In October 2019, as a battle raged over an attempt to repeal a $1.3 billion utility bailout, a FirstEnergy executive worked to keep the name of a senior aide to Gov. Mike DeWine off of a $10 million infusion of corporate cash into the fight.
The executive, Vice President Michael Dowling, did so even after an assistant told him it would violate IRS rules to not list the DeWine aide on the transaction, according to text messages presented Tuesday in the federal corruption trial of former Ohio House Speaker Larry Householder and lobbyist Matthew Borges. The men are accused of racketeering in a scheme to use $61 million from FirstEnergy in exchange for the massive bailout, most of which went to prop up the company’s failing nuclear and coal plants in order to make them attractive to buyers.
The governor appointed as chairman of the Public Utility Commission of Ohio a former FirstEnergy consultant who was paid $4.3 million by the utility just before taking his seat on the commission. Even though he was supposed to be regulating the utility, the official, Sam Randazzo, played a role in writing the bailout legislation, according to documents released by the Ohio House.
In early 2019, DeWine also appointed FirstEnergy lobbyist Dan McCarthy to be his legislative affairs director, meaning McCarthy was in charge of representing DeWine’s interests before the General Assembly.
Just after that, McCarthy formed a 501(c)(4) group called Partners for Progress. Also known as a “dark money” group, it received $5 million from FirstEnergy within a few weeks of when McCarthy founded it.
In an affidavit supporting Householder’s arrest, FBI Special Agent Blane Wetzel said Partners for Progress was “designed to conceal the nature, source, ownership, and control of the payments” from FirstEnergy and associated companies. Through the rest of 2018, McCarthy continued as president of Partners for Progress as it pumped FirstEnergy money into a Householder-controlled dark money group and funded the effort to make Householder speaker.
The following year, McCarthy resigned that role to work for DeWine in the legislature as Householder shepherded the bailout legislation, House Bill 6. When a final version passed in July 2019, DeWine signed it the same day.
But opponents quickly started a campaign to circulate petitions to put a repeal on the ballot. That prompted FirstEnergy to pump even greater sums into a “decline to sign” campaign aimed at thwarting the petitions.
It funded xenophobic mailers and broadcast ads claiming without evidence that the repeal effort was a Chinese plot.
“Who is knocking at your door?” began a mailer read in court Tuesday. “Foreign enemies have infiltrated our energy grid,” it added and said, ominously, that circulators of repeal petitions “are asking for your information.”
In October 2019, executives with FirstEnergy and its generation-owning subsidiary seemed panicked that the repeal effort might succeed and they were planning to pump $10 million more into the effort to stop it — through Partners for Progress, the dark money group started by McCarthy, who was now a DeWine aide.
Dowling, the FirstEnergy vice president, seemed to think it wouldn’t be a good look for the name of a DeWine official to show up on paperwork accompanying the huge transaction.
“Please make sure Dan McCarthy’s name is not on the filing,” Dowling said in a text message to Partners for Progress Treasurer Michael Vanburen that was presented in court Tuesday.
Vanburen replied that even though McCarthy was no longer president of the dark money group, IRS rules required that his name be on the filing. Dowling didn’t accept that.
“There must be a creative way to handle this,” he said. “It’s important that (McCarthy’s) name not be listed.”
Asked if DeWine asked that McCarthy’s name not be used in paperwork regarding the money transfers, Press Secretary Dan Tierney in an email said, “No. Dan McCarthy resigned from Partners for Progress in December 2018. Dowling’s comments, as you have relayed them to me, do not match the timeline of McCarthy’s affiliation with Partners for Progress.”
DeWine seems to have been in touch with FirstEnergy executives around the time of the repeal effort. Later in October 2019, FirstEnergy CEO Jones texted Vice President Dowling to say, “DeWine’s on board. I talked to him on Wednesday.”
According to Jones, they talked about whether the repeal HB 6 effort would gather enough valid signatures to get the measure on the ballot.
“He said their valid rate was less than 30%,” Jones said of DeWine.
For his part, Tierney said, “The Governor does not have any recollection of such a conversation.”
In a later text conversation, Jones said he’d received similar assurances from Secretary of State Frank LaRose.
After arrests were made in the House Bill 6 scandal, DeWine staunchly defended McCarthy and kept him in his administration for more than a year, until Sept. 24, 2021.
In another trial-related matter, U.S. District Judge Timothy Black on Tuesday said that he had released a second juror, this time for testing positive for COVID. An earlier juror had been released for refusing to wear a mask.
That brings the number of alternate jurors to two for a trial that is expected to last into early March.
