This monthly newsletter provides updates on Ohio’s ongoing utility corruption scandal and is a joint project of Eye on Ohio, the nonprofit, nonpartisan Ohio Center for Journalism, and the nonprofit Energy News Network.
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FirstEnergy’s CEO has stepped down just as the company announced the completion of an internal management audit, and four regulatory cases at the Public Utilities Commission of Ohio have been stayed until next year. Other developments in the saga surrounding House Bill 6, Ohio’s nuclear and coal bailout law, include:
- FirstEnergy wants the PUCO to block the Office of the Ohio Consumers’ Counsel from releasing documents the consumer advocate got through discovery before a stay took effect.
- The deposition of FirstEnergy’s assistant controller details who was who in the federal government’s July 2020 complaint and sheds light on the role of a Cleveland entrepreneur.
- The law firm retained by Ohio Attorney General Dave Yost to work with the Public Utilities Commission on responses to federal subpoenas and public records requests has multiple ties to House Bill 6.
- A federal court order has approved FirstEnergy’s settlement of shareholder derivative claims, but it’s unclear how that will affect another case where the judge wants more fact-finding before approving the settlement.
PUCO halts four FirstEnergy cases
On Aug. 24, the Public Utilities Commission of Ohio ordered a six-month stay in four FirstEnergy regulatory cases. The stays ensure that little new information will come out of the regulatory cases until after the gubernatorial elections this fall, where the HB 6 corruption scandal is an issue in the contest between incumbent Gov. Mike DeWine and challenger Nan Whaley.
The stay also prevents additional fact-finding interviews called depositions, where the Office of the Ohio Consumers’ Counsel and others sought to ask questions under oath to current and former executives of FirstEnergy. Texts between FirstEnergy executives suggest DeWine and Lt. Gov. Jon Husted played more active roles on HB 6 and on Sam Randazzo’s appointment as PUCO chair than they previously admitted.
U.S. Attorney Kenneth Parker of the Southern District of Ohio asked the PUCO to impose the stay last month, claiming that further action might interfere with “an ongoing investigation into corruption relating to Ohio House Bill 6 and action through the Public Utilities Commission of Ohio.”
Asking other courts or agencies to hold up on cases “is not unusual where there’s a pending criminal investigation,” said former U.S. Attorney David DeVillers. The government may also have additional targets in sight, although he could not comment on any names.
Yet Parker’s request came shortly after PUCO hearing examiners let FirstEnergy halt the deposition of a former ethics and compliance officer for the company. Notably, the Department of Justice has not sought to halt depositions in federal court cases where shareholders seek to recover damages for alleged stock losses.
An Aug. 19 order in one of those cases granted a motion by former FirstEnergy executives Chuck Jones and Michael Dowling to take another deposition of the company, noting that a former assistant controller, Tracy Ashton, could not answer many questions central to the case.
- Freeze of regulator’s HB 6 cases could further harm Ohio consumers (Energy News Network/Eye on Ohio)
- PUCO agrees to postpone FirstEnergy investigations (The Press)
- Utility regulators freeze investigations into FirstEnergy bribes (Ohio Capital Journal)
- Ohio Lt. Gov. Jon Husted pushed to make tainted House Bill 6 nuclear bailout even larger (Cleveland.com)
FirstEnergy wants an additional gag order
FirstEnergy has asked the PUCO to also block the Office of the Ohio Consumers’ Counsel from producing various documents in response to public records requests for materials the consumer advocate obtained in the cases.
After months of delay, FirstEnergy asserted blanket confidentiality claims for roughly 470,000 documents produced in securities litigation. A protective order in the PUCO cases requires the consumers’ counsel to inform FirstEnergy each time it wishes to disclose any document. The consumers’ counsel has yet to file its response to FirstEnergy’s Sept. 7 motion.
As a practical matter, the arrangement built further delay into the process. And if the company’s motion is granted, it could block the release of materials that really are not confidential and have otherwise already been disclosed.
Prior to the PUCO’s Aug. 24 stay of its regulatory cases, for example, the Energy News Network and Eye on Ohio asked the consumers’ counsel for digital copies of various exhibits to a deposition of Tracy Ashton, FirstEnergy’s assistant controller, which was filed with the PUCO on Aug. 19.
Although Ashton could not answer many questions put to her, she nonetheless shed light on the identities of various actors in the HB 6 saga. Among other things, she indicated that Cleveland entrepreneur Tony George helped set up a meeting between FirstEnergy and Householder and had other interactions with FirstEnergy executives. A Feb. 4 audit released by federal regulators found that some charges for his work had likely been passed on to ratepayers. An audit in one of the stayed PUCO cases reached a similar conclusion last year.
