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Tag: House Bill 6

Citing a hazy memory, former rep seems to distance himself from scandal

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

Vitale was said to be a big supporter of Householder now charged with racketeering

BY: MARTY SCHLADEN – Ohio Capital Journal

CINCINNATI — Former state Rep. Nino Vitale on Tuesday testified that he didn’t have much of a memory for — nor was he much interested in — raising money or campaigning for office. At several points, the Republican from Urbana even said he didn’t remember what year he was first elected to the legislature (it was 2014.)

But on cross examination, federal prosecutors showed him records and written communications indicating that Vitale was regarded as an enthusiastic member of “Team Householder” who, as part of the team, received thousands in campaign funds and other assistance that originated with Akron-based FirstEnergy.

As former Speaker Larry Householder’s appointee to chair the Energy and Natural Resources Committee, Vitale in 2019 helped to pass a $1.3 billion bailout that primarily benefited FirstEnergy. When they announced arrests in the summer of 2020, federal prosecutors said the bailout was at the center of what was likely the largest bribery and money-laundering scandal in Ohio history.

Vitale was called by Householder’s lawyers in the trial, which started on Jan. 23. Householder and former Ohio Republican Party Chairman Matt Borges are charged with racketeering in an alleged scheme to use $61 million in utility money to elect friendly lawmakers who would make Householder speaker and then bail out FirstEnergy’s failing nuclear and coal plants.

Vitale has long been known for controversial political gestures — including refusing to wear a mask at the height of the coronavirus pandemic because human faces are “the likeness of God.“

But on Tuesday, Vitale portrayed himself as a reluctant politician. In a possible nod to how uncompetitive his district was, the former lawmaker said he didn’t have to do much to get reelected.

“The whole marketing side of things wasn’t big on my radar because my district elected me overwhelmingly and frequently,” Vitale said.

Householder’s attorneys seemed to call Vitale and other Householder supporters in the House to testify so they could say they believed the bailout law was good public policy. But U.S. District Judge Timothy Black limited such testimony, saying the proceeding wasn’t a referendum on the merits of House Bill 6.

Vitale also said he never felt pressured to support Householder for speaker or to support the bailout.

But Assistant U.S. Attorney Megan Gaffney Painter then posed a series of questions that seemed to be intended to show that Householder made Vitale chairman of the Energy and Natural Resources Committee not because Vitale had any particular qualifications, but because he was an enthusiastic member of Team Householder who would do the speaker’s bidding.

Vitale tried to refute that characterization.

When Painter tried to get him to agree that he had little in his background to school him in large-scale electricity generation or the management of the state’s natural resources, Vitale wouldn’t.

“I know quite a lot about those topics, actually,” he testified.

Vitale said he works for his wife’s family’s company, which makes parts for truck brakes. It has an electricity substation and it sits on 30 acres, and those factors gave him expertise on the power grid and the environment, Vitale said.

When Painter proposed that Vitale had no academic credentials that would make him expert in those areas, Vitale disagreed again, saying his business degree provided him with such knowledge.

“In a business degree, part of what you study is energy inputs to a business,” Vitale said.

The former lawmaker also claimed that he wasn’t very familiar with FirstEnergy and had to be convinced to support the bailout bill. Then Painter displayed a text message from FirstEnergy Vice President Michael Dowling to CEO Chuck Jones on Feb. 17, 2019 — before the bill was introduced. Earlier testimony showed that the executives believed the bailout was critical to their company, and Jones had asked Dowling who was going to chair the House Energy and Natural Resources Committee.

“Nino Vitale from Springfield will chair,” Dowling responded. “Good friend and bigtime (Householder) supporter.”

Confronted with the message, Vitale said he’d only met Dowling a few times.

Vitale also disputed that it was Householder who first broached the idea of Vitale being chairman.

“I asked him,” Vitale said.

Then Painter played a voicemail message that Vitale left for Householder in January 2019, just after Householder had been made speaker. In it, Vitale said he had talked the matter over with his family.

