Eye on Utilities: Finger pointing and a tug-of-war



This monthly newsletter provides updates on Ohio’s ongoing utility corruption scandal and is a joint project of Eye on Ohiothe nonprofit, nonpartisan Ohio Center for Journalism, and the nonprofit Energy News Network.

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FirstEnergy continues its efforts to put the House Bill 6 scandal in the “rearview mirror,” while the DeWine/Husted re-election campaign remains mostly mum. Yet new developments in the saga surrounding HB 6, Ohio’s nuclear and coal bailout law, include:

  • Former executives fingered as having paid bribes have suggested other officers were briefed about a $4.3 million payment to a company linked to Sam Randazzo, the former chair of the Public Utilities Commission of Ohio, on or about Dec. 19, 2018. The day before, those executives texted about payment details with Randazzo and dined with Gov. Mike DeWine and Lt. Gov. John Husted.
  • Whether FirstEnergy settles several shareholder derivative cases may depend on the outcome of a tug-of-war between two federal district courts. Meanwhile, a settlement has been announced for class actions brought on behalf of ratepayers.
  • Subpoenas and litigation seek more documents from FirstEnergy and DeWine’s office relating to HB 6.
  • After long delays, the Public Utilities Commission of Ohio produced more documents subpoenaed by federal authorities last year, but it still hasn’t turned over all materials sought in public records requests.
  • PUCO hearing examiners shut down questioning of FirstEnergy’s former ethics officer in a regulatory case under Ohio law dealing with corporate separation between utilities and their parents and affiliates.

Who knew what, and when?

FirstEnergy fingered former Chair and CEO Chuck Jones and former Vice President Michael Dowling earlier this year when US District Court Judge John Adams demanded to know who paid the bribes. Now a July 22 filing in another case suggests Jones briefed certain other top FirstEnergy executives on the $4.3 million paid to a company linked to Sam Randazzo shortly before Ohio Gov. Mike DeWine appointed Randazzo to chair the Public Utilities Commission.

The filing describes the briefing as taking place “on or about December 19, 2018.” Texts among Randazzo, Jones and Dowling on the night before that date reflected a meeting among at least those three, spelled out the payment amount, and referenced prior billing under a consulting agreement with Randazzo’s company whose purpose the company later questioned in late 2020. Jones and Dowling also dined with DeWine and Lt. Gov. Jon Husted at the Athletic Club in Columbus on Dec. 18, 2018.

If other executives were briefed in December 2018, It raises questions about why the company waited until October 2020 to disclose the payments in a filing with the Securities and Exchange Commission. It also raises questions about whether Jones briefed those executives on the meeting with DeWine and Husted the day before.

FirstEnergy has also tried to distance current company personnel from the HB 6 corruption scandal. But an Aug. 3 filing by Jones and Dowling suggests the company could readily find out more beyond facts stipulated last year by talking with other current and former employees. Portions of that filing are blacked out, likely as a result of a protective order in the case.

Emails from FirstEnergy communications personnel said they could not comment on pending litigation, although one also wrote that neither current CEO Steven Strah nor current Vice President for Utilities Sam Belcher was aware of or approved the payment to Randazzo in 2018.

Last December, Husted spokesperson Hayley Carducci declined to say what was discussed on the Dec. 18 meal Husted attended with DeWine, Jones and Dowling. “The Governor has addressed this previously and the information is in [a Dayton Daily News article],” she wrote via email. But DeWine declined an interview for that article, and quotes by his spokesperson Dan Tierney also don’t spell out the substance of discussions at the meal.

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Tug of war

FirstEnergy’s efforts to resolve the shareholder derivative cases could soon be resolved — or not. Those cases seek to for damage done to the corporation recovering wrongdoing by officers and directors. The challenge is that lawyers filed multiple cases in different courts.

US District Judge Algenon Marbley in the US District Court for the Southern District of Ohio gave a preliminary thumbs up to a $180 million deal to settle three cases in the spring. However, he didn’t halt the other cases pending in different courts.

Meanwhile, Judge Adams for the Northern District of Ohio said he wanted more discovery before ruling on the fairness of the discovery. In particular, he wants lawyers to question some witnesses under oath in proceedings called depositions. Last year Adams refused to transfer that case from his courtroom to Judge Marbley’s. The case before Adams was filed earlier, and FirstEnergy is headquartered in the Northern District of Ohio.

Plaintiffs and FirstEnergy tried to get around Adams by dismissing the case, but he blocked that gambit on July 5. Granting the motion would have let them evade the court’s jurisdiction after invoking it in the first place. In a July 13 ruling, Adams also said he would appoint new plaintiffs’ lawyers. On July 20, he directed five law firms who had shown interest in the job to describe their approaches to discovery in the case.

Meanwhile, a July 7 filing in Marbley’s case asked him to give final approval to the settlement there. Marbley held a hearing on the question on Aug. 4. Marbley said he would follow up with a written opinion, which is expected shortly.

Resolution of the cases may affect how much more detail the public will learn about the alleged corruption related to HB 6. The cases also raise questions about how much oversight judges can practically exercise over settlements when plaintiffs file cases in multiple courts.

