Laura A. Bischoff,Jessie Balmert|Cincinnati Enquirer
Akron-based FirstEnergywill pay a $230 million fine for bribing key Ohio officials in a calculatedquest to securea $1 billion ratepayer-funded bailout for two nuclear plants and fend off future rate hikes.
FirstEnergy's fine – while far from the $1.1 billion the company earned last year–is still the "largest criminal penaltyever collected, as far as anyone can recall, in the history of this office," acting U.S. Attorney Vipal Patel said Thursday. The penalty surpassed $200 million imposed on Illinois'ComEd in 2020.
Read the deferred prosecution agreement below
"The principle here is trying to come up with a number that stings but doesn’t annihilate," Patel said. In fact, FirstEnergy's stock soared after the three-year deferred prosecution agreement was announced.
The 49-page agreement details how FirstEnergy bought key Ohio public officials– notably former Ohio House Speaker Larry Householder and former Public Utilities Commission of Ohio Chairman Sam Randazzo– with millions of dollars funneled through dark money groups to turn a profit usingOhio ratepayers' pocketbooks.
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At times, they were brazen in that pursuit. After House Bill 6nuclear bailout passed, former FirstEnergy CEO Chuck Jones, listed as Executive 1 in the federal filings, sent a photo-shopped image of faces on Mount Rushmore, including Randazzo’s. The caption read: “HB 6 F*** ANYBODY WHO AINT US.”
Randazzo replied that his photo was smaller than the others then responded: “funny.”
FirstEnergy fired Jones and vice presidents Michael Dowling and Dennis Chack in October 2020 over a $4.3 million payment made to Randazzo shortly before Gov. Mike DeWine appointed him to lead the PUCO. None of those individuals were charged Thursday, and Vipal declined to answer questions about the open investigation.
Jones, in a statement from his attorney, said hedid not engage in any unlawful activity or violate any of FirstEnergy’s policies.
Randazzo, whose Columbus condo was searched by FBI agents in November, issued a statement Thursday that said in part:“I executed my duties as PUCO Chair conscientiously, lawfully, and mindful of striking the right balance between competing interests. At no time prior to or after my appointment to the PUCO was I asked or did I agree to exercise authority as a public official or perform any official action in my capacity as Chair to further FirstEnergy’s legislative, regulatory or other interests."
More: 'A humbling moment': FirstEnergy chief responds to $230 million penalty. Watch his statement
The quest for power
Starting in 2016, FirstEnergy and its affiliated companies had several goals: pass a $1 billion bailout for two FirstEnergy Solutions-owned nuclear plants, secure money for FirstEnergy Corp. through a decoupling provision and ward off a rate distribution case scheduled for 2024.
House Bill 6, signed into law in July 2019,solved the first two problems. In November 2019, the PUCO under Randazzo’s leadership terminated the requirement that FirstEnergy’s subsidiaries file a new rate case in 2024.
FirstEnergy also tried to influence federal officials to solve those problems, wiring $5 million to a dark money group in May 2017 to influence Department of Energy or Federal Energy Regulatory Commission regulations. That ultimately failed and FirstEnergy set its sights on a state solution to bail out the nuclear plants.
How the dark money donations worked
Between 2017 and March 2020, FirstEnergy Corp. and FirstEnergy Solutions, now called Energy Harbor, donated $59 million to Generation Now, a dark money group controlled by Householder.
FirstEnergy paid for Householder's return to power in the Ohio House of Representatives, helped him pass House Bill 6 to bail out the nuclear plants and bankrolled a counter campaign to stop the ballot initiative that would have stalled the law. FirstEnergy also donated $2 million to Householder's effort to expand term limits, potentially giving him 16 more years in power.
A FirstEnergy executive said Householder's continued presence "extends and stabilizes existing leadership – good for the home team."
Householder's attorneys, in a statement, maintained thatFirstEnergy's donations were not bribes or illicit payments but rather legal donations protected bythe First Amendment. The companyentered into Thursday'sagreement to protect its share price.
"Our client Larry Householder pleaded not guilty for a simple reason: Because he is not guilty. He did not enter into a quid pro quo agreement with FirstEnergy, and he has never been bribed. We look forward to our day in court to defeat the government’s allegations," they said.
In addition to Householder, FirstEnergy also paid $4.3 million to Randazzo through his company. FirstEnergy Corp. executives pushed Randazzo as a PUCO pick so he could further the company's interests, according to the filing.
Federal investigators say Randazzo helped FirstEnergy craft language in House Bill 6 and pass legislation favorable to the company.
To achieve its ends, FirstEnergy set up a dark money group called Partners for Progress in February 2017, forming it in the state of Delaware to avoid scrutiny. FirstEnergy executives chose the three directors for Partners for Progress, two of whom were lobbyists for the company.
DeWine’s current legislative director Dan McCarthy was president of Partners for Progress in 2017 and 2018. At the time, he was a FirstEnergy lobbyist.
FirstEnergyleaders directed where the money was spent, according to the federal filings. Between 2017 and 2019, FirstEnergy funneled $25 million through Partners for Progress, and $15 million of that was paid to Generation Now.
Organizations formed as 501(c)(4) nonprofits are known as "social welfare organizations" that can't spend more than 49% of their resources on political causes.
“Do you all see a lot of social welfare going on? I don’t," Patel said. "We can do better. We don't need obfuscating names for our 501(c)(4) organizations."
The settlement
The $230 million fine will be split 50-50 between federal and state governments. Ohio's $115 million will go toward a program that helps Ohioans pay their utility bills. FirstEnergy cannot charge its customers to pay its fines.
FirstEnergy also must disclose all political donations– dark money or otherwise– made during 2021 and for the three years of the agreement. The company does not need to disclose donations made in 2019 and 2020 while the alleged bribes occurred.
FirstEnergy mustforfeit nearly$6.5million in the accounts of Partners for Progress.
“This resolution and the actions we have agreed to implement build on the substantial steps we have taken over the past several months to strengthen our leadership team, ensure we have a best-in-class compliance programand significantly modify our approach to political engagement as we work to regain the trust of our stakeholders,"said Donald T. Misheff, nonexecutive chairman of FirstEnergy’s board of directors.
FirstEnergy distributes electricity to 6 million customers and employs 12,000.It owns 10 electric companies that distribute power across five states. It is listed at No. 294 on the Fortune 500 list in 2020.
FBI Special Agent in Charge Chris Hoffman issued a stern warning to public officials who might want to “sell their integrity.”
“I would challenge them to either practice corporate responsibility on your own, now or forthcoming,"Hoffman said. or you will face this fierce accountability later form our office and the U.S. Attorney’s office.”
Jessie Balmert and Laura Bischoff are reporters for the USA TODAY Network Ohio Bureau, which serves the Columbus Dispatch, Cincinnati Enquirer, Akron Beacon Journal and 18 other affiliated news organizations across Ohio.