“I’m in if that’s what you want me to do,” Vitale said.

As Painter tried to move on to another question, Vitale insisted that chairing the Energy and Natural Resources Committee was originally his idea.

And to refute Vitale’s claims that he was half-hearted about fundraising and political marketing, Painter displayed an October 4, 2017 text message Vitale sent to Jeffrey Longstreth, Householder’s right-hand man in making him speaker and then passing the bailout. It certainly seemed to link FirstEnergy’s policy agenda to Vitale’s desire for corporate contributions.

FirstEnergy lobbyist “Ty Pine wants to meet with me on a legislative matter and I want to meet with him on a contribution matter,” Vitale said in his message.

After more than a month, testimony in the trial is entering the homestretch. Householder’s final witnesses — including Householder himself — are expected to testify Wednesday and Thursday. Then it will be Borges’ turn to call any witnesses he may have.

After that, the prosecution and the defense teams will make closing statements, Judge Black will instruct the jury and then it will deliberate.

Mar 1, 2023
Ohio utility regulator front and center in massive bailout scandal

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: MARTY SCHLADEN – Ohio Capital Journal

CINCINNATI — Ohio’s utility regulator is at the center of a massive bribery and money laundering scandal that has been the focus of a trial here since late last month. In 2019, its chairman and a very recent senior official played a central role in writing corrupt bailout legislation that would give more than $1 billion in subsidies to companies the Public Utilities Commission of Ohio was supposed to be regulating.

But did their role in the process violate any PUCO rules? The answer is unclear.

When it comes to being a consumer watchdog, the PUCO doesn’t have the best track record.

Since 2008, it has granted more than $1 billion in electric rate increases that were later declared illegal by the Ohio Supreme Court. But, thanks to the way the increases — or “riders” — were written, there’s no way to force utilities to return those ill-gotten gains to ratepayers.

In at least one of those instances, a regulator might have known the rate hike was illegal when he voted to grant it.

In June of 2019 — as Akron-based FirstEnergy was funneling millions through dark-money groups to pass the bailout that is the subject of the trial here — the Supreme Court struck down an increase that had already paid the company a non-refundable $460 million. Asim Haque, who months earlier was chairman of the PUCO, sent a FirstEnergy executive a text suggesting that Haque knew the increase was illegal when he voted for it. Haque then said he was just kidding.

Then, just last month, the PUCO approved an increase of more than 50% in fixed rates for Columbia Gas without making the company go through a formal process to show that it needs the money. That means that after five years throughout much of Ohio, it likely will cost nearly $60 a month just to have gas service — regardless of whether you live in a 500 square-foot apartment or if you live in a mansion on a five-acre lot. Any payments for gas itself will be in addition to that amount.

It doesn’t appear that Columbia owner NiSource needed the money. Last year, before the PUCO allowed the rate hike, NiSource’s profits came in $217 million — or 41% — higher than expected. Then, a month after the increase was granted, NiSource announced it was increasing its profit forecast for 2023.

In a press release, the company boasted of “strong regulatory execution” — including by winning the fixed-rate increase from the PUCO.

And then there’s House Bill 6, the 2019 law that is the subject of the trial in federal court here that has been ongoing since Jan. 23.

Former Ohio House Speaker Larry Householder and former Ohio Republican Party Chairman Matt Borges are on trial for their participation in what prosecutors say is likely the biggest bribery and money laundering scandal in Ohio history. They allege that $61 million that mostly came from FirstEnergy was used to make Householder speaker in 2019, and then to pass and protect the $1.3 billion bailout. Most of that money was intended to prop up FirstEnergy’s failing nuclear and coal plants.

No current or former PUCO employees have been charged in the scandal. But, to put it charitably, the conduct of at least two of them was puzzling — given that the agency’s mission is to protect ratepayers who don’t have a choice about buying the utilities’ products.

