a law, or implementing a regulation.”

    In overturning the convictions, the high court agreed, ruling that the McDonnells could still be prosecuted, but the “Government must identify a ‘question, matter, cause, suit, proceeding or controversy’ that ‘may at any time be pending’ or ‘may by law be brought’ before a public official. Second, the Government must prove that the public official made a decision or took an action ‘on’ that question, matter, cause, suit, proceeding, or controversy, or agreed to do so.”

    How much comfort Householder should take from the ruling is uncertain, however. Roberts ended the ruling with what seems to be a warning to politicians thinking of doing shady stuff.

    “There is no doubt that this case is distasteful; it may be worse than that,” he wrote. “But our concern is not with tawdry tales of Ferraris, Rolexes, and ball gowns. It is instead with the broader legal implications of the Government’s boundless interpretation of the federal bribery statute. A more limited interpretation of the term ‘official act’ leaves ample room for prosecuting corruption, while comporting with the text of the statute and the precedent of this Court.”

  • Corruption trial delayed by COVID

    Corruption trial delayed by COVID

    Former Ohio House speaker Larry Householder arrives for day two of his racketeering trial. Photo by Morgan Trau, WEWS.

    BY: MARTY SCHLADEN – Ohio Capital Journal

    CINCINNATI — A federal court trial over allegations of epic public corruption has been interrupted at least until Monday after a juror was diagnosed with COVID on Wednesday.

    “The Court was advised this afternoon that a juror has tested positive for COVID-19,” U.S. District Judge Timothy Black wrote in an order Wednesday evening. “In an effort to ensure everyone’s safety, jury trial will not convene for the duration of the week. The recess is CONTINUED until Monday, 1/30/2023 at 9:30 a.m.”

    In the trial, former Ohio House Speaker Larry Householder and lobbyist Matt Borges are accused of racketeering. 

    Householder is accused of masterminding a scheme in which $61 million — mostly from Akron-based FirstEnergy — was used to help elect Republican lawmakers who would make Householder speaker in 2019. In exchange, prosecutors say, Householder shepherded through a $1.3 billion utility bailout package and then protected it from a ballot initiative intended to repeal the measure.

    Borges is accused of acting corruptly in the successful effort to block the repeal.

    The great majority of the ratepayer money was intended to prop up two failing nuclear plants in Northern Ohio owned by FirstEnergy subsidiary FirstEnergy Services. Some went to “recession proof” coal-fired plants owned by the subsidiary that FirstEnergy management regarded as unsellable. 

    Even though the law was billed as a “clean air” measure, the rest of the package went to subsidize coal plants owned by utilities other than FirstEnergy — including a plant that’s not even in Ohio. Of the three tranches of subsidies, that is the only one that’s still in effect after FirstEnergy entered into a deferred-prosecution agreement.

  • Utility regulator accused of taking a bribe helped write bill targeting watchdog

    Utility regulator accused of taking a bribe helped write bill targeting watchdog

    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.

    BY: JAKE ZUCKERMAN Ohio Capital Journal

    Ohio’s former top utility regulator, who was accused of taking a $4.3 million bribe, quietly spent months helping write a sweeping energy bill that targeted a state watchdog agency that advocates for Ohio’s residential electric customers, records show.

    Emails that the Public Utilities Commission of Ohio gave in response to two FBI subpoenas show its former chairman, Sam Randazzo, conferred with the bill sponsor and helped draft legislative language. The bill would have limited the reach of the Ohio Consumers’ Counsel and given often-hostile state legislators control of its board.

    The OCC appears at PUCO cases and advocates for residential ratepayers’ interests, which often run counter to those of investor-owned utility companies and industrial-scale energy customers. The agency’s efforts have led to millions in refunds to consumers, including $306 million from FirstEnergy Corp. last year to settle a lawsuit against the company for charging an unlawful profit margin on its customers.

    Akron-based FirstEnergy told prosecutors last summer that it paid a business owned by Randazzo $4.3 million before his 2019 appointment in exchange for “official actions.” The company also said it gave a nonprofit secretly controlled by then-GOP House Speaker Larry Householder $60 million to help pass House Bill 6 — energy legislation worth an estimated $1.3 billion to FirstEnergy. Householder has pleaded not guilty and awaits trial. Randazzo has not been charged with a crime.

    Records released earlier this year showed some of Randazzo’s behind-the-scenes lobbying work on HB 6. The records released last week show his influence spanned further.

    In May 2020, Rep. Nino Vitale, R-Urbana, introduced the text of House Bill 246. The bill would have narrowed the scope of cases the OCC can join and subject the agency to “any reasonable conditions that the commission deems necessary to avoid duplication, repetition or delay.” It also gives state lawmakers appointment power over six of nine seats on the OCC’s board.

    The legislation contained a sweep of other changes as well, including creating new ways for utilities to set their prices, modifying setback rules for wind farms, and allowing the Ohio Power Siting Board to create new setback requirements for solar energy sites.

    In the six months before Vitale unveiled the bill, Randazzo and PUCO staff met with Vitale, drafted elements of the legislation, and helped edit Vitale’s introductory testimony to lawmakers, the subpoenaed emails show. The emails don’t show Randazzo addressing the OCC provisions directly. But in a statement through his attorney, Randazzo equivocated when asked if he drafted or advised on the section.

    “If so but having no recollection of either writing or advising any such language, it would only have been as the result of a request from the legislature,” he said. “It is likely that the utilities had input.”

     Sam Randazzo, then a private sector attorney, testifies before the PUCO in March 2018. Source: The Ohio Channel.

    The PUCO released the emails after the Ohio Capital Journal filed a public records request and an eventual lawsuit seeking them.

