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Shareholder sues FirstEnergy’s board of directors, alleging a lack of oversight involving payments to Householder

The Plain Dealer  Cleveland logo The Plain Dealer Cleveland 8/7/2020 By John Caniglia, cleveland.com

CLEVELAND, Ohio – A longtime shareholder sued FirstEnergy Corp.‘s board of directors Friday, accusing it of failing to provide the oversight needed to prevent what authorities called a massive bribery scheme involving House Bill 6.

Jennifer Miller of Alemedia, California, filed the lawsuit in U.S. District Court in Cleveland. Miller has been a shareholder since 1999 and owns 812 shares. As a shareholder, she sued the board on behalf of the company in what is known as a derivative lawsuit.

She alleged the board did not establish the internal controls that would have flagged the payments.

The suit also said the board lacked “reasonable and prudent supervision over the company’s management and policies.”

The allegations were filed eight days after the unsealing of a federal indictment that charged former Ohio House Speaker Larry Householder and four allies with racketeering.

Authorities said FirstEnergy affiliates funneled more than $60 million in bribes in exchange for House Bill 6, a $1.3 billion bailout of two nuclear plants that were, at the time, owned by a FirstEnergy subsidiary.

The lawsuit said the board members failed to prevent company executives from engaging “in a concerted effort to curtail losses from nuclear energy operation managed by a subsidiary in order to keep their lofty positions and to increase their own compensation.”

In an email, a FirstEnergy spokeswoman said she could not comment on the lawsuit. She noted that FirstEnergy’s chief executive operating officer, Charles Jones, has said that he believes FirstEnergy “acted properly in this matter and intends to cooperate fully [in the investigation].

“Ethical behavior and upholding the highest standards of conduct are foundational values for the entire FirstEnergy family,” spokeswoman Jennifer Young wrote. “We strive to apply these standards in all business dealings, including our participation in the political process.”

The lawsuit, filed by attorney Alan Rosca, disputes that.

It said that the members “sanctioned the corporate policy of illegal payments to government officials, including Ohio House Speaker Larry Householder and other individuals that resulted in a significant reduction in shareholder value when it was subsequently exposed.”

From 2015 through 2017, board members opposed a push by shareholders that sought “transparency and accountability on lobbying policies and payments” to legislators, according to the lawsuit.

Had the attempts passed, the payments to Householder and his allies would have been discovered, the lawsuit contends.

Householder was removed as the speaker July 30. Householder will be arraigned later this month, while the four others have denied the charges.

The lawsuit said FirstEnergy will suffer financially from the fallout of the investigation.

“Even beyond the reputational damage and loss in market capitalization —FirstEnergy’s stock lost 45% percent of its value within hours of the announcement of criminal charges —the total cost to the FirstEnergy and shareholders of its goodwill, diminished value, civil litigation and scorched-earth investigations may well stretch into the billions of dollars,” the suit said.

FirstEnergy connections are widespread in Gov. Mike DeWine’s administration

Gov. Mike DeWine calls for repeal of House Bill 6, reversing his position from the day before

FirstEnergy should expect shareholders lawsuits over stock losses tied to Householder corruption charges, legal experts say

Who is Team Householder, the candidates Larry Householder recruited to help him become Ohio House Speaker?

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