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Tag: Marty Schladen

  • 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.

  • 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.”

  • 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.

  • New Ohio voter ID law also excludes state veterans’ IDs

    New Ohio voter ID law also excludes state veterans’ IDs

    A Veterans Day parade. (Photo by Spencer Platt/Getty Images.)

    BY: MARTY SCHLADEN – Ohio Capital Journal

    Franklin County Recorder Daniel O’Connor is blasting Ohio’s Republican leaders for excluding county-issued veterans’ identification from the list of IDs one can use to vote under the state’s controversial new law.

    Gov. Mike DeWine signed House Bill 458 earlier this month after it was rushed through a lame-duck session by the heavily gerrymandered legislature in December. In previous elections, voters could establish their identities not only with valid drivers’ licenses, but also with documents such as utility bills and the county-issued vets IDs. 

    It might be hard to see significant problems with the old system. Secretary of State Frank LaRose found possible fraud in just one of every 222,000 votes cast in the 2020 election. But the state’s GOP leaders enacted HB 458 anyway, requiring Ohioans to have a driver’s license, state ID, passport or military ID to cast a vote.

    So far, it’s been tricky for researchers to show that strict voter ID laws suppress turnout because of problems with data and methodology. But voting rights advocates say that it only stands to reason that such laws would disproportionately affect the poor and communities of color.

    Those groups are less likely to have driver’s licenses or the documents needed to get one in the first place. And a report last year by the Legal Aid Society of Cleveland showed that a million Ohioans have licenses that are suspended because of debts relating traffic fees and fines and unpaid child support. That’s a number equal to one-eighth of the state’s registered voters.

    Those suspensions fall overwhelmingly on poor urban communities that — perhaps not coincidentally — are much more likely to vote for Democrats.

    In terms of military IDs, HB 458 allows people with federally issued military and veterans’ ID cards to use those to vote. It also allows Ohio National Guard IDs. 

    But it doesn’t appear to allow veterans’ cards that are issued by county recorders’ or veterans’ services offices under a 2016 law. To be issued one, a veteran has to produce a discharge form — DD-214 — and other forms of identification.

    O’Connor spokeswoman Hanna Detwiler said that about 5,000 Franklin County residents have such IDs, but it isn’t clear how many will be disenfranchised under HB 458.

    “I’m not sure how many veterans have our card as their only form of ID,” she said in an email. “But obviously things happen — like losing a wallet — where this might be the only form they have after showing the two additional forms of ID when initially getting the card.”

    Asked about the omission, DeWine Press Secretary Dan Tierney in an email said, “the bill did reduce the number of forms of identification that could be used and instead specified state-issued (and certain federal-issued) photo IDs. The bill provided for the (Bureau of Motor Vehicles) issued state identification cards as the photo IDs available at no cost to Ohio voters.” 

    Tierney added, “My understanding from legislative testimony is that, by far, the most common ID used for voting in Ohio are state-issued drivers’ licenses.”

    O’Connor, the Democratic county recorder, in a statement slammed GOP officials for not publicly announcing that this form of veterans’ ID will no longer be accepted at polling places.

    “It’s bad enough that in the middle of the night, the Ohio legislature decided to target our right to vote,” he said. “But specifically invalidating the free state-issued ID our office provides to retired service members is unacceptable, and I will not stay silent about it.”

  • Teachers’ pension system touts clean audit. Retirees unimpressed

    Teachers’ pension system touts clean audit. Retirees unimpressed

    BY: MARTY SCHLADEN – Ohio Capital Journal

    The State Teachers Retirement System of Ohio has been flagging the results of a special audit conducted in response to complaints from some teachers and retirees. But for its part, the group representing the state’s retired teachers isn’t backing down from its critiques of the system.

    The examination, conducted by state Auditor Keith Faber, was prompted by retirees who have received few cost-of-living adjustments in recent years while retirement system employees have gotten big salaries and bonuses. And, in the most recent fiscal year, they did so as their investments lost billions.

    In a Dec. 29 statement, the retirement system noted that the probe found no evidence of illegal conduct.

    “The special audit found no evidence of fraud, illegal acts or data manipulation related to the funds held in trust by STRS Ohio for its members,” the statement said. 