    Around Thanksgiving of 2019, Randazzo asked to meet with Maura McClelland, a policy adviser and attorney at the PUCO, to meet and discuss the language of the bill’s “ratemaking piece.”

    HB 246 created a new option for utilities to set prices called “alternative rate plans.” According to nonpartisan analysts with the state Legislative Service Commission, the plans can take into account aspects of fair energy pricing that the current model misses like efforts for energy efficiency or cash flow problems from the companies.

    “In general, alternative rate plans could lead to higher prices paid by ratepayers,” the LSC analysts wrote. “But presumably, PUCO would only approve those higher costs after examining aggregate effects in accomplishing its policy objectives.”

    HB 246 would also allow the PUCO to consolidate parties that it determines have “sufficiently common interests” to speed up cases.

    In a memorandum opposing the bill, the Ohio Manufacturers’ Association said the legislation would block its members from meaningful participation at the PUCO. The manufacturers argued the bill in several areas consistently gives utilities the upper hand over their customers, especially via the ratemaking proposal.

    “The bill is opaque and no clear reasoning exists for why its proposed changes are needed,” the memorandum states.

    Roger Sugarman, an attorney representing Randazzo, said via email that neither Randazzo nor the PUCO were the driving force behind the bill. He said he couldn’t determine if the LSC’s analysis is correct without more details.

    “Without knowing what type of alternative rate plan, or the object of your question and the statutory conditions required to secure PUCO approval, it is not possible to evaluate the LSC analysis,” he said. “In general, rate applications filed by utilities, whether alternative or traditional, lead to higher rates; the question is usually about how much higher.”

    He said some pieces of the bill wouldn’t have affected much change versus current law. Plus, the bill all but died after its first hearing. Randazzo’s time “was occupied by more pressing and important things than HB 246.”

    FBI agents arrested Householder and charged him with racketeering in June 2020. He awaits trial. Agents raided Randazzo’s condo months later. In July 2021, FirstEnergy signed a deferred prosecution agreement with the U.S. Department of Justice. It agreed to pay a $230 million penalty and cooperate with the ongoing investigation into HB 6 to possibly avert a charge of wire fraud.

    In a statement of facts paired with the agreement, FirstEnergy said it paid companies controlled by Randazzo $4.3 million in exchange for official action. The company said it hired Randazzo as a consultant and paid him a total of about $22 million since 2010.

    Before starting in state government, Randazzo represented industrial scale energy users before the PUCO. He spent years fighting against Ohio energy policies that forced utilities to include more renewable energy in their mixes or make their customers’ homes more energy efficient. He also represented subsidiaries of both CenterPoint Energy and Dominion Energy as a lobbyist, as well as a group of citizens opposing a wind farm in Huron County.

    Vitale drew significant media attention via outrageous claims including that Bill Gates invented the novel coronavirus or that Gov. Mike DeWine was bringing “FEMA Concentration Camps” to Ohio in relation to the pandemic. (Randazzo said his position on COVID “pulled in a very direction” than Vitale’s.)

    Vitale also, perhaps more subtly, helped guide HB 6 from legislation to law. He co-sponsored the bill and chaired the House Energy and Natural Resources committee that reviewed it. He first won office with $7,700 in financial backing from Householder’s campaign committee. He voted for HB 6 in 2019 and against repealing it after Householder’s arrest. He was one of 21 lawmakers who voted against expelling Householder from office.

    Vitale didn’t respond to a phone call or emails to his personal and official accounts.

     State Rep. Nino Vitale, R-Urbana. Photo from Ohio House website.

    “As you all know, anyone can be indicted for anything. Anything,” he said in a floor speech last year defending Householder.

    “However, that person deserves to go in front of a jury of their peers and prove their case. They might be guilty, they might not … That’s what makes us different from a communist country.”

    Federal prosecutors alleged that Householder secretly controlled a nonprofit organization that received $60 million from FirstEnergy. He used the money to elect a slate of candidates who would vote him into the House Speaker’s office and in turn support HB 6. He’s also accused of spending the money for personal use. Two alleged conspirators, including Householder’s former political adviser, have pleaded guilty.

    When the anti-OCC bill dropped, few knew or suspected of either Randazzo’s financial ties with FirstEnergy or his lobbying work on the bill. However, after Householder’s arrest and the raid on Randazzo’s home, some raised interest in ensuring the bill’s quick death.

    “This bill is a danger to anyone in Ohio who pays a utility bill and it remains on the Ohio House docket as a direct attack on the OCC and all Ohio residential utility customers,” wrote former Democratic State Senator Leigh Herington in a November 2020 op-ed in the Columbus Dispatch.

    He suggested the legislation was simple retaliation for the OCC’s opposition to House Bill 6 and another bill that allows FirstEnergy a more favorable accounting formula to determine if its collections from customers are “significantly excessive.” (The OCJ previously reported Randazzo lobbied on that legislation as well.)

    Utility companies spend big and wield considerable sway in Ohio politics. As Herington noted, the OCC has seen its size dwindle over the years. Its budget dropped from $9.3 million in 2011 to $5.5 million in 2020.

    The OCC also suggested the bill was retaliatory in nature due to its opposition to HB 6. Vitale’s bill, the agency said in a resolution, would “weaken the independence” of the board as well as its “utility watchdog role.”

    A PUCO spokesman said the emails only show the PUCO working on language related to the agency and the state Power Siting Board. He said he didn’t know why Randazzo and Vitale communicated through personal email accounts.

    “The PUCO does not take a position on proposed legislation,” he said. “We will always be responsive to inquiries from members of the General Assembly as they go through the legislative process.”