The History of the HB6 Scandal and Reforms Needed to Stop this from Happening Again
Shining A Light on Dark Money in Ohio
“Unless Ohio makes structural changes that improve transparency and accountability, expect the scandals to get bigger and more complex.’’ – Catherine Turcer, Common Cause Executive Director
In December 2020, Common Cause Ohio held a series of webinars entitled “Blueprint for Democracy: How We Can Stop Being Ripped Off.” Together with state and national experts, Common Cause identified specific structural reforms needed to stop Ohio’s recurring epidemic of corruption, including:
- Requiring transparency and disclosure to “shine a light on dark money”
- Giving the public access to records at Ohio’s bill-writing agency
- Requiring PUCO members and the panel that nominates them to be conflict free
- Requiring transparency in lobbying
Below, we review some of the key history of the HB6 scandal and discuss how the recommended reforms would work to stop a similar scandal from happening again.Image 5.5 Updated IEEFA Diagram
Randazzo, FirstEnergy, and a $4.3 million dollar bribe
Before Governor Mike DeWine appointed Sam Randazzo as head of the Public Utilities Commission of Ohio (PUCO), his former campaign treasurer warned the new governor to give Randazzo a thorough vetting.
“Sam Randazzo has opaque, undisclosed financial ties to FirstEnergy that should be fully examined,’’ the former treasurer included in the 198-page dossier. “Energy stakeholders across Ohio deserve full transparency and the confidence that their regulators are not conflicted or otherwise compromised.’’
Despite the dossier from a friend and separate warnings from environmental groups, DeWine made Randazzo the PUCO chair anyway, insisting he has the “knowledge and experience to lead the PUCO.’’
On Nov. 16, 2020, the FBI raided Randazzo’s home. DeWine continued to praise Randazzo — even after the FBI raided his home.
Randazzo resigned from the PUCO four days after the raid, framing his departure as a selfless move to save DeWine from distractions as he steered Ohio through the COVID pandemic. Eight months later, FirstEnergy admitted that it bribed Randazzo in exchange for future favors.
Although Randazzo has not been charged with any crime, he remains a key figure in the largest public corruption case in Ohio history.
The FBI’s ongoing bribery and racketeering investigation resulted in the July 2020 arrests of Ohio House Speaker Larry Householder, former Ohio Republican Party Chairman Matt Borges and three others. Federal officials have accused them of helping to use more than $60 million — mostly from utilities — to:
- install utility-friendly Householder as Speaker;
- push to pass House Bill 6 (HB6) — a ratepayer-funded bailout of two nuclear power plants owned by a FirstEnergy subsidiary, and;
- kill an effort to ask the voters to overturn the bailout law.
The money paid for consultant and campaign expenses, but Householder also received more than $500,000 for his personal benefit, prosecutors said.
Householder and Borges pleaded not guilty, and their criminal trials began in January 2023. Two other individuals and the dark money group Generation Now filed guilty pleas. Another co-defendant, lobbyist Neil Clark, died of an apparent suicide last year after writing a tell-all book that, among other things, contends DeWine accepted a $5 million contribution from FirstEnergy/FirstEnergy Solutions in exchange for his support for the planned bailout. DeWine has denied the assertion.
Pathway for Reform
One of the most important recommendations is for legislation that would increase transparency and require disclosure:
Reform #1: Transparency and Disclosure. “Shine a light on dark money”
Ohio needs to require disclosure of the funding sources of political advertisements. Transparency of political dollars allows the public to follow the money and consider the source of information. Secret money in elections encourages corruption.
The Householder Enterprise
Court documents refer to the HB 6 scheme as the “Enterprise,’’ and say that it received millions in bribes funneled through a web of hard-to-trace nonprofit and for-profit groups that do not have to disclose their donors. Such organizations are known as “dark money” groups. Much of the money initially came from FirstEnergy and AEP before landing in Generation Now, the dark money group that filed a guilty plea.
Prosecutors called the payments “akin to bags of cash — unlike campaign or PAC contributions, they were not regulated, not reported, not subject to public scrutiny — and the Enterprise freely spent the bribe payments to further the Enterprise’s political interests and to enrich themselves.”
At a press conference in 2020, Toledo Blade reporter Jim Provance asked prosecutors if the Householder scandal could have happened if Ohio had good disclosure laws. U.S. Attorney David DeVillers answered, “I don’t see how it possibly could have.”
How utilities used dark money groups
FirstEnergy and AEP — Generation Now’s main funders — stood to gain a lot from HB6. The law earmarked about $1 billion in ratepayer subsidies for two former FirstEnergy nuclear plants over the course of six years and also for aging coal-fired power plants. The nuclear subsidies were repealed in 2021, but Ohioans continue to subsidize two of the coal-fired power plants. One isn’t even in Ohio.
In some instances, FirstEnergy subsidiaries or other HB6 backers gave money directly to Generation Now, the dark money group at the center of the bribery scandal. But the path the money traveled varied. For example, the Growth & Opportunity PAC spent $1 million from Generation Now to help Householder allies win their primaries.
Guilty pleas and firings
Despite Ohio’s weak disclosure and transparency laws, the public has a great deal more information about the scandal since the indictments became public in July 2020 — much of it from court filings, news reports and statements from prosecutors.
