FirstEnergy Corp. has agreed to pay a $230 million fine for its role in a major bribery scandal involving two Ohio reactors and the now-ousted former Ohio House speaker.
The Akron-based corporation’s CEO Steven Strah and the acting U.S. attorney general for the Southern District of Ohio Vipal Patel signed a legal agreement Tuesday and announced it Thursday. Half the fine will go to the federal government and half will go to the state. An intermediary set up in Delaware by FirstEnergy called Partners For Progress is also forfeiting roughly $6.5 million still in its coffers.
In a Friday morning conference call with analysts, FirstEnergy CEO Steven Strah said the $230 million will come from cash that FIrstEnergy has on hand. “No portion will be recovered from customers,” he said.
In a Thursday press release Strah said: “Moving forward, we are intently focused on fostering a strong culture of compliance and ethics, starting at the top, and ensuring we have robust processes in place to prevent the type of misconduct that occurred in the past.”
FirstEnergy’sThursday filing with the U.S. Securities and Exchange Commission said the company is “unable to predict the adverse impacts on federal or state regulatory matters, including with respect to rates, and, therefore, any of these risks could impact us significantly beyond expectations.”
“Moreover, we are unable to predict the potential for any additional regulatory actions, any of which could exacerbate these risks or expose us to adverse outcomes in pending or future rate cases,” the filing said.
While its officers have not been formally charged, the federal government and FirstEnergy have been in talks for weeks on a plea agreement. In signing the plea deal, the corporation is pleading guilty to a single charge of conspiracy to commit honest services wire fraud.
In addition to its $230 million fine, FirstEnergy has agreed to cooperate with all government probes into this matter. It also agreed to hire a new chief legal officer, separate from the company’s chief ethics and compliance officer, to oversee the company’s legal and internal audit departments. Further, FirstEnergy said it would review its lobbying and political practices.
In Tuesday’s settlement agreement, both sides concur on the facts of how the bribery scandal unfolded.
According to the agreement, FirstEnergy used two intermediary organizations — Partners for Progress and Generation Now, both incorporated in Delaware — to move roughly $53 million of the $60 million it is accused of using to bribe former House Speaker Larry Householder (R) and four lobbyists and campaign allies.
The company is accused of bribing these officials to elect a slate of freshman legislators who would put Householder in charge of the Ohio state house in order to pass a bill into law that would raise rates on all Ohio utility customers. The measure, House Bill (H.B.) 6, would provide $150 million in annual subsidies to help FirstEnergy’s financially struggling Davis-Besse Nuclear Power Station and Perry Nuclear Power Plant. The Ohio General Assembly passed H.B. 6 in 2019.
A year ago, the FBI arrested Householder, three lobbyists and a former campaign chairman on money laundering charges. Householder and one lobbyist are fighting the charges. Two of the five have pleaded guilty. One lobbyist, Neil Clark, died by suicide earlier this year.
Householder was stripped of his speakership last year and formally ejected from the legislature earlier this year. The Ohio General Assembly unanimously repealed House Bill 6 in its 2021 session.
The joint court filing also said FirstEnergy funneled $22 million since 2013 to two unidentified companies operated by utilities lobbyist Sam Randazzo. Of that $22 million, $4.3 million went to Randazzo in early 2019 just before Gov. Mike DeWine appointed him chairman of the Public Utility Commission of Ohio (PUCO). Randazzo’s purpose as chairman of PUCO was to nurture and shield the $150 million annual subsidies earmarked for the Besse-Davis and Perry reactors under H.B. 6, this week’s filing said. Randazzo also allowed FirstEnergy to dodge a future 2024 review of its rates, the filing said. Randazzo resigned in late 2020 when the $4.3 million payout became public.
The governor said in a Thursday statement he knew Randazzo as a “well-known subject matter expert” on energy issues. “If, as stated in the court documents, Sam Randazzo committed acts to improperly benefit First Energy, his motives were not known by me or my staff,” DeWine went on to say.
“In light of today’s admission by First Energy, the campaign will make a monetary donation to the Boys and Girls Clubs in the amount First Energy contributed to the campaign committee,” DeWine added.
Energy Harbor — a former FirstEnergy subsidiary which filed for bankruptcy in 2018 under the name FirstEnergy Solutions — now owns the Perry and Davis-Besse reactors. Several efforts by RadWaste Monitor over the past few weeks to talk with Energy Harbor about the future of those two reactors have been unsuccessful. Energy Harbor split from FirstEnergy in 2019.
Meanwhile, FirstEnergy reported a $58 million profit on revenue of $2.6 billion for the second quarter of 2021, according to a Thursday filing with the U.S. Securities and Exchange Commission (SEC)
That figure compares to $309 million in net income on $2.03 billion in revenue for the same quarter in 2020, or $0.11 per basic and diluted share of common stock, compared to $0.57 per share in the second quarter of 2020.
Thursday’s filing also reported FirstEnergy earned $393 million in net income in the first six months of 2021 on $5.348 billion in revenue. In the same six months in 2020, FirstEnergy posted $383 million in profits on $5.231 billion in revenue.
In Friday morning’s conference call, Strah said the $0.11-per-share figure takes into account FirstEnergy’s deferred prosecution agreement and the $230 million fine it’s agreed to pay.
