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FirstEnergy fires CEO Chuck Jones after 2 plead guilty in Householder bribery scheme

Akron Beacon Journal logo Akron Beacon Journal 10/30/2020 Jim Mackinnon, Akron Beacon Journal

FirstEnergy Corp. fired Chuck Jones as its chief executive officer and named a replacement shortly after two men pleaded guilty in the $61 million Larry Householder bribery investigation.

"The Independent Review Committee of the Board of Directors of FirstEnergy Corp.  today announced a leadership transition, including the termination of the company's chief executive officer, Charles E. Jones, effective immediately," the Akron utility announced in a news release after the stock market closed Thursday.

a man wearing a suit and tie: FirstEnergy Corp. President and CEO Charles "Chuck" Jones appears at the company's Akron headquarters in 2015. The FBI served subpoenas at its offices in July 2020 in connection with a state bribery investigation. Jones and FirstEnergy have denied any wrongdoing. © Phil Masturzo/Beacon Journal file photo FirstEnergy Corp. President and CEO Charles "Chuck" Jones appears at the company's Akron headquarters in 2015. The FBI served subpoenas at its offices in July 2020 in connection with a state bribery investigation. Jones and FirstEnergy have denied any wrongdoing.

Background:How the FBI claims Larry Householder corruptly parlayed $60M into a $1.3B energy bailout, personal gain

The company said an internal review found Jones, a lifelong Akron resident, and two other executives who were also fired, "violated certain FirstEnergy polices and its code of conduct." The company did not elaborate.

In a filing Friday morning with the Securities and Exchange Commission, FirstEnergy said its internal investigation is ongoing.

Because of the violations involving the three former executives, FirstEnergy said in its filing that it is "re-evaluating its controls framework, which could include identifying one or more material weaknesses."

The firings are going to cost Jones and the other two executives what likely will be a significant amount of money. 

FirstEnergy said in the SEC filing that "each of the terminated executives forfeits or is otherwise ineligible to receive any grants, awards, or compensation pursuant to the company’s Short-Term Incentive Program, the 2015 Incentive Compensation Plan, or the 2020 Incentive Compensation Plan." 

A FirstEnergy board committee also is considering "whether recoupment, reductions or forfeiture of other grants, awards, and compensation may be warranted."

FirstEnergy has previously said it had done nothing wrong in connection with the federal investigation into Householder, the former Ohio House Speaker, and others.

Federal agents in July arrested Householder and four other men, including lobbyists for FirstEnergy and its former subsidiary FirstEnergy Solutions, now known as Energy Harbor. Investigators say FirstEnergy Corp. and its subsidiaries funneled $61 million to Householder and his team members, who enriched themselves while pushing a $1.3 billion nuclear energy bailout bill into law. Energy Harbor, spun off as an independent company by FirstEnergy through a Chapter 11 bankruptcy filing, owns the Davis-Besse and Perry nuclear plants in Ohio that benefited from the law, known as House Bill 6.

Background: FirstEnergy CEO defends company, tells investors federal bribery investigation is ‘serious and disturbing’

FirstEnergy is facing multiple shareholder lawsuits after the utility's stock price plunged following the arrests and the investigation. 

In late July, Jones initially addressed the Householder scandal and FirstEnergy.

"The financial support we provided to House Bill 6 isn't complicated," Jones said then. "We know what we did. We know why we did it. We're looking forward to sharing that with the Department of Justice. That's what gives me confidence to say we acted properly."

Jones also said at that time that FirstEnergy's support for Ohio's nuclear plants at no time interfered with or superseded the company's ethical obligations to properly conduct its business. "I believe the facts will become clear as the investigation progresses," Jones said then.

Jones was born in Akron and grew up in the city's Ellet neighborhood. He attended the U.S. Naval Academy and graduated from the University of Akron, becoming an electrical engineer. In 1978, Jones joined Ohio Edison as a substation engineer. He moved up the corporate ladder and was named president and CEO of FirstEnergy in January 2015.

