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Judge slams former Ohio regulator for not giving details about how he spent $4.3M in utility money




FBI agents remove boxes of materials from PUCO Chairman Sam Randazzo’s condo in Columbus Nov. 17, 2020. Photo courtesy of Daniel Konik/Statehouse News Bureau.

FirstEnergy conceded it was a bribe, but its former executives and former PUCO Chairman Sam Randazzo said it wasn’t.

Either way, a judge in a federal class-action case is again ordering Randazzo to fork over documents — including emails — addressing how he spent the $4.3 million he got from FirstEnergy in 2019 just as he was about to take the helm of the Public Utilities Commission of Ohio, the agency tasked with regulating FirstEnergy.

On Tuesday, Magistrate Judge Kimberly A. Jolson sharply criticized Randazzo’s lack of cooperation and again ordered him to produce the documents after already ordering him to do so on April 5. Reluctance on the part of Randazzo and his lawyers to even explain what they did to search for material “does not suggest good-faith compliance with their discovery obligations,” the judge wrote.

The order came after a filing on Monday in which Randazzo disclosed new information about how he spent the funds from FirstEnergy that is at least interesting. It includes a $1.4 million payment to the U.S. Treasury just days before news broke of a massive scandal of which the FirstEnergy payment to Randazzo is an important part.

Tuesday’s order, first flagged by the Energy and Policy Institute, essentially says the new information isn’t enough.

Racketeering scandal, angry investors

The order comes in a class-action shareholder suit over a racketeering scandal in which Akron-based FirstEnergy and other utilities paid more than $61 million between 2017 and 2020 to pass a $1.3 billion bailout. Most of the money was intended for FirstEnergy’s failing nuclear power plants in Northern Ohio, but some continues to flow to coal-fired plants that are partially owned by AEP in Ohio and Indiana.

David DeVillers — the U.S. Attorney when arrests were made in the matter — said the scandal was “likely the largest bribery and money-laundering scheme ever in the state of Ohio.”

Former Ohio House Speaker Larry Householder, R-Glenford, and former Ohio Republican Party Chairman Matt Borges in March were convicted of racketeering for their roles in the scheme by a federal jury sitting in Cincinnati. They’re scheduled to be sentenced at the end of June.

The men jury found them guilty of engineering a corrupt scheme to elect lawmakers in 2018 who would vote to make Householder speaker at the beginning of 2019. He then led the effort to pass and protect the controversial bailout legislation, House Bill 6.

Gov. Mike DeWine signed it the same day.

In the civil suit, investors in FirstEnergy are claiming that the company and its top executives cost them by engaging in the fraudulent scheme. It “exposed FirstEnergy to catastrophic risks (and now the reality) of financial, regulatory, legal and reputational loss,” the plaintiffs said in a legal filing.

FirstEnergy signed a deferred prosecution agreement and agreed to pay a $230 million criminal penalty. But former CEO Chuck Jones and former Vice President Michael Dowling — whose names came up repeatedly during the Cincinnati trial — have denied wrongdoing.

Also denying wrongdoing is Randazzo, whom DeWine nominated to chair the Public Utilities Commission shortly after he became governor in 2019. That January, FirstEnergy’s leadership directed $4.3 million into the accounts of the Sustainability Funding Alliance of Ohio Inc., an organization controlled by Randazzo, who was notorious for his opposition to renewable energy.

While Randazzo, Jones and Dowling said it wasn’t a bribe, the company who paid it conceded it was, referring to the former PUCO chairman as “Public Official B” in its deferred prosecution agreement (Householder was “Public Official A”).

“FirstEnergy Corp. paid $4.3 million dollars to Public Official B through his consulting company in return for Public Official B performing official action in his capacity as PUCO Chairman to further FirstEnergy Corp.’s interests relating to passage of nuclear legislation and other specific FirstEnergy Corp. legislative and regulatory priorities, as requested and as opportunities arose,” the agreement said.

Even though he was supposed to be regulating FirstEnergy and AEP, Randazzo and a very recent PUCO employee, Pat Tully, drafted the corrupt bailout legislation that benefited the utilities. As a possible sign of continuing problems with Ohio’s regulator,  a PUCO spokesman declined to say that it was wrong to do that during the corruption trial in February.

Randazzo, Jones and Dowling haven’t been charged in the case, although the FBI searched Randazzo’s Columbus condo months after it arrested Householder and Borges in July 2020. A spokeswoman for U.S. Attorney Kenneth L. Parker on Tuesday declined to comment on when — or whether — the men might be charged.

Demanding information

But in the class-action case, lawyers for the plaintiffs have been trying to pry out of Randazzo — who is not a defendant — documents regarding what he did with the $4.3 million FirstEnergy paid his misleadingly named organization.

When the plaintiffs in the class-action suit in April complained that Randazzo was stonewalling them, Judge Jolson ordered the former PUCO commissioner to do better. Randazzo and his attorneys then “made a supplemental production of documents regarding the use of the $4.3 million payment” that contained some interesting nuggets:

  • On July 15, 2020 — less than a week before Householder’s arrest —  Randazzo made an electronic payment of $1,412,774 to the U.S. Treasury.
  • Randazzo “estimated tax payments to the Treasury during 2019 in the amount of $78,532, and the remaining 2019 payments of $20,000 and $40,000 per the vouchers.”
  • Mortgage Payments “in excess of $1.4mm made to Synovus Bank during 2019, including $723,326.44… and online payments made during May 2019… and during July 2019.
  • A promissory note for “a loan made to Ambrose & Eve, a restaurant operated by Mr. Randazzo’s daughter, to which he loaned an additional $100,000 during 2019.”

However, lawyers for the plaintiffs in the case say they want more. They complained that Randazzo’s lawyers have “refused to disclose their search efforts” to see what emails and other electronic information Randazzo might have regarding how he spent FirstEnergy’s millions while taxpayers were paying him to regulate the utility.

The plaintiff’s lawyers gave some hypothetical examples of email messages that would be relevant to their case.

For example, they said they’d want to know if, just after getting the payment, Randazzo sent FirstEnergy CEO Jones an email saying “I’m enjoying my new beach home. Thanks$$.” The plaintiff’s lawyers said they’d also want to know if, right after getting paid, Randazzo sent his wife a message saying, “I hit the $4 mm jackpot with FirstEnergy.”

In her order, Judge Jolson agreed that Randazzo and his lawyers weren’t complying with her order when they said “they were only required to produce information about how the payment was ‘used and disbursed.’… They seem to suggest that because they have collected certain quantitative information about the payment, they are under no obligation to produce other qualitative information ‘regarding’ the payment, like emails discussing the payment.”

She also slammed Randazzo and his lawyers for saying they’ve disclosed all relevant information without explaining what they did to search for it.

“Their reluctance to be transparent about their search methodology does not suggest good-faith compliance with their discovery obligations,” Judge Jolson wrote.

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

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