In January 2019, Householder won the speakership and was beginning his push for a FirstEnergy bailout. At the same time, FirstEnergy lobbyist Ty Pine sent PUCO senior advisor Pat Tully’s resume to Jeff Longstreth, Householder’s right-hand man, according to testimony in the trial. Within weeks, Tully had moved from his PUCO job to one as senior advisor for energy policy in the House Republican Caucus.

Sam Randazzo, a former FirstEnergy consultant, was confirmed as Gov. Mike DeWine’s nominee to chair the utility commission in April 2019. When he nominated Randazzo, DeWine brushed off warnings that his nominee had “opaque and undisclosed” ties to FirstEnergy.

In the Householder trial, Tully testified that while Randazzo was still a nominee, he met with Tully, Householder and Rep. Nino Vitale R-Urbana. From there, Tully worked with Randazzo to help draft the utility bailout, HB 6, and to reconcile it with draft legislation submitted by FirstEnergy. The bill secured final passage in July 2019 — months after Randazzo had taken the helm at the utility commission.

In other words, Ohio’s top utility regulator helped write a law that gave a billion-dollar bailout to a company he was supposed to be regulating on the ratepayers’ behalf. And he was heading an agency that over the previous decade had awarded electric utilities more than $1 billion in illegal, non-refundable rate hikes.

Randazzo would later resign after the FBI in 2020 raided his Columbus condo. And in a deferred prosecution agreement, FirstEnergy admitted that it paid him $4.3 million just before he became PUCO chairman.

But does the PUCO have any rules against the role Randazzo played in drafting HB 6?

Asked if the agency had a policy prohibiting a commissioner from helping write legislation affecting a utility he or she is supposed to be regulating, spokesman Matt Schilling initially seemed to say that it did not.

“The PUCO is a state agency and will always be responsive to requests for information or technical assistance to the Ohio General Assembly on matters related to utilities and commercial transportation,” Schilling said in an email last week.

But in answer to a follow-up, Schilling seemed to say something different. He was asked if that means PUCO believes there was nothing inherently improper about its chairman helping to draft legislation creating subsidies for utilities the agency regulates.

“No, I never stated anything like that,” Schilling replied. “The PUCO does not comment on ongoing proceedings or court cases.”

So what about commission employees doing as Tully did when he had a FirstEnergy lobbyist passing out his resume? After all, you might pull punches as a regulator if you’re hoping to land a job with one of the companies you’re supposed to be regulating.

Schilling’s response might not be very reassuring. He cited a law that “prohibits Commission employees from seeking employment with utilities regulated by the Commission.”

But Schilling also sent along agency guidance that contains a pretty big loophole.

“Although this law prohibits Commission employees from soliciting Commission-regulated utilities for employment, it does not prevent employees from considering employment opportunities with these utilities in instances in which the utility approaches the employee,” it said.

It seems that, after the fact, it might be difficult for the PUCO to figure out who approached whom when an employee jumps ship for a well-paid utility job. And its protections against conflicts of interest during the hiring process don’t seem ironclad.

“However, if you are contacted by a utility concerning a possible job offer, you must immediately advise your supervisor of the contact so that your supervisor can limit your duties to matters which do not involve the utility in question while any discussions are taking place,” the guidance said.

In Tully’s case, he didn’t end up directly on FirstEnergy’s payroll. But he did help write a law that the company paid more than $60 million for.

Feb 27, 2023
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.”

Feb 25, 2023
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.

Feb 23, 2023
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.”

Feb 16, 2023
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.”

Feb 1, 2023
Air pollution impacting maternal, infant health of Ohioans

BY: SUSAN TEBBEN Ohio Capital Journal

Traffic on a highway. Photo by Chip Somodevilla/Getty Images.

Improving air quality in the state would lead to better health for Ohioans, and could be done through policy changes, according to a policy think tank.

In a recent examination of the connections between air pollution and health, the Health Policy Institute focused on maternal and infant health, lung and heart conditions and cognitive conditions, all of which could see better outcomes with increased monitoring and control of air pollutants.