- FirstEnergy pumped $1M into backing DeWine, records show (Dayton Daily News)
- Cleveland businessman Tony George was go-between for FirstEnergy, ex-House Speaker Larry Householder over nuclear bailout (Cleveland.com)
A small world after all?
Dinsmore & Shohl, a law firm retained by Ohio Attorney General Dave Yost to work with the PUCO on responses to federal subpoenas and public records requests, has multiple ties to the push for HB 6.
Ohio Rep. Bill Seitz, who pushed for HB 6 and later defended former House Speaker Larry Householder from expulsion, is “of counsel” at the firm. Former partner Eric Lycan served as an officer of the dark money group Generation Now and other nonprofits that played roles in the scandal. And Matthew Davis at Dinsmore’s lobbying affiliate did work on behalf of FirstEnergy Solutions (now Energy Harbor).
The Dinsmore firm was selected because it was a large firm with criminal law expertise that didn’t practice before the PUCO, said spokesperson Bethany McCorkle at the Ohio attorney general’s office.
Even if everything is entirely proper, the connections may show “just how insular the power community is in the state,” said Neil Waggoner, senior campaign representative for the Sierra Club’s Beyond Coal campaign in Ohio.
The Ohio Attorney General also hired Kegler Brown Hill & Ritter in 2020 to represent the PUCO in a case brought by the city of Cincinnati to block the HB 6 nuclear charges, as well as another matter. Roger Sugarman was a partner with Kegler Brown at that time but left the firm in December 2020.
Since August 2021, Sugarman has represented Randazzo in the state’s civil racketeering case. Randazzo and former FirstEnergy executives Chuck Jones and Michael Dowling were added as defendants at that time. Sugarman said his representation of Randazzo is proper because Cincinnati’s constitutional claim against the HB 6 charges was not “substantially related” to the Ohio attorney general’s racketeering claims relating to HB 6.
The Franklin County Court of Common Pleas consolidated the state court cases on Dec. 14, 2020. And Cincinnati and Columbus did not move to dismiss their claims until December 2021. Except for the Ohio attorney general’s efforts to freeze assets and a related appeal, the state court cases have otherwise been largely stayed since February 2021.
- Special counsel hired to help Ohio regulators with document requests has multiple ties to HB 6 push (Eye on Ohio/Energy News Network)
An abrupt departure
FirstEnergy CEO Steven Strah has retired from the company and its board. The same day FirstEnergy announced the news, it disclosed that the company had completed an internal management review required under a settlement agreement for shareholder derivative claims.
Strah announced last fall that as far as he was concerned, the HB 6 scandal was in the company’s “rearview mirror,” and FirstEnergy was moving ahead “to rebuild trust and confidence.” The settlement that led to the management review was apparently part of that effort.
FirstEnergy’s Sept. 15 filing with the Securities and Exchange Commission did not say whether the internal management review found any wrongdoing by Strah.
Emails made public last month before the PUCO’s regulatory stay indicate that Strah was involved in discussions on HB 6 and had supported “under the radar” measures to include terms in the law that would make the company’s Ohio utilities recession-proof. At the time, a FirstEnergy spokesperson had said Strah and other current employees were not involved in improper activities relating to HB 6.
- FirstEnergy CEO Steve Strah abruptly retires. Search for outsider begins (Columbus Dispatch)
- FirstEnergy CEO Steven Strah emailed about “under the radar” House Bill 6 provision that cost Ohio ratepayers millions of dollars (Energy and Policy Institute)
Settlement approved, but expect an appeal
FirstEnergy’s management review was part of a $180 million settlement package announced last winter, which seeks to resolve shareholder derivative claims in multiple courts relating to the HB 6 scandal. A shareholder derivative case seeks to make a corporation whole for losses incurred from alleged wrongful conduct by its officers and directors.
On Aug. 23, U.S. District Court Judge Algenon Marbley of the Southern District of Ohio approved the settlement package for the cases consolidated in his court. In his view, the monetary award got most of the available insurance money, “while preserving the possibility of salary clawbacks.” He commended the settlement’s governance reforms, noted the complexity and uncertainty of continued litigation, and stated that the public had other “means of truth-seeking” about the alleged corruption.
Expect FirstEnergy and some other parties to argue that the approval in Marbley’s courtroom resolves all or most claims in a case before U.S. District Court Judge John Adams in the Northern District of Ohio. Adams recently appointed new plaintiffs’ lawyers to question witnesses under oath and do other fact-finding before he would make a ruling on the settlement.
One or both cases will likely be appealed.
- FirstEnergy $180 million derivative deal wins final approval. Is it really over? (Reuters)
- Boies Schiller tripped up in apparent conflict in FirstEnergy derivative suit (Reuters)
- FirstEnergy Bribery-Related Derivative Suit Settlement Receives Final Approval; What Happens Next? (D&O Diary)