Ohio corruption trial: 'It would be bad for both of us if the story came out'

“It would be bad for both of us if the story came out. But it would be worse for you,” lobbyist Matt Borges told an FBI informant in a recorded conversation back in 2019.

Details about that story and others are coming out at the trial of Borges and former Ohio House Speaker Larry Householder on criminal charges relating to Ohio’s 2019 nuclear and coal bailout law, House Bill 6.

Developments in the case and other matters within the past month include:

What’s at stake

Stakes in the House Bill 6 case go beyond Ohio’s energy generation mix and how much people pay for electricity. The case is shining a light on dark money — funds used to influence the political process in ways the public can’t trace.

Under the Supreme Court’s 2010 Citizens United ruling, organizations can spend unlimited amounts on political causes, as long as they don’t coordinate with a candidate’s campaign. Common forms of dark money groups include nonprofits set up under Section 501(c)(4) of the Internal Revenue Code and nonpublic companies known as limited liability corporations.

501(c)(4) groups are particularly ripe for abuse as a money laundering tool, said former U.S. Attorney David DeVillers at a Jan. 18 Columbus Metropolitan Club panel. A lack of disclosure requirements raises the potential for bribery, which is among the alleged underlying crimes for the racketeering charges in the case against Householder, Borges and others.

Generation Now, the primary dark money group in the alleged conspiracy, might also have violated conditions for its tax-exempt status, which require that candidate campaigns can’t be the primary purpose of a 501(c)(4) group. Funds from a nonprofit also should not personally benefit individuals.

Corruption claims affect the perceived legitimacy of Ohio’s state government.

Multiple levels of dark money groups also undermine the spending limits and donor disclosure requirements of campaign finance laws. That’s especially so when there’s coordination with a candidate’s campaign, as shown by some trial exhibits in the Householder case.

Ohioans’ constitutional rights are also at issue. Provisions in the Ohio Constitution could have given voters a chance to reject HB 6 in 2020 in a referendum. Prosecutors allege the defendants’ actions thwarted efforts to get the law on the ballot.

Money matters, too. HB 6’s nuclear subsidies and revenue guarantee provisions were repealed in 2021, but Ohioans continue to subsidize two 1950s-era coal plants.

Tracking by the Office of the Ohio Consumers’ Counsel estimates consumers have paid almost $147 million for those plants since the start of 2020. Under Ohio law, the Public Utilities Commission of Ohio likely “can’t refund any money that’s still being collected,” said former commissioner Ashley Brown, who also spoke at the Jan. 18 panel.

‘And it paid off’

Prosecuting attorney Emily Glatfelter’s opening argument told a story that Householder and co-conspirators “sold the Statehouse.” The defendants allegedly used dark money groups to funnel millions paid by FirstEnergy, its affiliates and others to pass and protect more than $1 billion in bailouts for non-competitive power plants.

Voluminous exhibits and testimony document the flow of more than $60 million from FirstEnergy and its affiliates through nonprofits or limited liability companies and into dark money groups allegedly controlled by Householder or otherwise set up in furtherance of a conspiracy.

The evidence also shows frequent communications by then-high-ranking FirstEnergy executives with each other and with Householder and other members of the alleged conspiracy.

For example, when HB 6 passed and was signed into law on July 23, 2019, texts between former CEO Chuck Jones and a former vice-president congratulated each other about having made “big bets.”

“And it paid off,” Jones wrote.

On the stand

FBI special agent Blaine Wetzel testified for more than a week. Next up in the government’s case was fundraiser and communications expert Anna Lippincott. She worked with Longstreth, the president of Generation Now, which was the primary dark money group in the alleged conspiracy. Longstreth, a co-defendant in the case, pled guilty in October 2020 and is expected to testify for the government.

Co-defendant Juan Cespedes, who also pled guilty, took the stand after Lippincott. He testified that people acting on behalf of FirstEnergy Solutions made it clear to Householder that the company’s financial support hinged on getting a bailout for the nuclear plants. At the time, the company was a wholly owned FirstEnergy subsidiary.

Among other things, Cespedes testified about a 2018 meeting where a FirstEnergy check for $400,000 was given to Householder.

Although FirstEnergy was not named as a defendant in the Householder case, the company admitted wrongdoing in a July 2021 deferred prosecution agreement. Treasurer Steven Staub has testified that the company was “bleeding cash” because of its non-competitive power plants. It’s unclear yet who else from the company may testify.

Subpoenas have also been issued for several current or former lawmakers and Ohio Attorney General David Yost. The government’s witness list also includes Megan Fitzmartin, a former political consultant for Householder.

Court orders extend immunity to two potential witnesses so far.

Freezing assets?

The Supreme Court of Ohio will hear Yost’s appeal of a lower court order that would make him release a freeze of certain assets of Sam Randazzo. The former chair of the Public Utilities Commission Ohio is a defendant in the state’s civil lawsuit relating to HB 6.

Randazzo resigned in November 2020, after FBI agents’ early-morning search of his home and FirstEnergy’s disclosure that it paid $4.3 million to a company linked to Randazzo shortly before he became PUCO chair. He has not been named as a defendant in criminal proceedings.

New PUCO commissioner

Gov. Mike DeWine has named John Williams to replace Beth Trombold on the Public Utilities Commission of Ohio. Williams, who said he is politically independent, has been at the PUCO for roughly 20 years, most recently as director of transportation. He also spent nearly a decade in the natural gas and telecommunications industries. He still needs to be confirmed by the Ohio Senate.

DeWine chose Williams over Independent Christopher Healey and Democrats Mike Skindell and Jeff Crossman. Skindell, of Lakewood, continues to serve in the Ohio House of Representatives. Crossman, whose term there ended in December, unsuccessfully ran against Yost for attorney general last fall.

The Office of the Ohio Consumers’ Counsel has called for reform in the PUCO nominating process. Among other things, the consumers’ counsel wants all Nominating Council meetings, including candidate interviews, to be public.

Candidates should also provide more complete financial disclosures, consumers’ counsel board chair Michael Watkins wrote in November, noting former PUCO Chair Sam Randazzo’s financial relationship with a FirstEnergy affiliate through one of his companies.

“It’s news to me,” Nominating Council Chair Greg Lashutka said on Feb. 10, noting that he had not seen the letter and the consumers’ counsel representative did not bring it up at last month’s council meeting.

Lashutka also said he did not discuss Nominating Council matters with his daughter-in-law, Megan Lashutka, who was a registered lobbyist for FirstEnergy on HB 6 in 2019, as well as two other energy-related bills. “I don’t even know who her clients are,” he said.

Anti-corruption bills?

Ohio Republicans have announced plans for two bills to address corruption in state government. Whether either proposal would have prevented the alleged corruption in the HB 6 case is unclear.

On Jan. 18, Rep. Derek Merrin, who lost a bid to become House speaker last month, described one bill to require more financial disclosures from lobbyists, members of the PUCO and others.

A separate proposal announced by State Auditor Keith Faber on Feb. 2 would require more training and speedy reporting when agency officials suspect a crime. That bill is expected to be introduced in the Ohio Senate.

This article first appeared on Energy News Network and is republished here under a Creative Commons license.

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