As FirstEnergy's CEO, Jones championed Akron and helped support numerous local causes, including the All-American Soap Box Derby, where he recalled often bicycling down Derby Downs when he was a kid.

Jones led the transition of FirstEnergy from a deregulated electric utility to a traditional regulated utility. As part of that strategy, the former FirstEnergy Solutions, which was the debt-heavy generation arm of FirstEnergy, filed for Chapter 11 bankruptcy, coming out of that process in February this year as independent company Energy Harbor.

FirstEnergy shares were down  $1.77 or 5.6%, in late-afternoon trading Friday.

The two other executives fired Thursday were Dennis M. Chack, senior vice president of product development, marketing and branding; and Michael J. Dowling, senior vice president of external affairs. Jones also resigned from the FirstEnergy board of directors.

"During the course of the company's previously disclosed internal review related to the government investigations, the Independent Review Committee of the Board determined that these executives violated certain FirstEnergy policies and its code of conduct," FirstEnergy said.

Charles Fishman, a utilities industry analyst with Morningstar who follows FirstEnergy, said he is not surprised that Jones is out as CEO but is surprised that Jones was not allowed to resign.

Jones did a solid job as head of the utility, he said.

"I like Chuck Jones," Fishman said. "I thought he did a real service for shareholders separating FirstEnergy from FirstEnergy Solutions."

The FirstEnergy board likely deliberately fired Jones and the other two executives to send a message to politicians and regulators, Fishman said.

"They had to make it very clear he was terminated," he said. "Obviously, they [the board] made a big deal. That caught my eye."

Fishman put out a note Friday reminding investors he had previously speculated that he thought Jones, at age 63, was going to be forced to retire earlier than he had planned over the Householder and House Bill 6 scandal. 

Fishman said he is speculating that Jones may not have made full disclosures to the board related to FirstEnergy being the source of $15 million in funds tied to former Ohio Speaker Householder and the House Bill 6 issues; Fishman said he believes Jones is an honest individual.

Fishman also wondered whether there is more going on with FirstEnergy and whether it is a coincidence that the firings took place on the same day that two of the five people charged in the federal investigation made a plea deal.

Even with the firings and uncertainty over the utility's involvement in the bribery case, FirstEnergy's underlying businesses remain solid, Fishman said.

Steven E. Strah, 56, FirstEnergy president and its former chief financial officer, has been appointed acting CEO.

More: Feds: Householder pay-to-play scheme extended beyond House Bill 6

Board member Christopher D. Pappas, 65, has been named executive director, a non-management position. He will report to Donald T. Misheff, FirstEnergy's non-executive board chairman.

 "We as a board have strong confidence that this leadership transition and Steve's appointment as acting CEO will position FirstEnergy to move forward with positive momentum and drive long-term shareholder value creation," Misheff said in the news release.

Pappas said Strah's "deep knowledge of FirstEnergy's business and significant operational experience" will lead the utility through its transition.

"I'm excited for the opportunity to lead FirstEnergy and I am deeply committed to the future of this company," Strah said in the release. "I have seen firsthand the strong management team and deep bench of highly capable leaders across our organization, and I am confident in our ability to continue delivering value to our stakeholders as we remain intently focused on our business priorities through this transition and beyond. Together, we will advance our mission for the benefit of customers, communities, and our employees."

Strah was appointed president in May as part of the company's ordinary-course succession planning process, FirstEnergy said. He has been with the company and its subsidiaries since 1984.

While Strah is highly respected and has a long history with FirstEnergy, Morningstar's Fishman said he thinks it likely that the utility's board of directors will bring in an outsider as CEO "to smooth regulatory and political relationships in Ohio."

FirstEnergy will release third-quarter results on Monday before the stock market opening. 

Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ.

This article originally appeared on Akron Beacon Journal: FirstEnergy fires CEO Chuck Jones after 2 plead guilty in Householder bribery scheme

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