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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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Big chunks of the $4.3 million paid by FirstEnergy to a company controlled by Sam Randazzo shortly before he became Ohio’s top utility regulator went to pay taxes and a mortgage and to fund a loan for his daughter’s restaurant, a May 15 federal court filing shows.

Other recent developments in the ongoing saga surrounding House Bill 6, Ohio’s 2019 nuclear and coal bailout law, include:

  • Trial exhibits from the government’s case against former Ohio House Speaker Larry Householder and others show how executives at FirstEnergy and FirstEnergy Solutions maneuvered to transfer funds to dark money groups in ways that would hide the companies’ funding of House Bill 6 efforts as much as possible.
  • Judge Timothy Black has scheduled Householder’s sentencing for June 29 at 1 p.m. in Cincinnati. Sentencing for co-defendant Matt Borges is the following day at 11 a.m.
  • Recent FirstEnergy filings show it plans to refund more than $10 million to customers in Maryland and New Jersey, but it’s unclear when or if Ohioans will get refunds.
  • American Electric Power continues to face litigation and regulatory scrutiny related to HB 6.

Where did the money go?

A May 15 court filing in HB 6-related shareholder litigation shows Sam Randazzo, the former chair of the Public Utilities Commission of Ohio, used large chunks of the $4.3 million one of his companies received from FirstEnergy shortly before he took public office for personal purposes:

  • About $1.5 million went to pay federal taxes in 2019 and 2020.
  • More than $1.4 million was used for mortgage payments in 2019.
  • $100,000 was used for a loan to a restaurant operated by Randazzo’s daughter.

FirstEnergy admitted in a July 2021 court filing in another case that it paid the $4.3 million to Randazzo’s consulting firm shortly before he took office in return for his “performing official action as PUCO Chairman to further FirstEnergy Corp.’s interests relating to passage of nuclear legislation and other specific FirstEnergy Corp. legislative and regulatory priorities, as requested and as opportunities arose.”

Randazzo has denied wrongdoing and is not a party in the shareholder litigation or in any criminal case filed to date. Former FirstEnergy executives Chuck Jones and Michael Dowling, who are defendants in the shareholder case and other cases, have likewise denied liability.

Lawyers representing shareholders in the case said documents relating to Randazzo’s use of the funds are relevant because the information in them could lend support to or weaken claims that the payment was unlawful, as opposed to being for a proper business purpose. The plaintiffs want the court to order the production of any more materials relating to the funds or Randazzo’s characterization of the payment.

Emails from Randazzo’s lawyer, Roger Sugarman, objected to the plaintiffs’ demand for more documents and said materials showing how the money was used had already been provided. He declined to provide further comment.

Moving money

Trial exhibits in the criminal case against Householder and Borges include a text conversation in October 2019 among former FirstEnergy executive Michael Dowling, the company’s controller and chief accounting officer Jason Lisowski, and Michael Van Buren, who acted as treasurer for Partners for Progress, one of the dark money groups that funneled money from FirstEnergy to Generation Now and other organizations in the HB 6 scandal.

Other materials in the packet confirm Lisowski worked with Van Buren to transfer $10 million to Partners for Progress and signed the group’s donor form on behalf of FirstEnergy. The materials also show the group planned to characterize the donation as “educational,” as opposed to political spending for candidates.

FirstEnergy’s July 2021 deferred prosecution agreement states that FirstEnergy and FirstEnergy Solutions paid roughly $53 million from April through October of 2019 in connection with HB 6 and defeating a ballot referendum on it, including $13 million that went through Partners for Progress to Generation Now. Funds paid during the period were intended to help Householder and his efforts, the company said in that document.

FirstEnergy dismissed Dowling and Jones in late 2020, and various additional executives have retired or been dismissed. “Any suggestion that current FirstEnergy employees were involved in any improper activities at issue is false,” said company spokesperson Will Boye. “Due to pending litigation we are unable to provide additional comment.”

Lisowski’s inclusion in the trial exhibits seems to clash with that position, said Dave Anderson, policy and communications director for the Energy and Policy Institute. At a minimum, it raises questions about the effectiveness of financial controls at the company, he added. 

It was arguably [Lisowski’s] job to prevent bribes from being paid with company money, not facilitate them,” Anderson said.

A Federal Energy Regulatory Commission audit sent to Lisowski in February 2022 found fault with FirstEnergy’s failure to properly track and allocate disbursements among its affiliates and subsidiaries. A January 2022 audit in a PUCO case reached a similar conclusion.

“FirstEnergy has submitted updated, confidential policies and procedures to the FERC audit staff for its review,” Boye said. The confidential nature of the submission means consumer advocates and members of the public have not had an opportunity to submit comments.

The same month the FERC audit came out, the Office of the Ohio Consumers’ Counsel sought to take Lisowski’s deposition, meaning to ask him questions under oath, in one of four PUCO cases that are now in abeyance. The PUCO denied that request in April 2022, saying the time for pretrial fact-finding, called discovery, had ended.