“Exposure to air pollution can also increase the severity, lethality and prevalence of COVID-19 due to its negative impact on cardiopulmonary diseases and immune responses,” the HPIO said in a policy brief on the issue.

Sources of air pollution range from power plants to vehicle exhaust, and even natural sources like dust.

Improvements have been made through the federal Clean Air Act in 1970, which sought to regulate emissions through EPA oversight, and through implementation of plans in each individual state.

“The EPA can also take civil or criminal action against an entity that has violated environmental law, such as not installing a required air pollution control device,” the HPIO stated.

But Ohio “ranks poorly on outdoor air quality” according to the institute’s research, and performs worse than most other states.

Graph provided by the Health Policy Institute.

More than 32% of Ohioans commute more than 30 minutes to work alone, verses 4.1% who walk, cycle or use public transportation, according to a 2021 Health Value Dashboard cited in the policy brief.

But more than the choice of commute, some Ohioans are unwittingly in danger of air pollution effects based solely on where they live and the zoning policies in those communities. Even “redlining,” the use of discriminatory practice of denying mortgages and other financial services based on race or ethnicity, can cause minorities to end up in more polluted areas.

“Historically, zoning policies and redlining placed industrial plants and highways closer to predominantly Black neighborhoods and prohibited Black people from living in areas that did not have these sources of pollution near them,” the HPIO stated.

According to research from the National Equity Atlas, Black Ohioans face a risk of air pollution 1.5 times higher than white residents of the state.

Part of the problem in Ohio was the passage of the scandal-ridden House Bill 6, a bailout of energy companies that led to, among other things, a bribery investigation and, beginning this month, the criminal trial of former House Speaker Larry Householder.

Parts of the legislation were repealed in March 2021 related to the bailout, but measures that severely cut energy-efficiency programs and standards for renewable energy stayed in place.

“By reducing the renewable energy benchmark, Ohioans are more likely to continue to use fossil fuel-based energy and be more at risk of air pollution exposure,” the HPIO policy brief stated.

Ohio’s legislature also passed Senate Bill 52 in 2021, which hampers the development of energy sources such as wind farms and solar facilities and allows local governments to turn down wind and solar proposals.

Local governments have done their part to reduce air pollution, however, with the Central Ohio Transportation Authority planning a fleet transition to non-diesel by 2025 after receiving federal funding for the effort.

After a settlement between Volkswagen and the U.S. Environmental Protection Agency over an emissions scandal, Ohio is set to receive $75 million over 10 years to be used to fund emission-reduction projects.

“The latest round of grants, awarded in November 2021, were estimated to remove 33 tons of nitrogen oxides and 16 tons of other air pollutants annually,” the HPIO stated.

Moving forward, the policy institute said more legislation could set targets for “renewable energy procurement” and use air quality monitors to capture data on exposure. Increased funding for public transportation and an “environmental legislature review process” were also recommended by the HPIO.

Follow Susan Tebben on Twitter.

Jan 25, 2023
Texts, calendars, emails link DeWine to FirstEnergy’s bribery scandal

BY: JAKE ZUCKERMAN – Ohio Capital Journal

Gov. Mike DeWine and his administration played a hands-on role passing an allegedly pay-for-play nuclear bailout and appointing an industry-friendly regulator who has since been accused of taking a $4.3 million bribe, documents and messages show.

Calendar records show DeWine, a Republican, met repeatedly to discuss energy policy with FirstEnergy Corp. officials and at least once with GOP House Speaker Larry Householder, who has been criminally accused of taking a separate, multimillion-dollar bribe from the company to pass the bailout.

Despite a cautionary letter from environmental groups and a 198-page dossier from his former campaign staffer warning against the move, DeWine appointed Sam Randazzo in 2019 to the head of the Public Utilities Commission of Ohio. FirstEnergy last summer admitted it paid Randazzo a $4.3 million bribe. Randazzo has not been charged with a crime and denies wrongdoing.

