Federal agents arrested on Tuesday Larry Householder, the Speaker of the Ohio House of Representatives, as well as several lobbyists, on charges that the group used $60 million of funds provided by the monopoly utility FirstEnergy Corp. in exchange for passing a law that bailed out that company’s nuclear and coal plants.
While the government’s criminal complaint refers to FirstEnergy Corp. only as “Company A Corp.,” it makes clear that the monopoly utility both provided the funding and was intimately involved in the scheme that Householder and his circle of aides and lobbyists ran. Householder used the $60 million provided by FirstEnergy to finance a takeover of the Ohio House of Representatives by politicians loyal to Householder, who then installed him as House Speaker in January 2019 after a fierce leadership battle.
Householder and the rest of the racketeering operation returned FirstEnergy’s largesse by ramming through HB 6, the law that bailed out FirstEnergy’s nuclear and coal plants that were economically struggling, as well as other coal plants in which FirstEnergy held partial ownership.
The bill – which cost electric customers in Ohio billions of dollars – also undid Ohio’s standards requiring utilities to use renewable energy for a modest portion of their generation, and to help customers save electricity via energy efficiency measures.
Householder’s operation then further used FirstEnergy’s money to defend against a ballot initiative which threatened to undo HB 6.
You can read a version of the criminal complaint that EPI has annotated here:
Three big things we learned from the FBI’s criminal complaint against Householder
- FirstEnergy Corp. bankrolled the alleged criminal conspiracy
The indictment does not name as defendants FirstEnergy Corp, its subsidiary FirstEnergy Service Company, or FirstEnergy Solutions (now known as Energy Harbor), the company which owned the nuclear assets that HB 6 bailed out, and which FirstEnergy spun off in bankruptcy restructuring.
However, it makes clear that these companies provided nearly all of the $60 million to fund the operation, most of which it routed through a 501(c)(4) dark money organization called Generation Now.
The Columbus Dispatch reports that FirstEnergy Corp. “is clearly identified in the details throughout the affidavit, including the dates of its bankruptcy, words spoken by its CEO Charles Jones and its unique ownership of two nuclear power plants in Ohio.”
The criminal complaint implicates FirstEnergy Corp., identified as Company A Corp., and its service company, which is identified as Company A Service Co. Bankrupt subsidiary FirstEnergy Solutions, which emerged from bankruptcy as a separate new company called Energy Harbor in February 2020, is identified as Company A-1.
The Energy and Policy Institute previously reported on the shared services agreement described in the complaint, whereby FirstEnergy Corp. continued to provide political services to its supposedly “independent” bankrupt subsidiary during the fight over House Bill 6.
- Exactly how Householder and his associates spent FirstEnergy Corp’s $60 million
The criminal complaint describes how the Householder-run operation then spent FirstEnergy Corp.’s money in four key ways:
First, the operation used the money to finance the campaigns of 21 Republican candidates, referenced in the complaint as “Team Householder,” for the Ohio House in their primary and general election campaigns. The money mattered: the complaint notes that one FirstEnergy-backed candidate defeated his Democratic opponent in the general election by only 137 votes.
The complaint makes clear that Householder, his aide, and affiliated lobbyists directed the spending, which would violate federal election laws. Householder conceded as much when asked by reporters about one of the key PACs that worked to elect his slate of allies, in March of this year:
“Federal law prohibits me from coordinating with the Growth and Opportunity PAC so I cannot answer why that PAC is advocating in your area,” Householder said. “I encourage you to contact the Growth and Opportunity PAC regarding those questions.”
Second, Householder then had to hold up his end of the bargain in the operation that one defendant called “pay-to-play” by passing HB 6, the law to bail out FirstEnergy’s nuclear plants. FirstEnergy also promised to use the bailout to keep coal plants online. By the time the law passed, it had been laden down with more coal bailouts, and also became the vehicle to kill Ohio’s renewable energy and energy efficiency standards.
But the legislation was woefully unpopular, as some of the defendants acknowledged in text messages cited in the complaint.
“Polling shows the more we explain it, the worse it does,” Householder’s aide, Jeff Longstreth, told Householder in a text message.
To ram the bill through, the operation used FirstEnergy’s money to buy ads, providing political cover to legislators to vote yes. The charging document alleges that the operation spent $9.5 million to get the bill through the House and $7.3 million to get it through the Senate.