Developments since then from the Householder criminal trial and other public records “really open the door to a lot of new questions about FirstEnergy’s possible misuse of ratepayer money,” Anderson said. “A lot of new evidence has been put on the table, and that evidence justifies further discovery by the parties with the Ohio Consumers’ Counsel in those cases.”

The consumers’ counsel has asked the PUCO to lift the stay on that case and others, now that the Householder trial has ended, while FirstEnergy wants the freeze to continue.

Additional trial exhibits confirm that labor unions, nursing home interests, casinos, wealthy individuals, and other corporations also funneled money to Generation Now, the main dark money group at the center of the HB 6 scandal. Bank records released by the city of Cleveland earlier this year also reflect such payments.

Also released by the court was a recording in which Householder and now-deceased lobbyist Neil Clark disparaged former House Speaker Jo Ann Davidson, while Rep. Jay Edwards, R-Nelsonville, bragged about a bet that was not reported in his financial disclosure documents. Edwards has since said he did not make the bet. Critics say the comments, recorded by undercover FBI agents, reflect how Householder and his group conducted business.

Read more:

Sentencing scheduled

U.S. District Court Judge Timothy Black has scheduled Householder’s sentencing for June 29 at 1 p.m. in Cincinnati. Sentencing for co-defendant Matt Borges, a lobbyist and former head of the Ohio Republican Party, will be the following day.

Despite asking for more time to file post-verdict motions, neither defendant asked for a new trial nor for the judge to reverse his prior ruling that the evidence from the trial could support a guilty verdict.

Federal sentencing guidelines set the boundaries for the terms of the sentences Judge Black can impose. “Pre-sentence investigation reports are always sealed,” said spokesperson Jennifer Thornton at the U.S. attorney’s office in Columbus. The maximum allowed under the federal racketeering statute in the case is 20 years.

Read more:

Money back?

FirstEnergy’s recent regulatory filings in Maryland and New Jersey reflect plans to refund customers there a combined total of more than $10 million for improper charges that may have funded some of the company’s activities related to HB 6.

Similar charges are currently on review in pending PUCO cases, but it’s unclear whether the company will ultimately be required to make a refund. For one thing, the cases are currently in abeyance.

Beyond that, prior Ohio Supreme Court cases have been reluctant to refund consumer money. For example, a 2018 case refused to make the company pay back $43 million in unlawful payments for renewable energy credits, even though the charges were subject to after-the-fact regulatory review.

The PUCO can make an exception if it explicitly provides for a refund or adjustment in its order allowing for charges. But intervening parties would likely have to request such a statement from the commission. Any imposition of penalties also would likely not be classified as a refund.

Read more:

AEP update

American Electric Power continues to face litigation and questions about its possible involvement in matters relating to HB 6.

On May 5, an American Electric Power shareholder appealed a federal trial court’s dismissal of shareholder claims against various officers and directors of the company. The case had alleged that the company’s board knew about funds going to a dark money group that in turn helped fund efforts to pass and protect HB 6. The shareholder’s brief is due June 20, and the company’s response is due July 20.

Meanwhile, a company filing with the Securities and Exchange Commission indicates the SEC took testimony from several individuals at AEP in connection with an investigation relating to HB 6. The company previously disclosed that it got an initial subpoena for materials from the SEC in 2021, plus a second one in August 2022. The company declined to tell the Energy News Network which individuals had provided testimony to the federal regulatory agency.

“Given the confidential nature of the investigation and the ongoing nature of the legal proceedings regarding HB 6, we believe those SEC filings are the appropriate manner to provide updates,” said spokesperson Scott Blake. “We are cooperating fully with the SEC’s investigation, and AEP continues to believe that our participation in the HB 6 process was lawful and ethical.”

Exhibits from Householder’s criminal trial could raise additional questions about AEP’s potential involvement. Calendar entries in an exhibit show a July 2017 meeting between Householder and then-CEO Nick Akins, who has since stepped down.

A bill to subsidize the two 1950s-era coal plants that were eventually funded by HB 6 was pending at the time. A nonprofit linked to AEP also gave $200,000 that year to the Coalition for Growth & Opportunity, which spent money for ads to promote that earlier bill. The Coalition for Growth & Opportunity has also been linked to the HB 6 scandal.

Householder’s calendar also shows a meeting with Akins in early 2020, around the time when Householder was pushing to extend his term as speaker of the House. Other entries reflect meetings with AEP’s lawyer and lobbyists.

Another trial exhibit shows multiple payments from AEP to Borges ranging from $2,500 to $5,000 in 2019. The documents do not specify what the money was for. Ohio lobbyist records did not list the company among Borges’ legislative lobbying clients as of the end of that year.

Kathi is the author of 25 books and more than 600 articles, and writes often on science and policy issues. In addition to her journalism career, Kathi is an alumna of Harvard Law School and has spent 15 years practicing law. She is a member of the Society of Environmental Journalists and the National Association of Science Writers. Kathi covers the state of Ohio.