Ohio Attorney General Dave Yost in 2019.
By Kathiann M. Kowalski
The Ohio Attorney General’s office wants to keep information it produced in a state criminal case from going to plaintiffs in federal shareholder litigation. State lawyers also want to limit what former FirstEnergy executives Chuck Jones and Michael Dowling – who are defendants in both cases – can ask various witnesses in the shareholder proceeding.
The move to limit evidence is among the latest developments in Ohio’s ongoing corruption scandal surrounding the state’s 2019 nuclear and coal bailout law, House Bill 6. Other recent news includes:
The Securities and Exchange Commission agreed to settle claims against FirstEnergy for $100 million, but filed a separate court case against former CEO, Chuck Jones, for alleged securities law violations.
Ohio regulators limited evidence from challengers’ experts in one of four HB 6-related cases last week, while letting a FirstEnergy witness testify about issues challengers said were beyond the scope of the hearing.
An audit report in another of the regulatory cases found FirstEnergy allocated only a small share of its spending on the HB 6 bribery scheme to Ohio utilities, and concluded there was little or no impact on customers.
HB 6 is an issue in at least one Ohio congressional campaign this fall, while a new report reviews FirstEnergy’s work to secure federal bailouts when Donald Trump was president.
State seeks to limit fact-finding
The Office of the Ohio Attorney General has gotten involved in ongoing shareholder litigation related to HB 6. An October 10 filing seeks to pause the disclosure of materials it turned over to former FirstEnergy executives Chuck Jones and Michael Dowling in the state criminal case against them. The motion also asks the court to block their depositions — questioning under oath — of several witnesses the state plans to call in the criminal case.
Stays of this nature in civil proceedings pending criminal prosecutions are not automatic. Among other things, courts typically weigh whether ongoing civil proceedings will impair defendants’ constitutional right against self-incrimination or otherwise hinder their ability to prepare a defense against the government’s criminal charges.
The motion says Jones’ lawyer agrees that sharing discovery from the criminal case with plaintiffs could infringe on his right to a fair trial. However, the Ohio Attorney General notes that lawyers for Jones and Dowling have said they would oppose the stay on the depositions.
In other words, it appears the state is trying to block something lawyers for Jones and Dowling think might be helpful to their civil or criminal cases — or both.
“The State of Ohio has an interest in ensuring that Jones and Dowling do not ‘expand rights of criminal discovery beyond the limits’” of what they could otherwise get, the state’s filing said. Criminal lawyers can generally try to talk with the state’s witnesses, but those people generally can’t be compelled to answer under oath before trial, which would be the case for the depositions.
FirstEnergy spokesperson Jennifer Young declined to comment on the litigation. The company still has not turned over its internal investigation report to plaintiffs in the same litigation, despite a trial court order earlier this year directing them to do so. Briefing before the Sixth Circuit Court of Appeals on that issue wrapped up last month.
SEC settles with FirstEnergy but sues ex-CEO
Jones is also a defendant in a civil securities fraud case filed last month by the Securities and Exchange Commission. Separately, the SEC also agreed to a $100 million settlement with FirstEnergy. The charges and settlement with the company and the complaint against Jones were both announced September 12.
Among other things, the SEC’s investigation found FirstEnergy and its former CEO Chuck Jones made misrepresentations to investors about the company’s role in the alleged HB 6 corruption scheme.
FirstEnergy’s securities filings had already noted a reserve of $100 million related to the SEC investigation, so the similar amount is not a surprise. Nonetheless, it drew criticism.
“The settlement is disappointingly small, and does little to deter future legislative or regulatory capture by special interests,” said Nolan Rutschilling, managing director of energy policy for the Ohio Environmental Council.
The SEC’s order setting forth its charges and the settlement with FirstEnergy notes the company’s consent to its entry is limited to that proceeding. Thus, FirstEnergy’s settlement with federal securities law regulators can’t be used as admissions of liability in the shareholder litigation.
Tunnel vision?
Administrative law judges at a PUCO hearing last week granted FirstEnergy’s request to strike parts of testimony by experts for the Office of the Ohio Consumers’ Counsel and IGS Energy. Both parties and others claim the company violated Ohio law requiring corporate separation between utilities and unregulated affiliates.
The PUCO had already split off HB 6-related issues for an undetermined future review. But FirstEnergy objected to any mention of HB 6 and to any mention of former PUCO chair Sam Randazzo, even incidentally to matters before passage of the 2019 law.
“Such scope expansion would risk confusing the issues and result in a series of proceedings in which the same conduct is addressed more than once,” company lawyers wrote.
Letting FirstEnergy “hide the ball” does not mesh with the company’s public claims that its core values include integrity, openness and trust, the Consumers’ Counsel’s October 4 filing said in response. “And it will not aid in dispelling the black cloud that remains over the PUCO concerning its involvement in the HB 6 scandal,” it added.
“For consumers, the whole truth about HB 6 needs to come out sooner rather than later,” said Maureen Willis, the Ohio Consumers’ Counsel.
Among other things, Joseph Buckley’s written testimony for the Office of the Ohio Consumers’ Counsel argued FirstEnergy should pay penalties of nearly $53.3 million for violations of Ohio rules and an inadequate plan to maintain corporate separation. He calculated the proposed forfeiture at $25,000 per day from January 1, 2016 through November 21, 2021. That did not include any violations related to HB 6 itself, he said.
The PUCO’s website lists the corporate separation case as one of four HB 6-related cases. Earlier this year, other parties wanted all four cases consolidated, while FirstEnergy wanted three cases joined and the corporate separation case split off.