On Oct. 29, 2020, two of Householder’s top aides who were indicted with him pleaded guilty to participating in the racketeering conspiracy. One admitted to concealing the original sources of the money, the other said he knew the money would be used to pass and preserve the nuclear bailout law.
But the biggest development surfaced July 22, 2021, when Ohio’s largest utility admitted to bribing Ohio’s top utility regulator. In its deferred prosecution agreement, FirstEnergy said it bribed Randazzo, paying him $4.3 million in exchange for future favors. FirstEnergy paid a $230 million fine and agreed to fully cooperate with investigators. The next day, its stock rose about 5 percent.
FirstEnergy recently agreed to another $3.9 million fine for hiding information about nearly $94 million in lobbying expenses from federal regulatory auditors.
The racketeering investigation is the latest in a series of Ohio utility pay-to-play scandals. It’s also the biggest.
This reform proposed by Common Cause aims to make it easier to unearth future scandals:
Reform #2: Give the public access to records at Ohio’s bill-writing agency
The records of the Legislative Service Commission should be public so that we can follow the legislative process, see who initiated and crafted wording for the legislation or pushed for amendments, and identify the decision-makers behind attempts to change Ohio law.
Ohio lawmakers closed the records of the Legislative Services Commission (LSC, the government agency that writes and analyses legislation) after a previous utility scandal.
Closing LSC records
Then-state Sen. Roy Ray, an Akron Republican, was caught getting paid by a regulated utility that is now part of FirstEnergy, then introducing a pro-utility bill written by the very same utility that had him on its payroll. Through a public records request, Democrats learned that the utility itself — not Sen. Ray — actually wrote the bill. Soon after, Republicans exempted the bill-writing agency from Ohio’s public records law.
“Closing the Legislative Service Commission records was the only legislative response to the Roy Ray scandal,’’ Turcer said. “It’s time for real reform.’’
As the session begins, Turcer calls for passage of a law to re-open the bill-writing records and name it in honor of Jim Siegel, a highly regarded Columbus Dispatch reporter who died in 2019. He was 46.
“Whether the topic was politically connected utilities or failing charter schools, Jim Siegel used his public records expertise to dislodge records and inform the public,’’ Turcer said. “But average citizens need easy access to these records, too. After all, their tax dollars pay for the records to be created and stored.’’
Conflicts of interest at the PUCO
Despite repeated efforts from HB 6 allies to block or delay releases of information, because of court records and the hard work of the media, the public has a great deal more information about the scandal since the indictments became public in July 2020.
The PUCO’s conduct has generated harsh criticism from a bi-partisan trio of former Commission members. They called on the PUCO to launch its own investigation and said it could be done without interfering with the FBI’s investigation.
Ongoing conflicts of interest and lack of investigative zeal are why Common Cause Ohio included changes at the PUCO in its package of proposed reforms:
Reform #3: Require PUCO members and the panel that nominates them to be conflict free.
Applicants to the Public Utility Commission should have to provide financial statements that include sources of income and the original source of income of nonprofit corporations with which they are affiliated. The governor should appoint consumer advocates, rather than veteran utility lobbyists to the Commission.
In 2019, DeWine appointed Randazzo after he was officially recommended by the utility-friendly PUCO Nominating Council. The Council at the time was chaired by Michael Koren, who lobbied for FirstEnergy for years while serving as head of the panel that recommends utility regulators. Koren submitted his resignation letter last year, citing a need to recover from unspecified medical issues. His letter makes no mention of the scandal.
In a Feb. 3, 2002, in a letter to the Nominating Council, consumer advocates urged the panel to replace Koren with someone with a strong consumer background and avoid choosing a chair who has worked for the utility industry that the PUCO regulates.
“The failure of the commissioner selection process culminated recently in a shocking scandal involving FirstEnergy and the preceding PUCO Chair,’’ the letter states. Before Randazzo resigned, three of the five Commission members had long utility backgrounds.
Along with recruiting Randazzo to apply, Husted was instrumental in the administration’s hiring of his close friend, former FirstEnergy lobbyist and Partners for Progress President McCarthy, to be the governor’s top lobbyist.
Reform #4. Require Transparency in Lobbying
While we need to be able to “follow the money” in campaigns and elections, we should also be able to track spending in lobbying efforts and the fundraising activities of lobbyists.
In addition to shining a light on dark money, Turcer has called for a law that requires lobbyists to reveal any fundraising support they provide to candidates.
In a March 2021 report, Common Cause Ohio revealed a never-before-disclosed new dark money scheme: DeWine’s “weekly finance call.’’ Select lobbyists on the call received a list of upcoming fundraisers, then helped DeWine raise nearly a half-million dollars in the final weeks of 2019, Common Cause found. Nearly every lobbyist invited to the call supported the nuclear bailout, was attempting to shape the sports betting law, or both, Common Cause found. The money flowed as Ohio was debating how to structure legal sports betting, a lucrative new business opportunity that launched in Ohio on January 1. This analysis inspired the proposed reform.
“Because the DeWine administration knows which lobbyists raise money for his campaign, the public must know it, too,” Turcer said. “It’s been almost three years since the bribery scandal erupted. The PUCO continues to withhold records, and policymakers continue to block real reform. If this pattern continues, the public will continue to get hurt.’’