FirstEnergy Corp. hasn’t been charged – or even named – in a public corruption investigation but the Akron-based company announced it is in early talks with federal prosecutors to strike a deal that would allow it to avoid a potential criminal prosecution.
In disclosures filed late Thursday, FirstEnergy said it is in preliminary talks with the U.S. Attorney’s office about the possibility of a “deferred prosecution agreement.”
Under such agreements, the prosecution agrees not to pursue a criminal conviction if the party abides by terms of the deal, such as cooperating with investigators and paying fines.
FirstEnergy is volunteering to end a possible criminal prosecution, said Mike Gentithes, a professor at the University of Akron School of Law.
“It’s an alternative to facing that actual criminal charge and in exchange, the prosecutor is promising to exercise their discretion not to actually pursue the changes,” he said.
In an earnings call with financial analysts on Friday, FirstEnergy Chief Executive Steve Strah called the talks “constructive” and a “positive development for our company.”
“As for the details of the timing, the potential for fines or penalties, I can’t speculate on that at all,” he said. “And I just do want to say, though, I’m encouraged by our dialogue and I’m encouraged that we are certainly going to continue to fully cooperate with the Department of Justice.”
‘Deferred prosecution’ better for company’s reputation
FirstEnergy said the company is likely to take a hit to its finances and reputation.
Gentithes said a deferred prosecution agreement can potentially hurt a company’s reputation but it’s a better option that facing a full prosecution. “Traditionally, these were more lenient than a full prosecution and that’s why companies liked them, because they could survive. It allowed them an easy out from wrongdoing.”
In July, the U.S. Attorney for the Southern District of Ohio brought racketeering charges against state Rep. Larry Householder, R-Glenford, former Ohio GOP chairman Matt Borges, lobbyists Neil Clark and Juan Cespedes, and political operative Jeff Longstreth.
An Ohio utility company allegedly funneled nearly $61 million in bribe money through dark money groups, known as 501(c)4 organizations, to help Householder become Ohio House speaker. In return, Householder push through a $1.3 billion bailout to benefit the utilities, prosecutors allege.
Longstreth and Cespedes pleaded guilty; Clark died by suicide; Householder and Borges have pleaded not guilty.
Charges have not been brought against any companies that poured money into the 501(c)4 organizations.
FirstEnergy says it’s focused on ethics and compliance
In the earnings call, FirstEnergy executives continued to say they are focused on ethics, transparency and compliance.
FirstEnergy pledged to stop all contributions to dark money groups; is pausing other political contributions; is suspending or ending various political consulting agreements; and is expanding political spending disclosures.
The company is striving to return to investment grade credit ratings, FirstEnergy officials said.
Based in Akron, FirstEnergy distributes electricity to six million customers and employs 12,000. It owns 10 electric companies that distribute power across five states. It is listed at number 294 on the Fortune 500 list in 2020.
The company reported a first-quarter net income of $335 million, or 62 cents per share on revenue of $2.7 billion. That compares to earnings of $74 million or 14 cents a share on revenue of $2.7 billion for the same period a year ago.