Newly released text messages show FirstEnergy executives describing an open line with the administration on the selection and inside support from Ohio’s chief executive.

“When the Gov Elect asked me about attributes, I listed integrity, work ethic, creativity, thick skin, circumspection in public statements,” FirstEnergy’s then CEO texted Randazzo about the open PUCO seat in December 2018, just before DeWine took office.

“You fit all of those.”

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

In one text, FirstEnergy executive Mike Dowling credits DeWine and Lt. Gov. Jon Husted with performing “battlefield triage” to save Randazzo’s appointment before a key vote. Both DeWine and Husted have previously denied that a redacted version of the text message that appeared in criminal documents referred to them.

Federal prosecutors accused House Speaker Larry Householder of secretly controlling a nonprofit that took $60 million from FirstEnergy. He allegedly used the money to enrich himself personally and politically and to ensure the passage of House Bill 6, which provided a massive bailout to two nuclear plants owned at the time by FirstEnergy. Householder was charged with racketeering and awaits trial. Two alleged conspirators pleaded guilty.

FirstEnergy admitted last summer to the $60 million payment as well as a separate $4.3 million bribe to Randazzo just before he started as Ohio’s top utility regulator. The payment topped off $22 million in consulting fees to Randazzo since 2010 from the company.

Court documents from prosecutors reveal no focus on DeWine, who has not been charged with any crime. However, a review of records turned over in subpoenas, public records requests for his official calendars by the Energy and Policy Institute, text messages attached to regulatory filings, and others show DeWine and his staff repeatedly influencing and shepherding HB 6 into law.

On the campaign trail in July 2018, DeWine visited one of the nuclear plants that would receive a bailout, his official calendar shows. A month later, he met with FirstEnergy executives at their Akron headquarters. In October of that year, DeWine met with FirstEnergy at a fundraiser for Republican governors.

FirstEnergy contributed about $1 million in total to DeWine’s campaign, political organizations supporting it, and to another nonprofit supporting his daughter’s campaign for county prosecutor, according to the Dayton Daily News.

After winning a close race, DeWine, Husted, Jones and Dowling celebrated over dinner at The Athletic Club in Columbus. The next day, Jones sent Randazzo the text message (above) indicating they discussed the open PUCO seat.

In January of 2019, the FirstEnergy officials texted one another trying to fill not just one but two open PUCO seats, all the while mentioning phone calls with “DeWine guys” about it.

“That’s their plan but nothing certain until Sam’s [Randazzo’s] meeting [with DeWine],” Jones texted Dowling. “Four people in DeWine world, you, Sam, and I know about this.” The PUCO seats would eventually be filled by Randazzo with another commissioner renewed.

Dowling relayed to the other two men a message from Josh Rubin — a DeWine 2018 campaign adviser and a FirstEnergy lobbyist. He said once Randazzo takes office, DeWine will “lean on him on everything.”

Several texts focus on HB 6. The bill (and eventual law) would bail out FirstEnergy’s nuclear plants, subsidize two coal plants owned by other Ohio utility companies, and create a “decoupling” mechanism that effectively put ratepayers on the hook to guarantee certain revenue streams of FirstEnergy’s. Prosecutors estimate the bill as worth about $1.3 billion to the company.

Two days before the bill was introduced, DeWine’s calendar shows a slot for an “Energy Discussion” at the governor’s residence. Later that month, after the bill was repeatedly criticized during an opponent testimony hearing at the statehouse, DeWine, Husted, Randazzo and various staffers all met up at 5 p.m. for what the governor’s calendar calls a “Nuclear Bailout Bill Discussion.”

Over the next month, DeWine’s calendars show two entries for energy policy meetings, plus a call with Householder about HB 6, and another call on the bill.

On June 9, 2019, DeWine showed signs of wavering.

“Sam, what do we know about whether nuclear plants need this boost?” DeWine, using his personal email, wrote to Randazzo. “One editorial suggested testimony was not conclusive.”

