‘Unholy alliance’ - Court filings outline $61M bribery scandal among Ohio powerbrokers

Two accused in scheme pleaded guilty, will testify against defendants.

Credit: Joshua A. Bickel

Credit: Joshua A. Bickel

Former Ohio House Speaker Larry Householder is defending himself in federal court this week on charges he and his cohorts allegedly took $60 million-plus in bribes to save a controversial energy bill and retake the speakership.

After two and half years, Householder and former Ohio GOP chairman and lobbyist Matthew Borges are standing trial in federal court in Cincinnati defending themselves on charges that they participated in a racketeering conspiracy. Jury selection took place Friday and opening statements are scheduled to begin Monday in U.S. District Court Judge Timothy Black’s courtroom.

Over six weeks, federal prosecutors will detail how they say the largest public corruption scheme in state history unfolded. The defendants, men once in the innermost circles of statehouse power, will defend themselves and provide insight on how Ohio politics is played. This story looks at what legal arguments both sides are making in court.

On July 21, 2020, Householder, Borges, former FirstEnergy lobbyist and political strategist Jeff Longstreth and lobbyists Juan Cespedes and Neil Clark were arrested and charged with racketeering — a charge that carries up to 20 years in prison and up to a $250,000 fine.

The U.S. Attorney’s Office alleges the five ran a “criminal enterprise” that took nearly $61 million in bribes, funneled from FirstEnergy through the nonprofit Generation Now. The money was allegedly used to position Householder as speaker and then pass and defend House Bill 6.

Former U.S. Attorney David DeVillers, who brought the charges at the time, said it is likely the largest bribery scheme in the state.

“These allegations are bribery pure and simple,” he said. “This was quid pro quo. This was pay-to-play.”

All five originally pleaded not guilty, but not long after the indictment, Longstreth and Cespedes pleaded guilty and agreed to testify against their alleged partners in the scheme. Generation Now a 501(c)4 was also charged in the case and pleaded guilty on Feb. 19, 2021. Clark committed suicide a month later in Collier County, Fla.

Householder filed a motion to dismiss the case last February saying the government can’t prove a conspiracy.

“The government’s allegations describe no relationship joining all the alleged associates, nor any coordinated activity among them, towards an alleged common purpose,” his attorney Steven L. Bradley wrote. “Instead, the allegations at most set forth a ‘hub-and-spoke’ structure — with FirstEnergy occupying the hub and Defendants the spokes — with no common rim linking the individual spokes together.”

The judge denied the motion Jan. 3 saying the indictment “goes beyond merely alleging a surface-level or coincidental connection between the co-defendants.”

“The indictment sets forth the co-defendants’ concerted effort, working together as a cohesive structure, over time, to manipulate the legislative process, obtain and retain political power on behalf of defendant Householder, benefit financially, and obfuscate the nature of their activities,” Black wrote.

Indictment spells out allegations

Here is how the feds described the conspiracy:

  • Longstreth created Generation Now in February 2017, but it was secretly controlled by Householder.
  • FirstEnergy money flowed into Generation Now, which in March 2017 started receiving $250,000 quarterly payments.
  • The money was spent to help elect 21 pro-Householder Republicans into legislative seats to support his quest to become House speaker. In the fall of 2018 alone, the entity spent more than $1 million on negative ads against opposing candidates.
  • The money flowed through Generation Now to pay Householder’s campaign staff.
  • Householder received more than $400,000 in personal benefits, including money to settle a personal lawsuit, pay for renovations to his home in Florida and pay off thousands of dollars in credit card debt.
  • The enterprise paid $15,000 to an insider in the campaign to overturn House Bill 6 and offered to pay signature collectors $2,500 cash and plane fare to abandon the referendum campaign.

HB6 is central to the machinations that brought about the charges, but the judge has ruled the parties will not be arguing the merits of the bill at trial. Householder in court documents said he must be allowed to put it in context.

“The defense should be able to argue and present evidence that Householder did not advocate for HB 6 because he was bribed, but instead because he had legitimate beliefs in the merits of the legislation,” his attorney wrote. “In other words, that his conduct was not controlled by any explicit quid pro quo agreement.”

Black ruled if Householder testifies “his support of HB 6 could have some relevance, in context. But the jury is not tasked with determining whether HB 6 was or could have been good law, and thus simply presenting argument or evidence regarding the merits of HB6 is irrelevant.”

In its trial brief the government described Borges’ involvement in-depth.

“Defendant Borges knowingly received $1.6 million of the proceeds funneled from FirstEnergy Serv. Co., to Generation Now, to Defendant Borges’s contemporaneously incorporated entity, 17 Consulting. Defendant Borges used these payments to further the enterprise with knowledge of the “unholy alliance” — that is, the corrupt agreement — between defendant Householder and FirstEnergy,” the brief by U.S. Attorney Kenneth Parker reads.