Randazzo helmed the PUCO when it began the piecemeal approach to issues related to HB 6. Two months later, he resigned after being implicated in the scandal. The PUCO, now chaired by Jenifer French, continued the same approach.
Two cases were consolidated in June, but the other two remain separate, with the corporate separation case being further split up.
Audit says customers didn’t pay for HB 6
Although FirstEnergy spent roughly $75 million on HB 6 efforts and associated lobbying, the company only allocated about $5 million to its Ohio utilities, a September 30 audit report by the accounting firm Marcum found. Most of that related to a $4.3 million payment to Randazzo shortly before Gov. Mike DeWine appointed him as PUCO chair. FirstEnergy previously admitted that payment was meant to secure Randazzo’s help on HB 6 and other matters.
However, the Marcum report said, customer charges for some of those accounts maxed out at a certain point. So, utility customers only paid about $15,000 more than they otherwise would have been charged, it concluded.
“We already agreed to refund this amount, with interest,” said Young at FirstEnergy, noting the new audit results are consistent with a previous report for a capital investment rider. She also noted efforts the company has made since 2021 to strengthen ethics and accountability.
On one hand, the report’s findings appear positive: Although FirstEnergy spent millions for activity it admitted was corrupt, most was not charged to ratepayer accounts.
Yet the audit still documented improper charges to Ohio utility accounts. And it confirmed FirstEnergy did only a limited review before its assertion in 2020 that ratepayer funds were not used for HB 6.
Also, charges to utility accounts aren’t necessarily the same as spending ratepayer money. The audit team could not say how money put into a joint money pool was spent. That especially matters for a credit support rider the company collected about $450 million for, but which the Ohio Supreme Court ultimately held unlawful.
The audit team also didn’t review all depositions from HB 6-related shareholder litigation, some of which are subject to a protective order. Multiple witnesses also have not yet answered questions under oath in that litigation and in some of the HB 6 regulatory cases.
The audit also didn’t address amounts related to Cleveland-area entrepreneur Tony George, who helped set up a meeting between FirstEnergy leaders and former Ohio House Speaker Larry Householder. Nor did the audit include amounts FirstEnergy steered to dark money groups that supported Gov. Mike DeWine, Lt. Gov. Jon Husted, Ohio Senate President Matt Huffman, Ohio Secretary of State Frank LaRose and others.
Comments on the audit report must be filed with the PUCO by October 22. Any replies are due November 5.
FirstEnergy fought for a federal bailout
Although Donald Trump’s presidential administration pushed for a massive bailout for coal and nuclear power plants, the Federal Energy Regulatory Commission ultimately rejected that bailout. But it wasn’t for lack of trying by FirstEnergy, a new report by the Energy and Policy Institute shows.
While much of the information in the report was previously known, various documents and details have only become public after Trump left office in 2020. He is the Republican nominee in this fall’s presidential election.
“The internal FirstEnergy records released this year after years of delays describe in shocking detail the lengths FirstEnergy went to as the utility lobbied for this bailout,” said Dave Anderson, author of the report. The issue is especially relevant now that Trump has made a campaign promise to slash energy prices in half, Anderson said.
The report tells about meetings and other communications between FirstEnergy executives and Trump, former Vice President Mike Pence, and others. It also notes that in 2017, FirstEnergy gave $5 million to America First Policies, a pro-Trump dark money group. That same year, FirstEnergy also hired a lobbying firm founded by Trump’s former campaign manager Corey Lewandowski. Lewandowski has denied working for FirstEnergy.
Congressional campaign attacks Team Householder candidate
U.S. House Rep. Marcy Kaptur has made HB 6 a campaign issue in ads attacking Republican challenger Derek Merrin. Merrin is finishing his fourth term in the Ohio House of Representatives. He voted for HB 6 in 2019.
Merrin also was among the “Team Householder” candidates listed on a government exhibit introduced last year at the criminal trial of former Ohio House Speaker Larry Householder. The government claimed Householder directed the use of dark money funds to help candidates whom he expected to support his bid to become speaker and then to pass a bailout for FirstEnergy.
One of Kaptur’s ads said Merrin increased Ohioans’ electric bills. Ohioans have paid more than a third of a billion dollars for HB 6’s coal plant subsidies so far. A separate ad noted Householder and his co-defendant Matt Borges went to prison but said Merrin “kept their money — nearly $20,000.”
Kaptur campaign spokesperson Josh Strassberger pointed to a 2024 Daily Beast article saying Merrin received a total of more than $17,000 from Householder’s campaign committee and from one of the dark money groups involved in the HB 6 corruption scandal. Strassberger also referenced campaign donation and spending records adding up to those amounts.
Energy News Network reached out multiple times to Merrin’s campaign office but has not received a response.
Merrin was not under a legal obligation to return funding from the dark money group or Householder’s campaign. Nor have any criminal allegations been made against him relating to HB 6.
Criminal cases continue
Householder was forced out of the Ohio House of Representatives in mid-2021, nearly a year after his arrest on the federal criminal charges. Yet the Friends of Larry Householder campaign committee is still active, with disbursements through early this year.
State records reflect multiple payments through last fall to the Pullins Law Firm as payments or retainers for legal services. Approximately $70,000 of that amount was paid out after Householder went to prison last year.
Lawyer Scott Pullins told the Columbus Dispatch, which uncovered the payments, that he represents Householder in two cases before the Ohio Elections Commission, as well as a civil lawsuit.
Pullins told the Energy News Network he had no further comment, adding that various questions dealt with privileged and confidential matters. Among other things, the Energy News Network asked what share of charges was for the civil lawsuit. Pullins’ appearance in the case was filed in August 2024, after other lawyers for Householder and the campaign committee had filed a motion that could end the case.