Hamilton County and Loveland, Ohio – In the 90s Ohio Citizen worked with the Sierra Club, Communities United for Action (CUFA) and others to press Hamilton County to address the combined sewer overflow problem that’s polluted our rivers and streams and backed up sewage into people’s basements for literally generations.
Melissa English the Deputy Director of Ohio Citizen Action says, “Their failure to do so back then is just one of the reasons our sewer bills are so high today. It’s past time to demand action and relief for the county’s low-income, elderly and Black and Brown ratepayers, who bear a disproportionate share of the burden.
Melissa English with Ohio Citizen
English hopes you will join her on Thursday, June 17 at 4 PM at the County Building at 138 E. Court St. to help launch the Fair Sewer Rates Coalition.
English encourages people to bring an umbrella – even if it’s not raining. They want to demonstrate that we’re drowning in stormwater and it’s only going to get worse with climate change.
The Washington Post recently reported that “Storm-water systems are the soft underbelly of American infrastructure.” Read this article to find out how they’re increasingly vulnerable as climate change drives “rain bombs” that dump inches of water on cities in hours, overwhelming pipes and pumps.
The arrest of former Ohio House Speaker Larry Householder and others in July revealed how the use of dark money organizations enabled an alleged $60 million conspiracy to sway elections and provide costly bailouts to noncompetitive nuclear and coal plants.
As federal and state court cases move forward, questions remain about what can be done to restore confidence in the legislature and to prevent similar situations in the future.
“Dark money is really how special interests win right now,” said Jay Costa, executive director at Voters’ Right To Know. When corporations use shell groups to hide their political spending, they “gain a level of credibility they wouldn’t otherwise have,” he explained. “I like to think of it as the ‘Wizard of Oz’ effect.”
In other words, voters don’t get to see who’s behind the curtain.
Two months after the federal government’s criminal complaint and indictment in July, Ohio Attorney General David Yost has filed a state court lawsuit. The complaint alleges a “pattern of corrupt activity,” and seeks injunctive relief to prevent FirstEnergy, FirstEnergy Solutions, Energy Harbor and others from reaping benefits from the bailouts under House Bill 6. A hearing on a preliminary motion for that relief is currently scheduled for Friday, Oct. 2.
Meanwhile, it’s unclear whether Ohio lawmakers will actually repeal House Bill 6, the bailout law passed as a result of the alleged conspiracy. Both Democratic and Republican lawmakers called for a swift repeal in late July and early August. However, leadership in the Ohio House has so far refused to allow a full House vote on any pending repeal bills.
‘Dragging their feet’
Rep. David Leland, D-Columbus
“They’re just dragging their feet,” said Rep. David Leland, D-Columbus. “We have 58 members of the legislature who are willing to repeal HB 6 right now.”
Instead, Speaker Robert Cupp, R-Lima, has referred the bill to a House Select Committee on Energy Policy and Oversight. So far, those hearings have largely been a general review of the pros and cons of HB 6, rather than a focused oversight of the alleged corruption that led to its passage and whether it should be repealed in order to repair any claimed harm to public trust in the legislature’s integrity.
“The only way that we can prove that Ohio is not for sale is by repealing HB 6,” Leland said. “The polling we’ve seen shows that people by an overwhelming margin are going to punish those people who have voted for HB 6 and have done nothing to repeal it.” Early and absentee voting in Ohio begins on Oct. 6.
“Our legislators are supposed to act in the public interest,” said political scientist Leah Stokes at the University of California at Santa Barbara. Corporations’ interests may sometimes conflict. But, she adds, “it’s really politicians’ and regulators’ job not to be listening to those special interests. That basic responsibility of democracy has failed in Ohio with House Bill 6.”
A straight repeal would mostly restore Ohio energy law to before HB 6 became effective, subject to some follow-up regulatory matters before the Public Utilities Commission of Ohio. A quick replacement could potentially reenact all or much of the law, which also gutted the state’s clean energy standards.
Advocates say that rushing to ram through anything more than a simple repeal this year would either just repeat bad policy or create more problems, even aside the alleged conspiracy’s past influence on the current makeup of the Ohio House of Representatives. Even at that, a repeal bill would now need either an emergency clause or an injunction sought by the state attorney general in order to stop the nuclear subsidies slated to start in January. The committee adjourned on Sept. 30 and no additional meetings are currently scheduled.
HB 6 “is so questionable at this moment. The vehicle itself and the way it was sold is all just a pack of lies,” said Rachael Belz, executive director of Ohio Citizen Action. “We need them to repeal it, and then we need to go from there.” And that second step will take time, she said.
“It’s complicated and complex legislation and policy. And we have to get it right,” said Chris Neme, a principal and co-founder of Energy Futures Group. “Passing a bill in less than a couple of months like the way HB 6 was just leads us down the road of unintended consequences.”
