State to audit utility at center of $60M bribery case

State regulators will audit Ohio-based FirstEnergy Corp., adding to the long list of investigations and inquiries the utility faces over its advocacy for House Bill 6.

The Public Utilities Commission of Ohio will hire a third-party auditor by early December to review how FirstEnergy separated from FirstEnergy Solutions, its former subsidiary that owns two nuclear power plants in Ohio. The PUCO wants to know more about the corporate separation during the time leading up to HB6 becoming law.

Both FirstEnergy and FirstEnergy Solutions, which is now called Energy Harbor, benefit from the $1.3 billion bailout law.

Federal prosecutors allege that $60 million in bribes were funneled through Generation Now and other dark money groups to Republican state Rep. Larry Householder and his team to position Householder to be Ohio House speaker, pass HB6 and defeat a referendum campaign to overturn the bailout bill.

Householder and two others — lobbyists Neil Clark and Matt Borges — have pleaded not guilty to federal racketeering charges; lobbyist Juan Cespedes and political strategist Jeff Longstreth switched to guilty pleas last week.

Prosecutors don’t identify the companies that allegedly paid the bribes but descriptions identify them as FirstEnergy and Energy Harbor.

Last week, FirstEnergy fired its chief executive Chuck Jones and two senior vice presidents, Mike Dowling and Dennis Chack. The company said an internal review revealed the three men had violated FirstEnergy policies.

In its third quarter earnings call this week with financial analysts, FirstEnergy executives said the company is cooperating with investigators and has reached out to regulators, ratings agencies, banks, union leaders and lawmakers.

FirstEnergy executives said also in the earnings call that the board conducted the internal review that led to the terminations and is doing a full review of governance and oversight processes. FirstEnergy named Steve Strah as its acting chief executive. Strah has been at the company for 36 years.

“We take this as a serious and important matter and we will begin to address this immediately,” Strah said.

Energy Harbor has said it is cooperating with investigators but has declined further comment.

Lawmakers are considering repealing HB6. The repeal effort is among many complex issues the Akron-based utilities face:

  • The Securities and Exchange Commission issued a subpoena on Sept. 2 to FirstEnergy.
  • Multiple shareholder lawsuits have been filed over “material false and misleading statements” and failure to disclose its efforts in a campaign to win approval of HB 6.
  • A former employee of a FirstEnergy contractor has been accused of downloading sensitive corporate data before he left his job. FirstEnergy and the contractor filed suit to block the man from disseminating the data.
  • The Federal Energy Regulatory Commission is conducting an audit of FirstEnergy that began in February 2019. It marks the first FERC audit for the company since 2013.
  • Environmental groups filed a case in the 6th Circuit Court of Appeals asking the court to suspend the reorganization plan approved by federal bankruptcy court earlier this year for FES. The Ohio Consumers' Counsel filed a brief in that case.
  • Ohio Attorney General Dave Yost filed a civil lawsuit to block the subsidies that are part of HB6 from flowing to Energy Harbor and other utilities.
  • The Public Utilities Commission of Ohio is also reviewing charitable and political giving by FirstEnergy’s subsidiaries related to HB6. Interest groups are pushing to expand that review to a full-blown investigation.

A shareholder lawsuit filed in U.S. District Court by the Electrical Workers Pension Fund alleges that Strah signed the checks that FirstEnergy Service Co. paid to Generation Now, the dark money group that federal investigators say was controlled by Householder.

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