FirstEnergy Fined $100M by SEC in Ohio's Massive Bribery Scandal
FirstEnergy Corp. faces a $100 million SEC penalty for misleading investors about its role in Ohio's $60 million bribery scheme. The utility admitted to its part in the scandal, which led to significant legal consequences.
The U.S. Securities and Exchange Commission (SEC) has imposed a $100 million civil penalty on FirstEnergy Corp. for its involvement in a substantial bribery scheme in Ohio. This action follows the company's admission to participating in a $60 million corruption case that has had far-reaching implications for the state's political landscape.
FirstEnergy, an Akron-based utility serving approximately 6 million customers across six states, was found to have violated antifraud provisions by misrepresenting its role in the political corruption scheme and failing to disclose related payments. The SEC's cease and desist order highlighted that the company's former CEO made inaccurate statements to investors during a July 2020 earnings conference call.
This penalty comes in addition to a $20 million payment FirstEnergy agreed to make last month to avoid criminal charges in a deal with state prosecutors. The company's involvement in the scandal has led to multiple shareholder lawsuits and a significant drop in its stock price when the details were revealed.
The bribery scheme centered on FirstEnergy's efforts to secure a $1 billion bailout for two of its affiliated nuclear plants, Davis-Besse and Perry, through the controversial House Bill 6. This legislation, passed in 2019, was one of the largest corruption cases in Ohio's history and highlighted the influence of dark money in politics.
"We are pleased to have reached a settlement with the SEC."
The scandal has resulted in severe legal consequences for several individuals involved:
- Larry Householder, former Ohio House Speaker, was sentenced to 20 years in prison in June 2023 for orchestrating the scheme.
- Matt Borges, former chair of the Ohio Republican Party, received a five-year sentence.
- Chuck Jones and Michael Dowling, former FirstEnergy executives, were indicted in April 2024.
- Sam Randazzo, former chair of the Public Utilities Commission of Ohio, pleaded not guilty before tragically taking his own life at age 74 in April 2024.
The bribery operation involved using $60 million in secretly funded FirstEnergy cash to elect specific Republican candidates to the House in 2018 and secure the speakership for Householder. This money was then utilized to pass the tainted energy bill and obstruct a repeal referendum.
In July 2021, FirstEnergy admitted to its role in the bribery scheme as part of a deferred prosecution agreement with the U.S. Department of Justice. The company agreed to pay $230 million in penalties and implement extensive reforms within three years to avoid criminal prosecution on a federal conspiracy charge.
Since the scandal, FirstEnergy has implemented new leadership and corporate governance reforms. The company has also divested from its nuclear operations, marking a significant shift in its business strategy. This case has led to increased scrutiny of utility lobbying practices nationwide and prompted Ohio Governor Mike DeWine to sign the repeal of parts of House Bill 6 in 2021.
The SEC's action requires FirstEnergy to pay the $100 million penalty within 14 days or face interest charges, further emphasizing the regulatory body's commitment to holding corporations accountable for misleading investors and engaging in corrupt practices.
