Disclosures say Ohio regulator paid $4.3M acted on behalf of FirstEnergy

Credit: Ron Schwane

Credit: Ron Schwane

An Ohio utility regulator who was paid $4.3 million acted “at the request or the benefit of (FirstEnergy) as a consequence of receiving such payment,” according to detail buried in a previous disclosure made by FirstEnergy to the Securities and Exchange Commission.

Akron-based FirstEnergy Corp. is cooperating with federal investigators prosecuting a public corruption case over a 2019 energy law that applied costs to every Ohio electric customer.

So far FirstEnergy has fired top executives, including chief executive Chuck Jones and senior vice presidents Dennis Chack and Mike Dowling; launched an internal investigation that found transactions that lacked documentation or were improperly accounted for; and made disclosures to the SEC about a $4.3 million payment made in January 2019.

The payment ended a “purported consulting agreement” with someone who was appointed in February 2019 and started in April 2019 as an Ohio utility regulator.

The disclosures don’t specifically name attorney Sam Randazzo. Gov. Mike DeWine appointed Randazzo chairman of the Public Utilities Commission of Ohio in February 2019 and he started the job in April 2019.

At the bottom of a FirstEnergy disclosure made Nov. 17 to the SEC, the company used careful language to describe the conduct that followed the $4.3 million payment.

Schedule 1

Noncompliance Event

Payment by FE in January 2019 to an individual (the “Individual") or the consulting firm related to such Individual of approximately $4.3 million in connection with the termination of a purported consulting agreement (which had been in place since 2013) and the conduct corresponding to such payment of such consulting firm and the Individual (acting at the request or for the benefit of FE as a consequence of receiving such payment) and of FE (or any of FE's directors, officers or employees) during the time period after such payment during which the Individual was acting in any governmental or regulatory capacity, in each case, as previously disclosed to the Administrative Agent and the Lenders on or prior to the date hereof. Following such payment, in February 2019 such Individual was appointed (and assumed such position in April 2019) to a full-time role as an Ohio governmental official directly involved in regulating The Cleveland Electric Illuminating Company, Ohio Edison Company and The Toledo Edison Company, including with respect to distribution rates.

- FirstEnergy disclosure to the Securities and Exchange Commission

“FirstEnergy believes that payments under the consulting agreement may have been for purposes other than those represented within the consulting agreement. The matter is a subject of the ongoing internal investigation related to the government investigations,” the company says in filings.

FBI agents searched Randazzo’s condo in November. Days after the SEC disclosures and the FBI raid, Randazzo resigned from the Public Utilities Commission of Ohio.

Randazzo could not be immediately reached for comment.

Multiple government agencies are investigating FirstEnergy Corp:

U.S. Department of Justice and Federal Bureau of Investigation: Federal prosecutors allege that utility companies funneled more than $60 million through nonprofit groups to elect Republican Larry Householder as Ohio House speaker, who in turn helped pass and defend a $1.3 billion bailout bill. Prosecutors didn’t specifically name FirstEnergy and its former affiliate FirstEnergy Solutions but both companies have said they are cooperating with the investigation. Householder and four others were arrested. Two have pleaded guilty. Householder and two other men have pleaded not guilty to federal racketeering charges.

Securities and Exchange Commission: The SEC opened an investigation in August into possible violations of securities laws.

Federal Energy Regulatory Commission: Investigators gave notice to FirstEnergy on Jan. 21, 2021, to preserve and maintain all documents and information related to an ongoing audit.

Public Utilities Commission of Ohio: The PUCO is examining FirstEnergy’s political and charitable spending, auditing the corporation and ordering the company to submit to a rate case.

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