    It added, “The special audit’s findings include, ‘STRS’ organizational structure, control environment and operations are suitably designed and well monitored, both internally and by independent experts. These experts help assure that STRS follows applicable asset and liability measurement, reporting, investing and cash management laws, professional standards, and best practices. Our conclusions are consistent with the findings of these independent firms.’” 

    The same statement quoted STRS Executive Director Bill Neville as saying, “It is noteworthy that the special audit’s findings refute much of the inaccurate information circulated about STRS Ohio over the past two years, and the report provides extensive detail and analysis in support of its conclusions.”

    However, at least some of the complaints retirees have been raising don’t involve claims of criminality.

    At least 200 of the retirement system’s 500 employees make more than $100,000 a year. And, with bonuses, in the 2021-2022 fiscal year 33 of the system’s employees made more than $300,000. Nine made more than $500,000. 

    Meanwhile, the average public teacher salary in 2022 is $67,000 a year, according to the Ohio Department of Education.

    The retirement system manages about $90 million in teachers’ assets. The system makes traditional investments, while also putting money into high-fee “alternative” investments such as private equity and hedge funds. 

    In making such investments, the system is effectively trying to beat the stock market. STRS spokesman Nick Treneff has said alternative investments also allow for a more diversified portfolio, which can help to manage risk.

    But over at least the medium term, the stock market has proven to be the better investment.

    Over the past decade, it has provided a 14.8% return on investments, while the system’s alternative investments have provided 11.84% once fees are subtracted, Treneff said in July.

    Retirement system salaries and bonuses have grown large as retiree benefits have stagnated. 

    The latter group got a 3% cost-of-living bump in their benefits last year — their first since 2017. Treneff has explained that the freeze was due to new rules set down by the legislature in 2012. State and local governments were still reeling from the Great Recession and there were nationwide concerns about unfunded pension liabilities.

    In addition, the General Assembly hasn’t increased its contribution rate to the pension fund in 38 years.

    But what really has retirees incensed is the way the STRS board handled staff bonuses last year. In August, it awarded $10 million in bonuses even though it estimated that it would lose $3 billion in an environment that was brutal for investors. 

    Then in October, the actual numbers for alternative investments came in. System losses were 77% higher than original estimates — $5.3 billion. 

    For perspective, the losses follow $22.3 billion in gains a year earlier, according to the system’s financial statements. 

    However, the retired teachers union argued, if staffers are going to do well in times of plenty, they shouldn’t do so well when times are bad. Also, the group argued, the system’s board should have delayed awarding bonuses until after the actual loss figures came in instead of using a big underestimate.

    In light of those occurrences, the Ohio Retired Teachers Association wasn’t mollified by a clean audit

    “As expected, the State Auditor confirmed that a broken system yields broken results,” ORTA’s Executive Director Robin Rayfield said in a statement. “Although finding no direct evidence of criminal activity, the Auditor confirmed that the board allowed the staff to use an accounting gimmick to pay themselves $10 million in bonuses despite losing $5.3 billion last year. For years, the board’s bad policies have yielded bad results for teachers, who are working longer and paying more for less, while enriching STRS staff. The only way to change bad policies is to change the STRS board, which teachers will do in this Spring’s election.”

  • LaRose wants to make it harder for voters to amend constitution but evidence of a problem is lacking

    LaRose wants to make it harder for voters to amend constitution but evidence of a problem is lacking

     Secretary of State Frank LaRose (speaking) alongside Rep. Brian Stewart, R-Ashville, introducing a constitutional amendment requiring a 60% supermajority for all future citizen-led ballot amendments. (Photo by Nick Evans, OCJ.)

    BY: MARTY SCHLADEN – Ohio Capital Journal

    Ohio Secretary of State Frank LaRose denied that he wanted to block abortion protections or anti-gerrymandering measures when he announced that he wanted to hustle through a measure that would make it harder for voters to amend the Ohio Constitution.

    But he’s failed to point to a single amendment in the Constitution as an example of what he’s trying to protect against by changing rules that have been in place for more than a century.

    LaRose is proposing that — after advocates clear the already high hurdles to get proposed constitutional amendments on the ballot — they also be required to get at least 60% of the vote instead of the 50% plus one vote that’s currently needed.

    Meanwhile, amendments initiated by Ohio’s gerrymandered legislature would continue to need only 50% of the popular vote to make their way into the state Constitution. Ironically, the amendment LaRose wants that would make it harder to pass voter-initiated amendments falls into that latter, easier-to-pass category.

