FirstEnergy CEO Addresses Householder Scandal

FirstEnergy CEO Addresses Householder Scandal

AKRON, Ohio – On July 27, 2020 FirstEnergy Corp. released statements regarding the investigation and arrest of Ohio House Speaker Larry Householder and his alleged co-conspirators in a $60 million bribery ring.

FirstEnergy Corp. (NYSE: FE) today issued the following statement from Chief Executive Officer Charles E. Jones:

On Friday morning, July 24, 2020, FirstEnergy Corp. (FirstEnergy) hosted a conference call and live webcast to discuss our second quarter financial results with investors and analysts. Following the call, there were some additional questions that led me to believe it might be beneficial to clarify several points that I made.

The first relates to details of the separation of FirstEnergy and FirstEnergy Solutions (FES), which began when FirstEnergy announced a strategic review of competitive generation in November of 2016. Also, in November, the FES board was replaced with two independent board members and three new board members from the competitive generation business. FirstEnergy and FES independently engaged legal and financial advisors to help guide each of us through the complicated strategic review. At that point, I and other members of FirstEnergy leadership no longer had any decision-making power regarding the strategic direction of FES. This fell under the purview of the FES board. Leaders at FirstEnergy, me included, had frequent discussions with FES leadership and its board about the strategic review and, as it progressed, numerous matters related to FES, including employee impacts and shared services. As events unfolded, FES’ focus turned increasingly to bankruptcy as the sole alternative, culminating with the bankruptcy filing in March 2018. Immediately after, FES was deconsolidated from FirstEnergy’s financial statements.

The second clarification I’d like to make is regarding FirstEnergy making decisions under the shared services agreement with respect to external affairs. During the call, a question was asked as to whether we were “running external affairs” for FES following our separation. As I responded at the time, this was not the case. While FES received support from FirstEnergy’s External Affairs team to varying degrees, that support decreased over time, particularly, as the FES bankruptcy approached. FES made its own decisions after its new board was in place with respect to its external affairs strategy.

This third clarification, while perhaps unnecessary, is related to my statement that in every interaction with political leaders, I talked about FirstEnergy’s obligations to conduct its business transparently, ethically, and professionally. While those responsibilities are central to my actions, I did not mean to suggest that I express that responsibility literally in every single communication.  

As I have said many times, conducting our business ethically and acting with integrity and honesty are foundational principles for the entire FirstEnergy family as well as me personally. These high standards have fostered the trust of our employees, customers, and the financial community.  

The Case Against Householder

The Ohio Speaker of the House was arrested and charged in a federal racketeering conspiracy involving approximately $60 million paid to a 501(c)(4) entity to pass and uphold a billion-dollar nuclear plant bailout. 

It is alleged that Larry Householder, 61, of Glenford, Ohio, and the enterprise conspired to violate the racketeering statute through honest services wire fraud, receipt of millions of dollars in bribes and money laundering.

 Four other individuals were also arrested and charged. They include:

• Mathew Borges, 48, of Bexley, a lobbyist who previously served as chair of the Ohio Republican Party;
• Jeffrey Longstreth, 44, of Columbus, Householder’s longtime campaign and political strategist;
• Neil Clark, 67, of Columbus, a lobbyist who owns and operates Grant Street Consultants and previously served as budget director for the Ohio Republican Caucus; and
• Juan Cespedes, 40, of Columbus, a multi-client lobbyist.

Generation Now, a corporate entity registered as a 501(c)(4) social welfare organization, was also charged.

According to the 80-page criminal complaint unsealed recently, from March 2017 to March 2020, the enterprise received millions of dollars in exchange for Householder’s and the enterprise’s help in passing House Bill 6, a billion-dollar bailout that saved two failing, Ohio nuclear power plants from closing.

The defendants then also allegedly worked to corruptly ensure that HB 6 went into effect by defeating a ballot initiative to overturn the legislation. The Enterprise received approximately $60 million into Generation Now from an energy company and its affiliates during the relevant period.

As alleged, in February 2017, Longstreth incorporated Generation Now as a 501(c)(4) social welfare entity purporting to promote energy independence and economic development; however, the entity was secretly controlled by Householder. As Clark stated in a recorded conversation, “Generation Now is the Speaker’s (c)(4).” Pursuant to federal law, the names and addresses of contributors to 501(c)(4)s are not made available for public inspection. 

In March 2017, Householder began receiving quarterly $250,000 payments from the related-energy companies into the bank account of Generation Now. The defendants allegedly spent millions of the company’s dollars to support Householder’s political bid to become Speaker, to support House candidates they believed would back Householder, and for their own personal benefit.  When asked how much money was in Generation Now, Clark said, “it’s unlimited.”

The affidavit filed in support of the criminal complaint also alleges:

• In 2018, the enterprise spent energy company-to-Generation Now money on approximately 21 different state candidates – 15 (including Householder) in the primary, and six additional candidates in the general election.  The Enterprise spent more than one million in fall 2018 alone to flood the airways with negative ads against enterprise opponents.  Most of these candidates won the 2018 general election. All who won voted for Householder as Speaker.

• Money passed from the energy company through Generation Now was used to pay for Householder campaign staff, which would otherwise have been paid by Householder’s candidate committee, Friends of Larry Householder.
   
• Householder received more than $400,000 in personal benefits as a result of the payments into Generation Now, including funds to settle a personal lawsuit, to pay for costs associated with his residence in Florida, and to pay off thousands of dollars of credit card debt.
   
• The enterprise paid $15,000 to an individual to provide insider information about the ballot initiative and offered to pay signature collectors for the ballot initiative $2,500 cash and plane fare to stop gathering signatures.

The racketeering conspiracy as charged in this case is punishable by up to 20 years in prison.

“It takes courage for citizens to assist law enforcement in the ways detailed in the affidavit,” U.S. Attorney David M. DeVillers said. “We are grateful to those who felt a moral duty to work together with agents in bringing to light this alleged, significant public corruption.”

“All forms of public corruption are unacceptable,” stated FBI Cincinnati Special Agent in Charge Chris Hoffman. “When the corruption is alleged to reach some of the highest levels of our state government, the citizens of Ohio should be shocked and appalled.”

The case is being investigated by the FBI. Deputy Criminal Chief Emily N. Glatfelter, Assistant United States Attorney Matthew C. Singer, as well as Assistant Deputy Criminal Chief Timothy Mangan and Assistant United States Attorney Megan Gaffney Painter, are representing the United States in this case.

A criminal complaint merely contains allegations, and defendants are presumed innocent unless proven guilty in a court of law.