“Defendant Borges took a leading role and worked directly with enterprise members and associates on both sides of the corrupt agreement to defeat the ballot campaign. He also solicited and bribed an employee of an entity furthering the ballot campaign and transferred proceeds of the corrupt agreement through his personal account before using it to further the enterprise’s efforts.”

Borges has staunchly maintained his innocence.

“I never broke the law, nor did I intend to break the law. I didn’t conspire to break the law, and I wasn’t aware of anyone else breaking any laws,” Borges said previously.

Co-conspirators who plead guilty to testify

A couple key witnesses at trial will be those who pleaded guilty. Longstreth’s plea agreement says he organized Generation Now at Householder’s direction and to Householder’s benefit. He acknowledged managing the Generation Now bank accounts.

He admitted he managed messaging to get HB6 passed as well as defeat the referendum, was a point of contact for FirstEnergy, and was a signatory on Generation Now accounts, according to federal prosecutors.

The enterprise used the money to elect pro-Householder legislators, position Householder to be speaker, pass the bailout bill and campaign against a referendum effort against HB6, prosecutors say.

“The millions paid are akin to bags of cash — unlike campaign or PAC contributions, they were not regulated, not reported, not subject to public scrutiny — and the Enterprise freely spent the bribe payments to further the Enterprise’s political interests and to enrich themselves,” according to the 82-page criminal complaint.

Cespedes lobbied for FirstEnergy Solutions and in the plea deal he admitted that he orchestrated payments to Generation Now to benefit the defendants in exchange for Householder taking official action to help keep open two nuclear power plants in Ohio.

Cespedes also admitted to participating in a plan to thwart the HB6 referendum campaign. The referendum campaign failed to gain enough valid voter signatures to qualify for the statewide ballot.

Cespedes is described by prosecutors as a key middleman in the Householder Enterprise and was an essential player to getting HB6 passed. He was paid $600,000 in Generation Now money and another $227,000 from FirstEnergy Solutions, according to the criminal complaint.

Pre-trial wrangling between the two sides included arguments over whether jurors should be able to hear about Cespedes and Longstreth’s guilty pleas. Householder asked the judge on Jan. 16 to exclude those pleas. He urged the judge to exclude the plea deals since he doesn’t intend to use them to try and impeach the witnesses’ credibility.

“Longstreth’s and Cespedes’ guilty pleas and cooperation agreements are not probative of any fact to be proven trial. In fact, given Householder’s promise that he will not impeach on this basis, the plea and cooperation agreements are only probative of improper evidence: guilt by association” the motion to exclude their testimony says. “The government would use these agreements to brand the defendants on trial here, Householder and Borges, guilty by association and argue that a conspiracy must have existed because Longstreth and Cespedes have pleaded guilty to joining one. That type of evidence is improper and should be excluded.”

Prosecutors say they must be able to bring up the guilty pleas or the jury could construe that the government “selectively” prosecuted Householder and Borges, among other reasons.

“He has simply promised not to impeach the witnesses on the basis of their plea agreements. It is therefore likely that the government will need to question the witnesses about their guilty pleas on redirect,” the prosecutors wrote. “If Householder has his way, the jury will be left with the misimpression that the government was purposely hiding this evidence from them.”

Householder and Borges filed a supporting document Thursday on the eve of trial, saying the pair agreed to cooperate because the government has promised it will “recommend a custodial sentence measured in months, not years.” Black has sole discretion on sentencing decisions.

Black hasn’t ruled on this matter yet.

FirstEnergy’s role

The two sides have also quarreled over whether the FirstEnergy-deferred prosecution agreement is admissible evidence. The Akron-based utility company admitted and accepted responsibility for its role in the Householder money laundering scheme and agreed to pay a $230 million fine in July 2021.

The company has been charged federally with conspiring to commit honest services wire fraud and signed a deferred prosecution agreement that could be dismissed in the future if it continues to cooperate with investigators.

Householder wanted the deferred prosecution agreement kept from the jury but Black said it will all depend how things transpire at trial.

“The Court agrees that circumstances may present at trial, in which some reference to the DPA may become necessary. But the Court will address admissibility in those instances, if and when such circumstances come to pass,” Black ruled.

The impact of the trial

The day of reckoning has come for Householder and Borges and they are innocent until proven guilty, but many have said the damage done can’t be changed by the trial.

Miami University political science professor John Forren said previously the scope of the corruption allegations “goes far beyond just self-enrichment and self-dealing,” and agrees the charges are “almost certain to erode Ohioans’ already flagging confidence.”

“In a democracy like ours, citizens invest an enormous amount of trust in the people that they elect to office,” he said. “Indeed, when voters elect someone to the state legislature, they are saying in essence: we are investing you with a great deal of power to make decisions that affect our lives in profound ways.”

If the Householder allegations are proven true, Forren said, “Ohio has just suffered a breathtaking breach of that public trust” that will just feed into the “already disturbing decline in public confidence in government.”

Several Cox First Media staff writers contributed to this story.

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