    LaRose’s stated reason why citizens should lose some of their ability to change the Ohio Constitution: It’s badly needed to protect against wealthy interest groups that want to insert self-serving measures into what LaRose called “the state’s founding document.”

    “If someone is a special interest and they want to create a monopoly for themselves let’s say, or to try to do something that narrowly benefits their own interest, maybe it will make them think twice before they try to amend the Constitution,” LaRose said during a press conference on Nov. 17.

    So how many times have such powerful special interests actually succeeded in initiating a harmful constitutional amendment?

    LaRose didn’t cite any during his press conference. Instead, he said that of the 16 citizen-initiated amendments proposed in the past 22 years, just five have passed. And in response to a question, the secretary of state conceded that of the ones that passed, just two failed to get less than 60% of the vote.

    LaRose’s office didn’t respond when asked for an example of a problematic amendment in the Ohio Constitution that his proposal would have prevented  — or to other questions for this story. But while he and his staff didn’t cite any such examples, there are some citizen-initiated amendments coming that LaRose and the state’s other Republican leaders may well oppose.

    One is a measure that would amend the Ohio Constitution to protect abortion rights. 

    When the U.S. Supreme Court in June overturned Roe v Wade, a 2019 law signed by Gov. Mike DeWine took effect. It outlawed the vast majority of abortions months earlier than they had been and almost immediately, horror stories started to pile up.

    They include a 10-year-old and two other under-18 rape victims who couldn’t get abortions in Ohio; women with cancer who couldn’t get abortions in order to start chemotherapy; women whose fetuses couldn’t survive but still had to continue their pregnancies. The list goes on.

    This month’s elections showed that in states where abortion was on the ballot, it proved to be a powerful motivator for supporters of abortion rights. And, with the Republican dominated legislature expected to pass even stricter restrictions, abortion-rights groups are planning to seek a voter-initiated amendment to protect those rights.

    At the same time, LaRose’s fellow Republicans in 2021 and 2022 ignored voter-initiated amendments against gerrymandering that passed with more than 70% of the popular vote. The Republican-dominated Redistricting Commission drew state legislative maps that were rejected five times by the Ohio Supreme Court as unconstitutionally gerrymandered. LaRose sits on the commission and voted for each of the maps that have been declared unconstitutional by a bipartisan court majority.

    GOP members of the commission complained that the changes the court was demanding were unconstitutional. That ignores the fact that it’s the job of the Supreme Court to decide what is or is not constitutional — not members of the executive and the legislative branches who were litigating a dispute before it. 

    In April, LaRose told a group of Union County Republicans that he’d “be fine with” impeaching Republican Chief Justice Maureen O’Connor for voting with the court’s three Democrats to strike down the Republican-drawn maps. LaRose claimed O’Connor had violated her oath of office in ruling against his party. 

    The Republicans succeeded in running out the clock and starting next year, the party’s representatives in the state legislature will continue to be wildly overrepresented compared to the partisan mix of the state as a whole. And they’ll be representing districts that are officially unconstitutional.

    The chief justice, who is retiring, has said that citizens need to come up with new citizen-initiated amendments with fewer loopholes if Ohioans want to end extreme gerrymandering.

    In his press conference last week, LaRose claimed that he’s not seeking to block amendments supporting abortion rights or ending gerrymandering. Such short-term goals weren’t good reasons for undertaking something as weighty as amending the Ohio Constitution, he said.

    “If you’re going to amend the Constitution, you need to be thinking about the long term,” he said. “So anybody who’s thinking about shorter or transient goals in the next year or two or three years, that’s not what this kind of a change should ever be about.”

    LaRose added, “If we’re talking about amending the Constitution probably for the rest of our lifetimes, that’s something that should be taken very seriously.”

    But among the questions his office wouldn’t answer this week: Why — if this should be such a deliberative process — did he wait until late November to announce that he would try to ram the measure through in a weeks-long, lame-duck session with an eye toward getting it on the ballot in May? Only about five months would elapse between the time the public first learned of the proposal and when it could alter the state Constitution, as LaRose said, “probably for the rest of our lifetimes.”

    In his press conference, LaRose denied that he was trying to hurry the measure through.

    “I don’t think it’s a rush necessarily,” he said. “It’s an idea whose time has come.”

