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Householder trial: New evidence shows depth of long-suspected scheme

 By Kathiann M. Kowalski

This article is provided by Eye on Ohio, the nonprofit, nonpartisan Ohio Center for Journalism, in partnership with the nonprofit Energy News Network. Please join the free mailing lists for Eye on Ohio or the Energy News Network, as this helps provide more public service reporting.

Ohio’s largest corruption case continues in federal court in Cincinnati, where former Ohio House Speaker Larry Householder and lobbyist and former Ohio Republican Party leader Matthew Borges are on trial. The alleged conspiracy deals with the dark money saga surrounding House Bill 6, Ohio’s nuclear and coal bailout law.

“The most astonishing aspect of this so far for Ohio Citizen Action has been the brazenness of the corruption and the overall disdain that Ohio elected officials had for voters and ratepayers,” said the group’s political director, Kyle Marcum.

Yet, “for anyone that was working really closely on HB 6, it’s been clear how much money was going into it,” said Neil Waggoner, federal deputy director of energy campaigns for the Sierra Club. In many ways, the trial confirms there was a lot of coordination between Householder’s office and FirstEnergy, he said.

“There’s no way this money was coming out of the blue. It was very clearly coming from FirstEnergy,” Waggoner said.

Here’s a rundown so far on what was known and what’s been learned since the trial began in January.

Labor unions gave $840,000 to Generation Now. And they got $1.4 million back for ads to thwart a drive to give voters a chance to reject HB 6.

The evidence: A Jan. 30 filing indicates Generation Now gave $1.4 million to the Ohio AFL-CIO to pay for ads during the campaign to block a voter referendum on HB 6.

A Feb. 6 response by Householder’s lawyers said they want to question Tim Burga, the union president, about donations he approved for Generation Now, the primary dark money group in the alleged conspiracy.

What we knew: Unions or their political action committees reported $840,000 in donations to Generation Now in 2018 and 2019, the Energy News Network and Eye on Ohio reported three years ago.

What’s new: The Jan. 30 court filing is the union’s first public acknowledgment that its 2019 “Decline to Sign” ads were paid for with money from Generation Now.

The filing notes that the Ohio AFL-CIO insisted on having the final say on the ads’ content. However, the fact that the money came from a FirstEnergy-funded group would likely have weakened the ads’ credibility if it had been disclosed.

The Feb. 6 response by Householder’s lawyers also suggests Burga knew some donations he authorized were meant to support “Team Householder” candidates. The filing suggests that would undermine the government’s arguments about secrecy and show that funds going to Generation Now “were not bribe payments but were political contributions protected by the First Amendment.”

Open questions: What was the source of money for the unions’ donations? Why did they make the donations? And who asked them to give money to Generation Now in the first place?

And why did people involved with Generation Now decide to have some anti-referendum ads come from the union and other entities, rather than itself?

If the answers involve FirstEnergy, that’s “pretty disturbing,” said David Anderson, policy and communications manager for the Energy and Policy Institute. 

The situation also raises questions about whether other union-sponsored ads in Ohio or elsewhere might have been paid for with company or special interest money.

Moves to block a voter referendum on House Bill 6 sought help from the Ohio Attorney General and Ohio Secretary of State.

The evidence: Trial exhibits suggest Borges and Householder wanted Ohio Attorney General Dave Yost to block the referendum. Phone records indicate Yost had phone conversations with both Householder and Borges. Text messages also reveal maneuvering.

“Had dinner with Yost last night and put the referendum issue on his radar,” said a June 2019 text from Borges to co-defendant Juan Cespedes, who has pled guilty. Borges also reported that Yost said he would have opposed HB 6 “if it weren’t for FE’s support and your involvement.” 

Additional texts said Borges was in touch with Ohio Secretary of State Frank LaRose. “LaRose is expecting us to be publicly supportive of him,” Borges wrote in a July 2019 text. In another text, Borges wrote that LaRose wanted to meet with John Kiani, now chair of Energy Harbor (then FirstEnergy Solutions).

What we knew: One month of the 90-day period for seeking signatures on petitions was taken up with getting necessary approvals from Yost and LaRose’s offices. Ohio attorneys general have rejected initial filings for bill referendums before. This time, though, FirstEnergy Solutions was actively trying to block the referendum.

Among other things, a lawyer for FirstEnergy Solutions urged Yost to rule HB 6 was not subject to a referendum on the grounds that it was a tax. Yost ultimately let the referendum move ahead, but only after rejecting the first bill summary language.

LaRose’s office likewise waited until the end of August 2019 before letting the referendum effort move ahead. Ohioans Against Corporate Bailouts, the group wanting a voter referendum, later complained about HB 6 supporters being able to get contact information for signature collectors. That information let a pro-HB 6 group pay off some of those workers to quit.

What’s new: A text from Borges also suggests he got a heads-up before Yost rejected the first bill summary language on Aug. 12, 2019. In other texts, Borges indicated Yost was sympathetic to the anti-referendum effort, although Yost would have been against HB 6 but for the fact that FirstEnergy supported it.

HB 6 opponents filed a revised bill summary several days later. In a recorded voicemail message, Yost told Householder, “We will be undertaking our bill analysis again. And I look forward to talking with you soon or eventually.”

Borges’ claim that LaRose wanted to meet with Kiani is also a new development. Cespedes responded that LaRose would regret it. 

Open questions: Up until 2021, FirstEnergy was known to spend large amounts on political campaigns. To what extent did those campaign contributions alter how public officials acted with respect to HB 6?

