FirstEnergy Corp. leaders collected more than $80 million, including $35 million in stock awards, in the three years that FBI agents say the Akron energy conglomerate bankrolled the “largest bribery, money-laundering scheme” in the history of Ohio politics.
That’s according to two new class-action lawsuits as shareholders blame FirstEnergy and its top brass for their investment losses.
The suits, filed July 28 in a federal court in the Southern District of Ohio and July 31 in Summit County Common Pleas Court, are the latest civil cases against Akron-based FirstEnergy and its top executives amid an ongoing political corruption scandal.
The class-action lawsuits cite an anti-fraud statute in the Securities Exchange Act of 1934. While starting with a single plaintiff, the two SEC class-action cases could attract other investors seeking collectively to recoup billions of dollars in losses.
On July 21, federal agents arrested Ohio House Speaker Larry Householder and four other men, including lobbyists for FirstEnergy and its former subsidiary FirstEnergy Solutions (now known as Energy Harbor), which owned two nuclear power plants. 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.
Within 48 hours of the arrests, FirstEnergy’s shareholders collectively lost $7.6 billion as the parent company’s stock price plummeted 34%, according to one of the class-action lawsuits.
In speaking to investors and stock analysts, FirstEnergy Corp. CEO Charles Jones denied any wrongdoing. He’s said the parent company contributed about 25% of the $61 million in question.
A spokeswoman for FirstEnergy said Jones and other defendants in the class-action suits would not be available for interviews and that the company “is unable to comment on pending litigation.”
A third class-action lawsuit was filed July 29 in Summit County Common Pleas Court on behalf of the company’s electric customers. That suit alleges that the “illegal” passage of House Bill 6 imposed hundreds of millions of dollars in surcharges for customers.
And a fourth lawsuit, filed July 25 just days after FBI agents took their investigation public, alleges that a single shareholder from Euclid was also harmed when company executives and board members broke their fiduciary responsibility to serve the interests of investors with proper oversight, transparency and honesty.
FirstEnergy executives and board members “misled investors and analysts by touting FirstEnergy’s attempts at legislative solutions for its struggling nuclear facilities,” according to one of the two more recent class-action lawsuits, which is a verified stockholder derivative complaint signed by shareholder Robert Sloan of Boynton Beach, Florida.
The executives failed “to disclose that these so-called ‘solutions’ centered on the illicit campaign to corrupt high-profile state legislators in order to secure favorable legislation,” Sloan complained.
Sloan’s lawsuit in Summit County tallies all the compensation board members and top executives collected in 2017, 2018 and 2019 when FBI agents say the pay-to-play scandal unfolded. Fourteen board members for the publicly traded company earned an average of $646,000 in that time, with more than half coming from stock awards.
Board members were encouraged to invest heavily in the company’s stock, which appreciated from news that lawmakers were working on and eventually passed a $1.3 billion public subsidy to save the company’s failing nuclear reactors. At the time, FirstEnergy owned the reactors through FirstEnergy Solutions, which emerged from bankruptcy in February 2020 as Energy Harbor, an independent company.
Sloan’s lawsuit reference the other SEC class action cases filed on behalf of shareholder Diane Owens.