    Ohio Democrats have denounced LaRose’s push as a “power grab.”

    But at the same time he was proposing to make it harder for voters to change the Ohio Constitution, LaRose seemed to say he was doing it in support of democracy.

    “That’s the beauty of this, is that all the power rests with the people of Ohio,” he said.

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  • Doctors call on DeWine to answer questions about abortion laws

    Doctors call on DeWine to answer questions about abortion laws

    BY: MARTY SCHLADEN – Ohio Capital Journal

    Days after Gov. Mike DeWine said the medical community will be consulted as Ohio considers future abortion legislation, a group of more than 1,400 doctors implored him to answer questions about a law he’s already signed.

    The Ohio medical community has said that to date, DeWine and Republican lawmakers have shown little interest in what doctors have to say when it comes to abortion. Then, late last week, DeWine seemed to reinforce that impression, declining to respond to a list of nine questions that Ohio Physicians for Reproductive Rights sent him and Democratic gubernatorial nominee Nan Whaley.

    The group was formed in the wake of the June 24 U.S. Supreme Court Decision overturning the right to an abortion under Roe v Wade. In Ohio and nationally, medical groups said that decision ignores the health care aspects of abortion.

    DeWine’s non-response is unacceptable, said Lauren Beene, a Cleveland-area pediatrician and a director of Ohio Physicians for Reproductive Rights.

    “These are very important questions that people need to know his stance on because … this can have a lot of implications on a person’s health and their ability to get medical care,” she said, explaining that Ohio’s abortion restrictions can discourage doctors from living here — or even women worried about having the full range of medical options. 

    “If you have somebody who’s running for governor who can’t or won’t answer the question of whether or not he supports a bill that would make all abortion illegal except in the most dire of circumstances,” Beene said, “from a medical perspective (that) doesn’t really make any sense. What does that even mean? It’s not good at all.”

    She was referring to proposed legislation that would go even further than Senate Bill 23, a law DeWine signed in 2019 and which took effect when the U.S. Supreme Court overturned Roe v. Wade on June 24. 

    SB 23 outlaws almost all abortions after about five or six weeks of pregnancy and it doesn’t make exceptions for victims of rape and incest. It makes some exceptions to protect the life and health of mothers, but doctors have complained that they’re vague and practitioners are reluctant to risk felony charges for running afoul of them.

    Several doctors interviewed by the Capital Journal have said they repeatedly tried to warn DeWine and the legislature of the hazards of SB 23 before it was passed and signed in 2019, but they were ignored. Then, shortly after enforcement began in the summertime, many of the things they warned of came to pass.

    Just a week into enforcement, an Indianapolis doctor reported that she aborted the pregnancy of a 10-year-old rape victim from Columbus who couldn’t get one under the Ohio law DeWine had signed. In the following weeks, Ohio doctors told of having to call lawyers first as patients’ lives were fading in front of them — and even then being terrified of the consequences while performing lifesaving terminations.

    Then, in sworn affidavits, doctors and other workers at Ohio abortion clinics reported other horrors under SB 23. They included two more rape victims under 18 who couldn’t get abortions in Ohio; two cancer patients who couldn’t get the abortions they needed to start chemotherapy; and three women whose fetuses had severe abnormalities or other conditions that made a successful pregnancy impossible. Even so, they, too, couldn’t get abortions in Ohio. 

    SB 23 was in force for 11 weeks before a Cincinnati judge temporarily paused it. 

    Now DeWine and Attorney General Dave Yost are in court trying to get the stay lifted. But through it all, DeWine has refused to say whether he thinks it’s a good thing that SB 23 makes women and girls have their rapists’ babies — nor has he said much about women facing the medical problems described in the abortion clinics’ affidavits.

    DeWine has refused to debate Whaley, but last week in a joint appearance with her before the Cleveland Plain Dealer editorial board, he gave his most extensive recent comments about abortion in Ohio.

    DeWine said policymakers will listen to the medical community as further abortion restrictions are considered. However, he only did so after seeming to repeat Yost’s false assertion that under SB 23, a 10-year-old can get an abortion based on her age alone. 

    The law mentions no age at which a rape victim is too young to be forced to have that baby. And several obstetricians told the Capital Journal that while pregnancy in a 10-year-old is riskier than the average pregnancy, that’s also the case for the obese, diabetics, older mothers — and women with a host of other conditions that SB 23 makes no exceptions for.