Dowling paid a visit to the governor’s residence the next day. Randazzo responded to DeWine’s email on June 11, casting doubt on the studies referenced in the editorials.

On July 1, Dowling texted Jones.

“Just had a long conversation with JHusted just now,” he said, going on to explain that Husted sought to extend the length of the bailout. “All is well.”

Court records contain another text from Jones stating that “State Official 2,” later confirmed to be Husted, joined with others in “fighting to the end” for a beefier bailout.

After a long slog, lawmakers passed HB 6 on July 23, 2019. DeWine signed it into law mere hours later.

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.

Loyalty to staff and HB 6

As the FBI made its first arrests, DeWine began a pattern of defending HB 6 on the merits and showing unflinching loyalty to his staffers, some of whom have ties to FirstEnergy.

Householder, his political strategist, a prominent GOP lobbyist, and two FirstEnergy lobbyists were arrested and charged with racketeering in connection with HB 6 on July 21, 2020. The next day, DeWine stood by the law he signed.

“Because people did bad things does not mean that the policy is not a good policy,” he said.

He reversed himself the next day and called for a repeal of the bill.

In October, FirstEnergy fired Jones, Dowling, and fellow executive Dennis Chack as it waged an internal investigation. The company fired another two executives days later “due to inaction and conduct that the Board determined was influenced by the improper tone at the top.”

At this point, the public remained unaware of the multimillion-dollar financial arrangement between the embattled FirstEnergy and Randazzo. However, on Nov. 16, 2020, FBI agents were seen raiding Randazzo’s condo and removing boxes of material from inside. The next day, FirstEnergy submitted a little-noticed securities filing outlining the $4.3 million payment.

Despite the images of FBI agents entering Randazzo’s condo, DeWine publicly defended his appointee.

“We have no indication he’s under investigation or he’s the target of an investigation. We’ll wait until we find additional facts,” he said in a Nov. 17, 2020 news conference. “Look, the FBI many times will indicate if someone is a target. They have not indicated he’s a target. I have no reason to think he’s a target. I don’t know. So, we’re waiting for additional information, quite candidly. I hired him. I think he’s a good person. If there is evidence to the contrary, then we’ll act accordingly, but not going to act without facts.”

Randazzo would resign three days after that statement.

Mid-summer 2021, FirstEnergy signed a deferred prosecution agreement with the U.S. Department of Justice. The company agreed to pay a $230 million penalty and cooperate with investigators to avert a charge of honest services wire fraud.

The agreement contained a lengthy set of facts from the company, stating it paid the $64 million in bribes in exchange for official action from Householder and Randazzo.

Days after the agreement was announced, DeWine held a press conference on anti-hazing legislation. Reporters asked questions afterward about the agreement, including a line that refers to “State Official 1” and “State Official 2” lobbying to ensure Randazzo’s appointment. DeWine said he’s “not aware” of anyone in his administration, including himself, appearing in the document. Husted, in a statement, said he too “does not believe” he’s referenced in the document.

Texts obtained by the Ohio Consumers’ Counsel from FirstEnergy and attached to a regulatory filing contain the unredacted version of the text, identifying DeWine and Husted by name.

In 2017, a lobbyist named Dan McCarthy created a nonprofit entity called Partners for Progress to engage in “advocacy in support of nuclear power,” tax records show. FirstEnergy would later admit to paying $25 million to Partners for Progress, some $15 million of which went to Householder’s nonprofit.

DeWine hired McCarthy as his legislative director in 2019, around the time McCarthy stepped down from the organization’s board. In February 2021, after media reports identified McCarthy’s role with Partners for Progress, DeWine defended McCarthy.

“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.

McCarthy resigned in September 2021.

DeWine response

In a phone interview, DeWine spokesman Dan Tierney said the OCC-obtained text messages and meetings listed by the Ohio Capital Journal contain no new information.

The texts, he said, in fact show the lack of a role from DeWine and Husted within the scandal. He said prosecutors have not subpoenaed him or any of his employees.

