By John Stang
As corporate wheeler-dealer Carl Icahn showed interest in obtaining millions of dollars worth of its voting securities, FirstEnergy Corp. this week said it is revampinp its management style in the wake of a $60 million bribery scandal related to its two Ohio reactors.
FirstEnergy’s leaders discussed that overhaul in a Thursday teleconference on its fourth quarter and annual filings with analysts.
“The board and management are focused on a critical objective — to move forward from the past actions of certain former executives and take the steps necessary to improve the tone at the top of our culture of ethics and the way we do business,” said Chris Pappas, FIrstEnergy’s interim executive director. Pappas is a board member who became executive director last October, pending appointment of someone else.
Also last October, FirstEnergy’s board of directors fired CEO Chuck Jones along with Dennis Chack, senior vice president of product development and marketing; Michael Dowling, senior vice president of external affairs; and Robert Reffner, chief legal officer.
FirstEnergy has been accused of — but not so far charged with — funneling and laundering $60 million in bribes and hidden political contributions to former Ohio House Speaker Larry Householder (R) and the campaigns of many legislative allies in order to have ratepayers subsidize FirstEnergy’s operation of the financially struggling Davis-Besse and Perry reactors.
The FBI has charged Householder and four political operatives with racketeering. Two operatives have pled guilty. Householder, who lost his speakership over the charges, and two allies have maintained their innocence.
Former FirstEnergy subsidiary FirstEnergy Solutions now operates the two Davis-Besse and Perry reactors and had planned to retire them, respectively by May 2020 and May 2021, because it did not have the money to operate them economically.
But the company reversed course after the Ohio Legislature in July 2019 passed House Bill 6 to provide a $150 million annual financial bailout to the power plants, starting in 2021. It was to be paid with an $0.85 monthly increase in the electric bill for each Ohio residential utility customer, regardless of whether that home is a FirstEnergy customer.
The FBI alleged that FirstEnergy bribed Householder, and supported election of 21 new representatives in 2018 who would ensure Householder’s selection as House speaker. Householder would then ensure the state’s ratepayers would subsidize the two reactors with a rate hike.
Also on Thursday, FirstEnergy announced that John Somerhalder has been appointed vice chairman and executive director of FirstEnergy’s board, effective March 1. Somerhalder had been interim president of CenterPoint Energy, Inc., an electric and natural gas utility. Somerhalder’s duties will include repairing FirstEnergy’s relations with regulators and the financial community.
Meanwhile, FirstEnergy is creating a new position of chief compliance and ethics officer. The company also has in place an independent committee with outside counsel to investigate the Householder affair internally.
According to a Thursday filing with the Securities and Exchange Commission (SEC), FirstEnergy said the independent committee is also looking into $4 million that FirstEnergy had earlier paid a consulting firm owned by Sam Randazzo, who later became chairman of the Public Utilities Commission of Ohio, which regulates FirstEnergy.
Acting CEO Steve Strah said FirstEnergy is rethinking how it approaches political advocacy, including setting some limits on its involvement in politics. That includes not sending money to 01(c)4 groups such as Generation Now, which is controlled by Householder. That group is pleading guilty to being the middleman in funneling money from FirstEnergy to Householder and his allies.
Corporate officers stressed that FirstEnergy is fully cooperating with the U.S. Department of Justice and the Securities and Exchange Commission about the Householder affair and related issues.
“We’re taking a new direction in building up our reputation and our brand,” Strah said.
All this is taking place as Icahn sent a letter Tuesday to FirstEnergy announcing his interest in the Akron-based corporation.
In a regulatory filing, FirstEnergy said Icahn Capital LP filed a document with the Federal Trade Commission and the Department of Justice to comply with the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Ichan’s Justice filing described “‘a present good faith intention to acquire voting securities of (FirstEnergy) in an amount exceeding $184 million but less than $919.9 million of the voting securities of the issuer, depending upon various factors including market conditions,’” FirstEnergy said in its own regulatory filing.
“FirstEnergy does not know whether Carl Icahn and his affiliates have acquired shares of FE common stock and/or derivatives and does not know Icahn’s intentions with respect to FirstEnergy or any such acquisition,” the company said in its SEC filing Thursday.
Strah told analysts: “We can’t really comment on it.”
Meanwhile, the SEC filing said FirstEnergy made a profit of about $1 billion on some $10.8 billion in revenue in 2020. In 2019, FirstEnergy tallied $912 million in profits on about $11 billion revenue.