Third, after the law passed, a coalition of environmentalists and consumer advocates and organized to run a ballot initiative to repeal it. The enterprise spent $38 million of FirstEnergy’s money to defeat the ballot initiative, according to the complaint.
Householder’s racket responded, according to the complaint, by “conflicting out” signature collecting firms: essentially paying them to do nothing, so that the initiative organizers could not find top firms without conflicts of interest to run the ballot campaign. The complaint alleges that the criminal operation also used FirstEnergy Corp.’s money to bribe petition collectors.
The “conflicting out” and bribery tactics have been used by other utilities opposing ballot initiatives, including a Florida Power and Light-financed group and an Arizona Public Service-financed group.
Fourth and finally, Householder and other defendants used FirstEnergy’s money to personally enrich themselves, according to the complaint. Householder used $500,000 of the funds to pay for a house in Florida, for his own political campaigns, and to settle a lawsuit.
- FirstEnergy Corp. not only funded, but was intimately involved in the operation
While the FBI has not yet charged FirstEnergy with wrongdoing, it describes in detail how close the company and its executives were to the alleged racketeering operation.
Householder spoke with FirstEnergy CEO Chuck Jones 30 times during the first half of 2019, and 84 times from early 2017 through July 2019. He spoke with First Energy’s Vice President of External Affairs Michael J. Dowling 14 times during that time period, and with its Ohio Director of State Affairs 188 times during that period.
One of the defendants, lobbyist Matt Borges, is cited in the complaint describing an incident in which he drove Jones and other FirstEnergy executives to the airport in September of 2019, during the ballot initiative fight. Jones requested that Borges divert the car to a place where a person would be collecting signatures to repeal HB 6, so that he could “get out and talk to him.”
3 Big Things We Don’t Know Yet
- Will federal prosecutors charge FirstEnergy Corp. or its executives?
“Everyone in this room knows who Company A is,” U.S. Attorney for the Southern District of Ohio Chris DeVillers told a press conference on Tuesday, citing federal rules for why he would not mention the name of an unindicted party.
Given the excruciating detail in which the complaint describes the relationship between FirstEnergy, its executives, and the defendants, other legal action may be coming.
When asked if the company would face charges, he added:
“We’re going to continue to investigate this, and we’re going to investigate wherever it leads.”
FirstEnergy acknowledged receiving subpoenas.
- What will Ohio legislators do about HB 6?
With federal prosecutors revealing the extent of the bribery and corruption that fueled the passage of HB 6, pressure is likely to mount on legislators to repeal the law.
As one Ohio political reporter noted, “If even half of what the federal government claims is true, the legislation is tainted. Everyone’s involvement is suspect, whether they had pure intentions or not. That goes for Democrats as well as Republicans.”
The bill passed by a razor-thin margin the first time, and some legislators are likely to face close elections this fall. At least one Republican candidate already has pledged to return a contribution from Householder’s PAC.
- Who are “Company B” and “Company C”?
While the vast majority – almost all – of the funding supplied to the alleged conspiracy came from FirstEnergy’s coffers, other unnamed companies contributed.
“Company B” wired $100,000 on Oct. 26, 2018 to “Dark Money Group 1” – likely Hardworking Ohioans, Inc., an entity set up to run negative advertisements against opponents of Householder’s slate of candidates in that year’s general election. The complaint describes Company B as “an energy company with interests aligned with Company A.”
Coal producer Murray Energy revealed making a $100,000 payment to Hardworking Americans on October 26, 2018 in a statement of financial affairs filed in its ongoing bankruptcy case. Murray Energy benefited from House Bill 6’s stealth bailout of the Sammis coal-fired power plant owned by FirstEnergy Solutions; the company has provided the coal to that plant.
The “CEO of Company C” also wired $100,000 to Dark Money Group 1 on Oct. 29. Company C is described as having “interests aligned with Company A.”
More of EPI’s coverage of FirstEnergy’s public corruption over the past two years
EPI has reported on the FirstEnergy bailout and corruption scandal in depth throughout 2019 and 2020. Read more of our coverage from researcher Dave Anderson here:
Energy Harbor reveals money, risks involved in Ohio bailout, March 26, 2020