“This all along has been a Larry Householder scandal and a FirstEnergy scandal,” he said.

When asked whether DeWine, a former prosecutor and attorney general, detected any sense of impropriety during all his contacts with Householder and FirstEnergy leading up to the passage of House Bill 6, he declined comment.

Husted offered a similar comment through a spokeswoman, stating that “there is nothing new here” in the texts, emails and meetings.

“This kind of advocacy is well within his responsibilities as a public official, and, as we know, the bill was ultimately passed with bipartisan support,” he said.

Aug 15, 2022
Judge scolds former GOP chairman, forbids him from intimidating whistleblower

Photo by Getty Images.

BY: JAKE ZUCKERMAN Ohio Capital Journal

A federal judge lambasted a suspect in a criminal public corruption case for posting a FBI informant’s social security number and address on the internet.

U.S. District Judge Timothy Black said he finds it “entirely incredible” that lobbyist and former GOP Chairman Matt Borges accidentally posted the information of the whistleblower online, as Borges claimed.

“Indeed, page 3 of the file alone includes [the informant’s] name, address, phone number, spouse’s name, spouse’s phone number, and [the informant’s] social security number, all of which are listed in large, bold font, at the very top of the page,” Black said, using the visual emphasis in his court order.

“It is virtually impossible for anyone to scroll through the file and not see that it contains unredacted personal identifiers.”

Federal prosecutors have accused Borges of participating in a scheme alongside former GOP House Speaker Larry Householder and three others to take $60 million from FirstEnergy Corp. and enrich themselves while ensuring passage of favorable legislation for the company.

FirstEnergy has since admitted to giving $60 million to a nonprofit secretly controlled by Householder in exchange for his help passing House Bill 6 in 2019. Borges allegedly used $15,000 of the money to bribe a political operative for inside information about a campaign to overturn the recently-passed legislation via a ballot referendum.

Borges worked as a lobbyist for a FirstEnergy subsidiary at the time, with deep Republican connections from his time running the state party.

Prosecutors asked Black earlier this week to modify the conditions of Borges’ bond. They said an FBI agent noticed in June that Borges posted the informant’s employment file online, including his tax documents and photocopies of his social security card and driver’s license. They requested the judge block Borges from posting the information in a continued effort to intimidate a witness.

In charging documents, the informant was not personally identified. However, consultant Tyler Fehrman has since acknowledged he’s the unnamed whistleblower in media reports.

Prosecutors called Borges’ actions an “attempt to intimidate and retaliate against” the informant. They requested Black forbid him from posting Fehrman’s sensitive information online.

Attorneys for Borges said he obtained the employment file via public records request and sharing the personal identifying information online was “inadvertent.”

Black sided with prosecutors. Besides the financial risks of posting a social security number online, he said, “financial harm is by no means the most severe consequence that could result from publicly exposing and disparaging a confidential government source.”

According to the prosecution, Borges told Fehrman that if he provided inside information from the campaign, Borges would give him a job or money to pay off his debts. Fehrman —who managed field workers soliciting signatures to put the repeal on the ballot — covertly recorded the conversation.

“Borges further indicated that others are getting ‘fat’ off the HB 6 issue, so they might as well benefit, too,” prosecutors alleged in court filings.

Screenshot of a text prosecutors say they obtained from Matt Borges.

Fehrman declined the bribe, according to prosecutors. Borges, in a text message, responses with an order to “No matter what — don’t ever tell anyone about our conversation from earlier.” At the behest of FBI officers, Fehrman went on to accept the bribes and provide information to Borges, who allegedly shared information with others involved in protecting the newly passed HB 6.

The file containing Fehrman’s information appeared on a website Borges created to raise funds for his legal defense. Borges, on the site, accuses the prosecutors of running a “politically motivated” prosecution and claims he told the prosecutors to “go f*ck themselves” when offered a plea deal.

Aug 8, 2022
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.”

Aug 6, 2022