    But in the future, DeWine said, medical experts will be heard.

    “As we go through debates and discussions, my belief would be that that 10-year-old would have been able to have an abortion in Ohio because of that,” DeWine told Whaley and the editorial board, referring apparently to SB 23’s health exceptions. “If I’m wrong — if I was wrong — and we’re going to hear more from medical professionals, then these are the things that we’ll need to work out, that the legislature will work out as it debates this bill.”

    Despite being asked twice by Whaley, DeWine didn’t answer whether he agreed with the provision in SB 23 forcing such young girls to have their rapist’s babies. DeWine also hasn’t said whether he agrees with the law’s requirement that victims of rape and incest must carry their pregnancies to term regardless of their age.

    In their written questions, Ohio Physicians for Reproductive Rights asked the governor to state his position on proposals that would go even further, including House Bill 704 “that would declare a fertilized egg, a single cell, to be legally the same as a human being.” 

    DeWine didn’t respond. When asked about the doctors’ questions, DeWine Press Secretary Dan Tierney on Tuesday said in an email, “The Governor has no additional comments beyond his previous statements at this time.”

    For Beene, one of the directors of the doctors’ group, DeWine’s silence is telling.

    “We have doctors in all specialties all across the state,” she said. “And if we have questions and he won’t answer them, what does that say to the public? For us as physicians, we’re very frustrated with him not wanting to answer.”  

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  • Ohio, other states sitting on huge piles of money, new report says

    Ohio, other states sitting on huge piles of money, new report says

    BY: MARTY SCHLADEN – Ohio Capital Journal

    Ohio has enough in its rainy day fund to operate the state government for 35 days on that money and nothing else. If you factor in the money it has in other unexpended balances, the number of days grows to 73, according to a report released last week by the Pew Charitable Trusts.

    It’s part of a trend in which states are sitting on reserves that are at or near record levels after states got unprecedented federal assistance during the coronavirus pandemic while their revenue collections didn’t drop off as much as they feared. In 21 states — including Ohio — collections even exceeded pre-pandemic growth.

    Governments aren’t banks and their basic role isn’t to sit on huge reserves of taxpayer money. But today’s big reserves might come in handy in the not-too-distant future. Government data released Thursday said that gross domestic product grew at an annualized rate of 2.6% in the second quarter, but experts warned that other signs of a coming recession loom.

    As anyone who watched government finance during the Great Recession between 2007 and 2009 knows, in such circumstances tax collections can plummet, leaving state and local governments to face excruciating choices for years.

    “States use reserves and balances to manage budgetary uncertainty, including revenue forecasting errors, budget gaps during economic downturns, and other unforeseen emergencies, such as natural disasters,” the Pew report said. “This financial cushion can soften the need for spending cuts or tax increases when states need to balance their budgets.”

    In addition, large cash reserves can give states and local governments better credit ratings, allowing them to float bonds and otherwise borrow at better rates. 

    “For example, Fitch Ratings upgraded Michigan’s credit rating in July 2022, citing the state’s buildup of reserve levels as part of its rationale,” the report said.

    However, the amounts states are sitting on can be eye-popping. For purposes of comparison, Pew expresses them in terms of the number of days states can operate solely on their reserves. Those amounts range from 350 days for Wyoming to 12 for Illinois.

    At 71 days, Ohio comes in a little below the 50-state median of 89 days.

    In dollar amounts, Ohio is estimated to have $5.5 billion in reserves for 2022. That’s far in excess of any year since at least 2000 except for last year, when reserves totaled $7.4 billion, according to the Pew report.

    And those amounts don’t count unexpended federal coronavirus dollars to the states. This summer, Governing Magazine reported that at the end of 2021, states had spent just 27% of those funds. 

    In August, Cleveland.com reported that Ohio had spent nearly two-thirds of its $5.4 billion in American Rescue Plan funds, primarily repaying an unemployment loan, on law enforcement and sewer grants, and on incentives for the Intel chip plant.

    Meanwhile, other pressing needs only partially have been met. 

    Ohio’s foodbanks say they’re desperate for supplies and infrastructure. In May they requested $50 million in emergency funding and have made an overall request of more than $100 million to also upgrade their infrastructure.

    So far all they’ve gotten from the state is $15 million in coronavirus funds that Gov. Mike DeWine announced earlier this month.

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