Shining a light on dark money
The bigger question is how to prevent similar abuses in the future. Utilities and fossil fuel interests have given heavily to Ohio political campaigns since the state enacted a 1999 law calling for competition in electricity generation. And the level of giving went up dramatically once a competitive market actually began to develop in the state.
Utilities’ political spending has continued during this election season. FirstEnergy spokesperson Jennifer Young said that its political action committee has since canceled campaign donations it had originally reported as going out in July shortly before Householder’s arrest.
Campaign donations shown for August have in fact been sent out, Young said. FirstEnergy has denied any wrongdoing in connection with its political donations or the alleged Householder scandal.
Meanwhile, a 2010 Supreme Court case, Citizens United, “really opened up the floodgates of fossil fuel and electric utility influence over politics,” Stokes said. Utilities’ political spending is “particularly pernicious,” in her view, because customers “have to buy from these companies” to get electricity delivered to their homes.
At the same time, reporting requirements currently apply only to immediate spenders on political issues and campaigns. They don’t reach all the way up the chain to the original source of the money.
“It’s basically this Russian nesting doll scenario, where you have one donor giving to another donor, giving to another donor, to get to the person who finally spends the money to influence the voters,” Costa explained.
In the case of HB 6, money flowed into Generation Now from multiple sources, with a lion’s share allegedly originating with Company A — understood to be FirstEnergy — and its subsidiaries, according to the federal complaint.
Some of the money in turn then went to a political action committee. Or, it went to other organizations that directly funded pro-HB 6 ads. One such ad claimed a debunked Chinese conspiracy was behind last year’s failed effort to put a referendum on the law on the ballot this fall. A for-profit group called Ohioans for Energy Security paid for that ad. When asked last year, lawyers at the firm that set up the corporation, Isaac Wiles, would not answer questions about the source of its funding.
“The notion that dark money is something some people don’t like is not part of the elements of the crime,” Mark Weaver, an attorney at that firm, said at a Columbus Metropolitan Club forum after news broke about the Householder arrest.
Asked if there was too much money sloshing around at the statehouse, he said it’s “a lot of money, no doubt,” but it “pales in comparison” to the amount that Americans spend on Halloween candy and costumes every year. And he said that the First Amendment protects the right to conduct political speech anonymously.
“Of course, state and local governments may (depending on how they draft) pass additional 501(c)4 disclosure requirements that could meet constitutional scrutiny,” Weaver later added.
Ian Vandewalker, Ian PHOTO CREDIT: Courtesy of Brennan Center for Justice
“There is no absolute right to anonymous speech,” said attorney Ian Vandewalker at the Brennan Center for Justice at New York University School of Law. Elections are treated differently from general speech, because of the overriding interest in making sure elections function properly, he explained at a panel organized by the League of Women Voters of Ohio.
“That requires informed voters. And it requires policies to not be able to cheat the public,” Vandewalker said. “And so those interests require that there be a level of transparency.”
“No regulation, no law, no set of ethical rules substitutes for American voters paying attention to who’s running for office — pressing them hard on what they stand for, looking closely at the issues, and going into the ballot box having done your homework,” Weaver said.
“The reason that information is important and transparency is important is so that voters are educated,” said Catherine Turcer, executive director of Common Cause Ohio. “You can’t make the argument that voters need to be better educated but you shouldn’t give them actual education. It doesn’t make any sense.”
Moreover, disclosure needs to be timely, said Heather Taylor-Miesle, executive director for the Ohio Environmental Council. In the case of HB 6, Generation Now didn’t report its 2017 spending to the Internal Revenue Service until late 2019. By then, millions more had been spent to influence the 2018 elections, the passage of HB 6, and the failed referendum effort against it.
Pending bills
Several bills introduced by Democratic and Republican lawmakers could make a strong start toward improved disclosure, including HB 737, HB 739, and SB 347. Those bills should be broadened to include digital media, as well as more traditional campaign spending, Turcer said.
The bills should also call for disclosure not only of the name of an organization, but the identity of the top three original donors of funding, Turcer added in her Sept. 16 testimony in support of SB 347. “Otherwise, wealthy special interests will attempt to avoid disclosure by creating pop-up shell groups,” she said.
And while Ohio voters won’t know who’s behind all the groups funding attack ads or other political spending this election season, information is available about how lawmakers voted on HB 6. The Akron Beacon Journal has also compiled some information on how some funds were used in the 2018 Ohio House campaigns.
“People should contact their legislators about HB 6” if they want to speak out about the issue, Stokes said, noting that the law passed with support from a mix of both Republicans and Democrats.
“When the public is outraged about an issue and really shows up, these issues get reversed,” Stokes added. “There’s a lot of leverage right now.”
