Politicial Bribes

FirstEnergy and its shareholders seek secrecy around company bribes

First Energy Corp. and its shareholders argued before a federal judge that they should not be forced to publicly disclose which executives ordered the payment of political bribes that the company admitted to in a related criminal case.

Both parties are awaiting court approval of a proposed settlement in a derivative lawsuit filed by FirstEnergy shareholders. The settlement would require FirstEnergy’s insurers to pay the company $180 million for damages suffered as a result of the company’s role in what prosecutors described as the largest display of public corruption in state history. .

In a settlement with prosecutors reached in July 2021, FirstEnergy, as a company, admitted to a $60 million bribery scheme anchored by the then-Speaker of the Ohio House, and another bribe $4.3 million deal to Ohio’s top utility regulator.

The statement of facts in this agreement, however, anonymizes FirstEnergy officials involved in the scandal. The agreement also provided that FirstEnergy would pay a $230 million fine and cooperate with investigators to potentially avoid a wire fraud charge against the company.

Delaying any possible approval in the shareholder spin-off case, U.S. District Judge John A. Adams last week asked attorneys for the shareholders to say who at FirstEnergy ordered the bribe payments,

Jeroen van Kwawegen, an attorney representing the plaintiffs, objected and did not answer the question, prompting Adams to cut the hearing short. Adams then issued an order calling on all “interested parties” to provide an answer to his question or give a good reason why they cannot release the information. He threatened the lawyers with contempt and possible expulsion from the case for failure to respond.

The shareholders, in arguments on Wednesday, offered to privately tell the judge who at FirstEnergy ordered the bribes. They said they could not do so publicly because it would violate confidentiality rules associated with discovery (the process of sharing evidence before trial) and mediation.

The shareholders’ attorneys said their obligations were to their customers and to FirstEnergy itself, not to the public.

“Such public disclosure could also be detrimental to FirstEnergy given the myriad related criminal and civil proceedings, ongoing regulatory investigations and the pending securities class action lawsuit in the Southern District of Ohio where FirstEnergy is a defendant,” they wrote.

Kwawegen attached emails attached to the filing showing that he asked lawyers for FirstEnergy and its former executives if they would agree to voluntarily release some of the information. It was rejected by the company, its former CEO Chuck Jones, Dennis Chack and Mike Dowling (whose attorney said they were unwilling to provide a “blanket waiver” but asked for specifics). Jones, Chack and Dowling were all fired in October 2020 amid an internal investigation.

FirstEnergy made similar arguments. The lawsuit and settlement, its lawyers said, are intended to repair the harm caused to the company by its actions. Any public liability, they argued, “risks harming the interests of FirstEnergy and its shareholders, which is the exact opposite of what derivative litigation is intended to do.”

Notably silent on the issue: federal prosecutors. They weighed in neither in court. A spokeswoman for U.S. Attorney for the Southern District of Ohio, Kenneth Parker, did not respond to an inquiry.

The spin-off lawsuit dates back to the passage of House Bill 6 in 2019. The energy overhaul legislation, among other provisions, called for a massive bailout of two nuclear power plants owned at the time by a subsidiary of FirstEnergy. Federal prosecutors said the legislation was worth $1.3 billion to the company.

To secure its passage and thwart a referendum attempt to repeal it, FirstEnergy admitted to providing $60 million to a nonprofit secretly controlled by House Speaker Larry Householder, R-Glenford. The householder reportedly used the funds to elect a slate of candidates who would support his candidacy to become Speaker of the House, engineer passage of the bill, thwart a repeal effort and enrich himself personally. He has pleaded not guilty and is awaiting trial, scheduled for January 2023.

FirstEnergy also admitted to secretly paying $4.3 million to energy attorney Sam Randazzo just before Governor Mike DeWine named him chairman of the Ohio Public Utilities Commission. Randazzo has not been charged with a crime and has denied any wrongdoing.

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