“Yost received $24,000 from FirstEnergy and Mr. Borges” as campaign contributions, noted Ohio Citizen Action’s Marcum. And Borges’ text statements suggest FirstEnergy’s support might have swayed Yost’s position on HB 6, “despite his duty to protect Ohio voters and consumers.”

Just what was said in communications between Yost or LaRose and people connected with the alleged conspiracy?

And did Yost or LaRose act improperly in any of those communications or other actions related to HB 6 and the ballot referendum?

“It’s kind of awkward when the evidence starts to mention the state attorney general who’s prosecuting a case” in state court relating to HB 6, Anderson said. That case has been mostly on hold pending the Householder trial, although Yost has added former FirstEnergy executives as defendants, as well as former Public Utilities Commission Chair Sam Randazzo.

Yost “was subpoenaed to potentially be a witness in this case. At this time it is inappropriate for him to comment,” said spokesperson Bethany McCorkle at the attorney general’s office. He gave the amount of campaign donations from Borges and FirstEnergy to charities a few months after Householder and Borges’ arrests in 2020.

Asked about Borges’ comments concerning LaRose, Secretary of State spokesperson Rob Nichols said, “This is a lobbyist bragging to his HB 6 clients about influence he never had, and the secretary didn’t do anything he wanted.” Nichols also wrote that LaRose never met with Kiani.

The DeWine administration helped behind the scenes.

The evidence: Texts by FirstEnergy executives show they were in touch with Gov. Mike DeWine’s office. Texts also indicate that Lt. Gov. Jon Husted was trying to get the Ohio Senate to extend the time period for subsidizing the nuclear plants.

DeWine signed HB 6 into law on July 23, 2019, within hours of the final vote in the House. Householder also made plans for a state-owned plane to fly lawmakers back to Columbus for the vote, if necessary. A text by former FirstEnergy Vice President Mike Dowling implies approval came from Laurel Dawson, who was then DeWine’s chief of staff.

What we knew: DeWine and Husted dined with former FirstEnergy executives in December 2018, and trial exhibits suggest there were additional meetings as well.

Both DeWine and Husted have previously said they would have supported HB 6 in any case. Neither has provided detail about what was discussed in meetings with FirstEnergy or others about HB 6.

What’s new: Texts referred to Husted pushing to extend the time for HB 6 subsidies in the Senate. Other texts among FirstEnergy executives asked if they should get DeWine to make a call to former Ohio Senate President Larry Obhof.

In yet another text conversation, DeWine’s director of legislative affairs, Dan McCarthy, texted with Dowling about the possibility of a ballot drive.

“You guys are freaking out about a potential referendum,” McCarthy wrote. Dowling’s response indicated concern that the bill’s language would make it harder to block a referendum.

Before joining DeWine’s administration, McCarthy had been a registered lobbyist for FirstEnergy and a president of Partners for Progress, one of the pass-through groups that funneled money from the company and its affiliates to Generation Now.

Open questions: Much remains unknown about how much DeWine and Husted knew about the flow of money behind HB 6 and other aspects of the alleged conspiracy.

There also hasn’t been a full accounting of money FirstEnergy gave to other dark money groups to support DeWine or his daughter’s political races, Anderson said.

Financial motives drove FirstEnergy’s subsidy-seeking, despite the company’s claims about customers’ interests.

The evidence: FirstEnergy Solutions “was just bleeding cash” before the HB 6 bailouts, company treasurer Steven Staub testified last month.

The company invested heavily in coal-fired power plants as the natural gas fracking boom took off, and its nuclear plants were even more expensive. HB 6 also paved the way for the company to attract investors when it decided to exit the power generation business.

What we knew: “It had been clear to observers for the past decade that the root of FirstEnergy’s problems was a series of bad financial decisions aimed at propping up its uncompetitive coal and nuclear plants,” said Sandy Buchanan, CEO of the Institute for Energy Economics and Financial Analysis. “The company’s strategy was to make ratepayers and taxpayers pay the consequences.”

“FirstEnergy is apparently still trying to solve its underlying financial problems today, as evidenced by their recent $3.5 billion cash sale of part of their transmission system, which they say will improve their credit profile,” Buchanan added.

Ashley Brown, former head of the Harvard Electricity Policy Group, observed two years ago that HB 6 made it “easier to unload Energy Harbor” in the bankruptcy case.

Asim Haque, a former public utilities commissioner, also testified in 2019 about a PJM report that the costs of HB 6 could exceed its nuclear bailout subsidies.

What’s new: Staub’s trial testimony may be the clearest public contradiction yet of FirstEnergy’s earlier insistence that bailouts were good for customers.

When FirstEnergy sought its first subsidies in 2014, the company claimed they would promote reliability and eventually produce savings on electric bills. And in 2019, David Griffing, a FirstEnergy Solutions vice president, testified on HB 6, claiming it “saves Ohio consumers millions of dollars annually while also promoting clean energy.”

Open questions: What else might FirstEnergy’s communications show about executives making statements that seemed to belie the financial realities?

And might there be potential liability under securities laws or tax laws?

Actions where FirstEnergy, Householder, Borges and others sought to make sure things stayed secret also raise questions.

“If they had Ohioans’ best interests in mind,” Marcum said, “what did they have to hide?”

News Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.

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News Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.

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Kowalski specializes in covering energy and environmental issues, such as our Eye on Utilities newsletter.

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