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Bankruptcy judge orders lobbyists to explain their role in HB 6

Marty Schladen, Ohio Capital Journal

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Davis-Besse Nuclear Power Station in Ottawa County, Ohio

A federal judge handling the bankruptcy of a company involved in an allegedly corrupt nuclear bailout has ordered a prominent law firm to explain its role in the affair.

The firm, Akin Gump Strauss Hauer & Feld, LLP, served both as lead bankruptcy counsel to the company receiving the $1.3 billion ratepayer bailout and as a lobbyist for the effort to pass it last year, U.S. Bankruptcy Judge Alan M. Koschik wrote last week.

The effort to pass the bailout, House Bill 6, has since blown up into what U.S. Attorney David M. DeVillers said is likely the biggest bribery scandal in Ohio history.

He alleged that $61 million from Akron-based FirstEnergy Corp. and associated companies was funneled through dark-money groups and used to make Rep. Larry Householder, R-Glenford, speaker. Householder then led the effort to pass and defend the bailout, most of which will go to two failing nuclear plants in Northern Ohio.

Householder and four associates were charged in July. In late October, FirstEnergy fired CEO Chuck Jones after two Householder associates pleaded guilty.

Last week, the state’s top utility regulator, Public Utility Commission of Ohio Chairman Sam Randazzo, resigned after the FBI was spotted removing documents from his German Village home days earlier. Around the same time, FirstEnergy revealed that in 2019, it paid more than $4 million to someone who “subsequently was appointed to a full-time role as an Ohio government official directly involved in regulating” FirstEnergy.

Judge Koschik ordered Akin Gump — a firm with offices around the world — to explain its role in the scandal as part of a routine proceeding to pay the lawyers in the bankruptcy as it wound down.

FirstEnergy Corp. made the decision to spin off nuclear plants in Ohio and Pennsylvania in late 2016. They became part of FirstEnergy Solutions, which filed for bankruptcy in March 2018.

FirstEnergy Corp. claimed earlier this year that it gave up operational control when FirstEnergy Solutions got its own board of directors. But FirstEnergy Corp. CEO Jones also acted as CEO of a third company that provided most, if not all, management for the nuclear spinoff, FirstEnergy Solutions.

It appeared that part of the purpose of the spinoff and the bankruptcy might be to insulate FirstEnergy Corp. from from liability for part of the eventual $10 billion cost to clean up the nuclear sites.

Earlier this year, FirstEnergy Solutions emerged from bankruptcy with a new name, Energy Harbor.

In his Nov. 20 order, Koschik noted items in bills submitted by Akin Gump that struck him.

“Approximately $2.8 million of the compensation sought by that firm related to state government lobbying, including work related to the ultimate passage of Ohio House Bill 6,” the judge wrote. “The court understands that the circumstances surrounding the passage of HB 6 is relevant to the criminal complaint against the criminal defendants and possibly other ongoing investigations.”

Koschik pointedly noted that federal government lawyers have shown no interest in Akin Gump’s disclosure that it wanted almost $3 million for its role — witting or unwitting — in what federal prosecutors are now calling a criminal conspiracy.

“Notwithstanding the lack of opposition from the United States, the court remains concerned about the value provided to (EnergyHarbor) in connection with their state-level lobbying work in Ohio, given the apparently expanding federal investigations, civil and criminal, regarding the passage of HB 6,” Koschik wrote.

Akin Gump’s New York office didn’t immediately respond to a request for comment.

Koschik said that the bill submitted by Akin Gump included time records for members of its “Statehouse team:” Sean G. D’Arcy, Henry A. Terhune, James R. Tucker, and Geoffrey K. Verhoff.

The four “have never appeared in this court during these (bankruptcy) cases. Based upon the court’s review of the docket, they have never made written declarations in these cases,” the judge wrote.

“However, according to Akin Gump’s invoices submitted in support of that firm’s applications for compensation, these were the timekeepers involved who interacted with currently-indicted individuals or entities in the service of” Energy Harbor, Koschik wrote. “The nexus apparent in the docket between this Ohio Statehouse team and currently-indicted individuals and entities compels the court to demand that further testimony be introduced into the record, under oath.”

The judge ordered the Akin Gump employees to answer 11 questions by Jan. 8.

They include whether members of the Akin Gump team had a role in electing lawmakers who then voted to make Householder speaker and whether they whipped votes for HB 6 in the House and Senate. The judge also wants to know whether any of the men was involved in multimillion-dollar deposits into Generation Now, a now-indicted 501(c)(4) dark money group that DeVillers said was vital to the criminal conspiracy.


This story was republished from the Ohio Capital Journal under a Creative Commons license.

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