FirstEnergy Fires CEO as Nuclear Bailout Probe Continues

Credit to Author: Darrell Proctor| Date: Fri, 30 Oct 2020 16:58:24 +0000

The post FirstEnergy Fires CEO as Nuclear Bailout Probe Continues appeared first on POWER Magazine.

FirstEnergy Corp. President and CEO Charles “Chuck” Jones was fired late Thursday after an internal review found Jones and two other company executives violated company policies in connection with an alleged bribery scheme.

The case is connected to a legislative bailout of the state’s nuclear power plants that occurred in 2019. The law, known as House Bill 6 (HB 6), meant state electricity ratepayers would pay more in their bills to subsidize the state’s nuclear plants, along with two coal-fired power plants jointly owned by the state’s utilities.

Thursday’s action came after two of the four lobbyists charged in the federal racketeering probe entered guilty pleas in the case.

Federal agents in July arrested Larry Householder, an Ohio Republican lawmaker and former Speaker of the House, and four other men, including lobbyists for FirstEnergy and its former subsidiary FirstEnergy Solutions, now known as Energy Harbor. Investigators said FirstEnergy Corp. and its subsidiaries funneled $60 million to Householder and his team members, as part of an effort to push the $1.5 billion HB 6 into law. The law benefited Energy Harbor, which owns the Davis-Besse and Perry nuclear plants in Ohio.

FirstEnergy was not identified in the July indictment, but legal experts have said it is thought to have been “Company A” in the investigation of how corporate money was used by Householder to finance the multi-year campaign to ensure passage of the bailout legislation. Householder has pled not guilty to the charges, and is awaiting trial.

Charles “Chuck” Jones was fired from his role as FirstEnergy Corp.’s CEO effective immediately late on Oct. 29. Courtesy: FirstEnergy

“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,” Akron, Ohio-based FirstEnergy announced in a news release late Oct. 29. The company said, “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.”

The company’s news release did not elaborate on the violations. Steven E. Strah, FirstEnergy president and its former chief financial officer, has been appointed acting CEO.

Two Other Execs Fired

The two other executives fired Thursday are 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 company’s board of directors.

FirstEnergy has been criticized by several groups, including consumer advocates, for not disclosing more information about the case. “FirstEnergy’s lack of transparency is a continuation from its resistance to prove it even needed the bailout it received in House Bill 6, despite requests from lawmakers during HB 6 hearings,” said Miranda Leppla, vice president of Energy Policy for the Ohio Environmental Council Action Fund, in a statement Friday. “It is not surprising to see FirstEnergy’s current efforts to block any scrutiny of its actions in these legal and regulatory venues where organizations and the state are trying to get answers.”

The FBI in July served subpoenas at FirstEnergy’s offices, one year after HB 6 was signed into law. FirstEnergy in a filing Friday with the Securities and Exchange Commission said it is continuing an internal investigation into the case. The company in the filing said it is “re-evaluating its controls framework, which could include identifying one or more material weaknesses.”

FirstEnergy in the SEC filing said “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.”

Multiple Shareholder Lawsuits

FirstEnergy has previously said the company did nothing wrong in connection with the case. FirstEnergy is facing multiple shareholder lawsuits after the utility’s stock price plunged after the July arrests and news of the ongoing investigation. Neither FirstEnergy nor Energy Harbor has been charged in the case.

Jones in late July, commenting on the case and the arrests, said, “The financial support we provided to House Bill 6 isn’t complicated. 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 did not interfere with or supersede the company’s ethical obligations to properly conduct its business. “I believe the facts will become clear as the investigation progresses,” Jones said in July.

The now-dismissed CEO in a company earnings call in July said FirstEnergy had contributed about a quarter of the $60 million used in the campaign organized by Householder.

Jones led the transition of FirstEnergy from a deregulated electric utility to a traditional regulated utility. That move included having FirstEnergy Solutions, which was the debt-laden generation business of FirstEnergy, file for Chapter 11 bankruptcy. FirstEnergy Solutions emerged from bankruptcy in February of this year, as the now-independent company Energy Harbor.

Board member Christopher Pappas has been named FirstEnergy’s executive director, a non-management position. Pappas will report to Donald Misheff, FirstEnergy’s non-executive board chairman. “We as a board have strong confidence that this leadership transition and Steve’s [Strah] 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.”

Hearings to Repeal HB 6

Ohio lawmakers have held hearings on revoking HB 6, but the Republican-controlled Ohio House and Senate have not moved the repeal legislation out of committee.

Tom Bullock, executive director of the Citizens Utility Board, in a statement Friday said, “The HB 6 scandal has reached a grim milestone—the ‘allegations’ have now officially become crimes, and the victims are Ohio consumers who are on the hook for higher power bills because of a corrupt energy bailout. We urge Ohio leaders to stand up for consumers and repeal HB 6.”

Darrell Proctor is associate editor for POWER (@POWERmagazine).

The post FirstEnergy Fires CEO as Nuclear Bailout Probe Continues appeared first on POWER Magazine.

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