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Another summer settlement

Meanwhile, FirstEnergy and Energy Harbor have agreed to settle class action cases brought on behalf of electricity ratepayers who have been paying more as a result of HB 6. Under the deal announced on July 29, Energy Harbor will pay $11.5 million, with another $37.5 million coming from FirstEnergy.

The combined total of $49 million is less than the nearly $60 million FirstEnergy and its affiliates paid in the corruption scandal. It’s also less than one-fifth of the nearly $275 million Ohioans have paid so far for HB 6’s coal plant subsidies. Among Ohio’s regulated utilities, FirstEnergy subsidiaries serve just over 30% of the ratepayers.

FirstEnergy had tried to halt one of the cases last fall by arguing that HB 6 somehow blocked claims for corruption, despite the company’s alleged actions in passing the law and blocking a referendum on it.

FirstEnergy still faces several lawsuits brought on behalf of groups of shareholders whoses in the company fell in value and resulted in losses due to alleged wrongdoing by the company’s officers, directors and others.

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Subpoenas and more

On July 11, the SEC issued additional subpoenas to FirstEnergy. FirstEnergy “believes that it is probable that it will incur a loss in connection with the resolution of the SEC investigation,” but cannot yet estimate how much, the company said in a July 26 quarterly report.

Meanwhile, ongoing litigation between the Ohio Democratic Party and DeWine’s office full copies of documents relating to the governor’s calendars, appointments and travel from before HB 6 and later. Partial materials produced by the governor’s office in response to public records requests had large parts blacked out. And many pages were unrelated attachments.

On July 21, Ohio Attorney General Dave Yost, representing DeWine’s office, opposed a motion to make it preserve unredacted copies of the materials, saying an order was unnecessary. However, current retention policies for calendars and schedules “are unclear and lack significant penalties,” the Ohio Democratic Party said in its July 7 motion.

The HB 6 corruption scandal is an issue in the fall election campaigns for governor, attorney general, and other races. Delays in getting all responsive materials could keep voters from having full information before November.

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PUCO drags out document production

Five months after producing its first group of materials turned over to federal authorities in February, the PUCO provided a second batch of documents to public records requesters on July 29.

The materials shed light on how Randazzo, DeWine and others acted leading up to and in the wake of HB 6. Among other things, Randazzo assured DeWine the former FirstEnergy nuclear plants needed the law’s $1.1 billion bailout, which was later repealed. They also reflect Randazzo meeting with Energy Harbor and trying to persuade lawmakers about “unwinding challenges” if HB 6 were to be fully repealed.

However, The PUCO has not yet produced all documents that were subpoenaed by federal authorities last year. Nor would an agency spokesperson give a yes or no answer to whether it had completed its response to those subpoenas.

The PUCO also has not yet provided materials requested by Energy News Network and Eye on Ohio about various communications by individuals at the agency and others for the period after Randazzo’s November 2020 resignation. Those materials could shed light on whether the PUCO has been asked to thoroughly investigate and address any alleged corruption, whether there have been communications about the timing or other issues in FirstEnergy cases, and more.

FirstEnergy admitted last year that a $4.3 million payment to a company linked to Randazzo was made with the expectation of favorable treatment in his official capacity. The PUCO has largely stayed, limited with the piecemeal approach orchestrated by Randazzo before he left. And various people who worked with Randazzo on HB 6 and its aftermath remain at the PUCO.

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Questioning blocked

PUCO hearing examiners, who act in judge-like roles, shut down questioning of FirstEnergy’s former ethics officer on July 21. The case deals with whether FirstEnergy violated Ohio laws requiring corporate separation of utilities’ business from their parents and affiliates. The Office of the Ohio Consumers’ Counsel and others appealed that ruling to the full commission. FirstEnergy’s utilities and the former ethics officer, Ebony Yeboah-Amankwah, opposed that appeal on Aug. 1.

Earlier attempts to avoid the ethics officer’s appearance to answer questions under oath had failed. Then FirstEnergy’s lawyers told hearing examiners they had contacted a federal prosecutor without other parties present and had gotten their view that questions improperly overlapped with matters being investigated in ongoing criminal proceedings. Lawyers for challengers disputed that, saying FirstEnergy had objected even to basic background questions.

A FirstEnergy lawyer had told the hearing examiners the issue was “just a matter of timing.” However, while FirstEnergy is subject to a deferred prosecution agreement, federal authorities have not yet charged Randazzo or former FirstEnergy officers with crimes. And former Ohio House Speaker Larry Householder’s trial isn’t scheduled until next year, after the 2022 elections.

Unless reversed, the ruling could hinder challengers’ ability to prepare for the evidentiary hearing in the PUCO case. addition, the ruling “may block the public’s right to know how the former PUCO chair [Randazzo] may have disadvantaged Ohio consumers in favor of the FirstEnergy Utilities and their affiliates,” the Ohio consumers’ counsel and other challengers argued in their July 26 filing.

On Aug. 4, the Office of the Ohio Consumers’ Counsel also filed motions for additional subpoenas for current and former FirstEnergy executives, including Dowling and current CEO Strah.

Meanwhile, the PUCO still has not granted OCC’s July 7 motion for a subpoena for Jones. The delay is unusual because the issuance of deposition subpoenas is basically a ministerial function, said former PUCO Commissioner Ashley Brown.

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