By John Stang
Two potential class action lawsuits were filed this week in federal court this week against FirstEnergy Corp. for its suspected role in a $60 million bribery and money laundering scheme to prop up a pair of financially troubled nuclear power plants in Ohio.
On Wednesday, FirstEnergy stockholder Diane Owens sued in U.S. District Court in Columbus to seek unspecified damages from the Akron-based power company and several executives, including CEO Chuck Jones.
On Monday, Jacob Smith, of Lorain County, filed a lawsuit in the same court to seek unspecified damages and other relief from FirstEnergy and subsidiary FirstEnergy Services.
Smith says he was damaged as a homeowner who would pay the rate increase enacted in 2019 state legislation that established a $150 million annual bailout for the Davis-Besse and Perry facilities. His complaint does not address the fact that the rate hike would not go into effect until 2021, focusing instead on the alleged racketeering case.
Owens’ lawsuit addresses the same racketeering allegations, adding that the July 21 unsealing of the indictment papers dramatically cut the value of FirstEnergy’s shares. The value of FirstEnergy’s stock fell from $41.26 per share on July 20, the day before the indictment was unsealed, to $22.85 on July 22, according to the filing.
“FirstEnergy shareholders have suffered massive losses as a result of these declines,” the suit says. “The Individual Defendants also had the motive and opportunity to commit fraud, selling millions of dollars’ worth of FirstEnergy stock at artificially inflated prices during the Class Period.”
Attorneys for both plaintiffs are seeking to expand the lawsuit into class-action cases, asserting claims for a much larger group of ratepayers.
Smith’s attorney, Dennis Murray of Sandusky, contends in the lawsuit FirstEnergy Corp.’s actions affected “tens of thousands, if not hundreds of thousands of persons.” Cleveland.com also reported Smith holds 108 shares of FirstEnergy stock.
Both complaints seek jury trials.
The two power plants were at the time owned by FirstEnergy Corp. subsidiary FirstEnergy Solutions, which went filed for Chapter 11 bankruptcy protection in 2018 and emerged last year as the stand-alone company Energy Harbor.
FirstEnergy Corp. declined Thursday to comment on any litigation. Spokeswoman Jennifer Young noted the company does not receive any revenue from the controversial rate increase, since Energy Harbor is now unaffiliated with FirstEnergy Corp.
Smith’s and Owens’ complaints largely rely on the federal criminal affidavit unsealed on July 21 against then-Ohio House Speaker Larry Householder (R), three lobbyists, and another political operator to funnel and launder money from “Company A” and affiliates from 2017 through 2019. Federal authorities have not denied that Company A is FirstEnergy Corp.
FirstEnergy Solutions had planned to retire the reactors, respectively by May 2020 and May 2021, because it did not have the money to operate them economically. But it reversed course after the Ohio Legislature in July 2019 passed House Bill 6 to bail them out.
The legislature set rate hikes ranging from $0.85 per month for a home up to $2,400 per month for a large industrial business. All Ohio ratepayers must pay the rate hike, regardless of if they are FirstEnergy Corp. customers. That translates to $150 million a year going to the reactors, from next year through 2027.
The $60 million allegedly went to bribes to Householder and the other four; to fund the election of roughly 20 freshmen state representatives in 2018, who would vote for Householder to become speaker in 2019; to support the bailout legislation; and to finance opposition to a proposed ballot initiative to repeal the rate hikes. That ballot initiative died in late 2019.
On Thursday, a federal grand jury formalized the indictment of Householder and the four others on the racketeering conspiracy charges announced last week. They face a potential maximum of 20 years in prison, a fine of up to $250,000, and possible forfeiture of the $60 million their venture received.
The Ohio House on Thursday also unanimously stripped Householder of his speakership, replacing him via a 55-38 vote with Rep. Bob Cupp (R). Cupp told Ohio news organizations that the legislation on the controversial rate hike will be revisited.
Ohio Gov. Mike DeWine (R) last week supported the repeal of House Bill 6, but said it should be replaced with new legislation to support the nuclear plants.
FirstEnergy Corp. has denied wrongdoing in the Householder affair, and has said it is cooperating with the ongoing federal investigation.
“We are having discussions with the Department of Justice lawyers and will fully comply with the subpoenas,” Jones told financial analysts during the company’s July 24 teleconference on its second-quarter earnings. “I believe that FirstEnergy acted properly in this matter and we intend to cooperate fully with the investigation to among other things, ensure our company and our role and supporting House Bill 6 is understood as accurately as possible.”
Responding to the federal questions in the subpoena will require an internal assessment of the statement in the 81-page criminal affidavit filed last week in the case against Householder and his associates, Jones said.
He declined to elaborate to analysts on the details of the FBI’s case, other than saying FirstEnergy provided 25% of the funding in the campaign to pass House Bill 6. He declined to elaborate on that figure.
FirstEnergy plans to do an internal review of the FBI’s allegations. Jones said he is not the CEO mentioned in parts of the FBI affidavit, declining to elaborate. He also declined to say when FirstEnergy became aware of the investigation.
The FBI affidavit suggests 84 phone contacts between Householder and Jones from February 2017 to July 2019, along with contacts with two other executives, Cleveland.com reported last week. Jones declined to discuss that report.
He stressed that FirstEnergy and the former FirstEnergy Solutions are separate entities, with FirstEnergy having no control over what is now Energy Harbor. Jones said no FirstEnergy executives are on that company’s board of directors. He denied making payments to the indicted lobbyists: “I’ve never made a payment to a lobbyist in my life.”