[Note: the original version of this story took additional comments made by Mr. Weaver and summarized them to help the story flow better and to highlight the most relevant points. Mr. Weaver contacted Eye on Ohio and the Energy News Network after publication expressing his concern that the summary was not an accurate representation of his public comments. While we do not share that view, we are happy to share the full text from which that summary was taken. We know our readers are smart and can draw their own conclusions regarding their meaning. Beneath this article is that text, as well as a link to the entire video.]
Mark Weaver: Blaming Citizens United for this I think is wrongheaded. The New York Times, it’s sort of been proven that their collusion story about Russia has fallen completely apart and yet I don’t blame the First Amendment for the right to print what they printed. I think they had a right to print all that. I think it was substantively wrong, but I wouldn’t go after their ability to print that stuff.
And so what the Supreme Court said in Citizens United was, if a few of us get together and want to form a group to communicate, we ought to have a right to do that under the First Amendment.
And a lot of donors are looking at what’s happening in America right now with the doxxing, or the releasing of personal information and targeting people for shame. So that’s why some donors don’t want to give. Now some may have less noble notions for wanting to keep their money and their name private. But we saw what happened to Amy Acton for example where her personal home was targeted by protesters– that’s just wrong.
The notion that- I disagree with you so I’m going to personally vilify you and show up at your house where your family or your children are- so many donors see that as part of 2020 current affairs and so many of them want to avoid that. And I know not everyone has that reason.
Mike Thompson: But the problem comes in not just that somebody gives $500 to a candidate or a cause they believe in. It’s that somebody gives– $61 million or $35 million, let’s be conservative, and we don’t know that’s happening. Is there a middle ground where we can say, okay I can protect your identity, your First Amendment rights, but you can’t have THAT much influence?
Weaver: Well, not Constitutionally, no. It’s not just Citizens United. There was a case out of Ohio called McIntyre vs. the Ohio Elections Commission. This is the 7-2 Supreme Court case that said it’s legal to keep yourself anonymous when spending politically, based out of Ohio, in Westerville, Mrs. McIntyre. I used to teach the case. This morning I looked at it again and I had forgotten about this quote. This is not a close call. 7-2. This is Supreme court on anonymous speech: “It’s not a pernicious, fraudulent practice but an honorable tradition of advocacy and of dissent.”
And they pointed to the Federalist Papers that were written anonymously, to avoid scrutiny of the authors and focus on the ideas. So this notion of anonymous speech is one that’s protected by Supreme Court precedent.
Thompson: Laura, there are efforts at the statehouse to make it more transparent. Is it just lip service or are they serious efforts?
Laura Bischoff: You know it’s interesting. I do think the conditions are probably better now for reform than they were six months ago. So, there’s a couple of different bills pending. One is House Bill 737, which is sponsored by Gayle Manning, a Republican from North Royalton, and Jessica Miranda, a Democrat from Cleveland. And it’s got the support of the Ohio Secretary of State, Frank LaRose. And it would require, if you’re going to have a 501c(4) that’s spending in Ohio on political matters then it would require reporting through the state. Louis Brandeis said that the best disinfectant is sunshine. And so, this kind of works on that premise– transparency and disclosure will help clean it up.
Thompson: Derrick, It comes down to the Supreme Court. And the courts have said money equals speech. How much money? We have unlimited amounts of Free Speech. We can stand on a street corner, 24 hours a day, 7 days a week, and as long as we don’t yell fire in a crowded theatre we can do all we want. Should that same apply to the amount of money someone can give to a campaign? Or to a political cause?
Derrick Clay: Well you know if you have the money to give it, that’s your discretion whether you want to give that money to a c(4). You know, right now we’re under the law from that Citizens United case where people can give unlimited amounts of money to a c(4) nonprofit. So until that court case is overturned or challenged, then that’s the law of the land that we all have to abide by unfortunately.
Thompson: Is it too much money sloshing around at the statehouse? And you guys [points at Weaver and Clay] have both advocated for groups, and helped raise money and spent money that’s been raised. I mean, you’re part of the system-
Weaver: It’s a lot of money, no doubt. But when you look at what America spends on Halloween candy and costumes every year it pales in comparison. There’s lots of money done for lots of things.
Halloween candy and costumes don’t have the protection of the First Amendment. Remember, the Supreme Court has been very clear: the speech that aggravates us the most gets the most protection. And when you’re laying out what’s protected, political speech is the highest. And so whatever laws get passed, and I’m interested to read the details, and I’m interested in whatever laws are being put out there, they will have to withstand First Amendment scrutiny just like the news organizations represented today.
This article first appeared on Eye on Ohio and is republished here under a Creative Commons license.
