After years of hearings, depositions and court documents, some of Akron-based FirstEnergy’s biggest investors are still accusing the company of blocking their requests for information related to a massive bribery scandal that has already sent two people to federal prison.
FirstEnergy, in turn, argues that the plaintiffs in the lawsuit either do not understand or misinterpret the limits of attorney-client privilege.
The tussle came as part of a class-action lawsuit filed by huge pension and investment funds against FirstEnergy over a scandal in which the company admitted to paying more than $60 million in bribes between early 2017 and slow 2019. In return, the Republican-controlled Ohio Legislature passed a $1.3 billion taxpayer-funded rescue package which was primarily intended to serve FirstEnergy.
Former Ohio House of Representatives Speaker Larry Householder, a Glenford Republican, in June sentenced to 20 years in prison for his role in leading the conspiracy, and former state Republican Party chairman Matt Borges received five years for his lesser role. Two others who cooperated with prosecutors have pleaded guilty and are awaiting sentencing, while a fifth man charged, lobbyist Neil Clark, committed suicide.
In his deferred prosecution agreementFirstEnergy alleged improper conduct by three players, who were not charged.
The statement said former CEO Chuck Jones and Vice President Michael Dowling paid tens of millions in bribes to make Householder speaker and push through and protect the bailout. And FirstEnergy said the two paid $4.3 million in bribes to Sam Randazzo around the time Gov. Mike DeWine nominated Randazzo to be the state’s top regulator as chairman of the Public Utilities Commission of Ohio.
All three men deny the allegations, and U.S. Attorney Kenneth L. Parker said a criminal investigation is ongoing.
Large investors include, among others: California Public Employees’ Retirement Systemare suing FirstEnergy, alleging that the company violated federal securities laws by failing to disclose the risky behavior Jones and Dowling engaged in. Like most others, investors were caught off guard when Householder and the others were arrested in July 2020 — and their investments in FirstEnergy suffered as the company’s stock price plummeted.
In their lawsuit, investors accused FirstEnergy of trying to shield other executives and board members who may have been guilty — or at least may have known about — the fraud.
One way the company was accused of protecting itself was by hiring lawyers uninvolved in the litigation to conduct an internal investigation into the scandal. Then, in sworn statements, FirstEnergy’s lawyers told current and former board members and directors not to testify about anything they learned from the lawyers.
As part of a motion challenging the scheme filed last week, lawyers for the investors submitted portions of transcripts of the depositions of Julia Johnson and Tracy Ashton.
At the time of the bribery, Johnson was a member of FirstEnergy’s board and a member of the Corporate Governance and Corporate Responsibility Committee. In that role, she also worked as a political activist for other utilities and telecommunications companies, Energy and Policy Institute reported.
Johnson said that even though she held a position overseeing corporate governance and ethics, she believed CEO Jones was a man with a vision until his arrest caught her off guard, according to excerpts from the transcripts.
In the documents, FirstEnergy lawyers repeatedly interrupted questions about what she knew about the scandal to instruct her not to talk about things she learned from FirstEnergy lawyers. Johnson often complied.
Interestingly, Johnson said the board did not ask any questions of Jones or Dowling when it informed the directors of their dismissal on October 29, 2020.
Ashton was an assistant controller at FirstEnergy. As someone who helped oversee day-to-day accounting operations, she also may have had reason to know that tens of millions were going to a criminal conspiracy.
But as with Johnson, company lawyers repeatedly instructed her in her deposition not to say anything she might have learned from company lawyers, including things that were later disclosed publicly in a deferred prosecution agreement and U.S. Securities and Exchange Commission disclosures.
Lawyers for the investors say communications from lawyers not involved in the dispute — such as those who led the investigation — cannot be hidden behind attorney-client privilege, and they are demanding that they be allowed to take further depositions from company officials.
“First, the parties must complete the testimony that FirstEnergy has unlawfully obstructed,” they wrote last Thursday. “Reopening testimony is appropriate when, as in this case, a party unlawfully prevents witnesses from testifying about disclosable information.”
The investors’ attorneys are also seeking to interview attorneys who conducted the internal investigation. The plaintiffs’ attorneys argue that FirstEnergy waived all privileges when it shared the information with an outside accountant and government officials.
“Second, given the extraordinary circumstances of this case, the testimony of the investigating prosecutors, to be scheduled in the ordinary course pursuant to the Protocol of Testimony, is appropriate,” the letter reads.
FirstEnergy’s lawyers say that as long as the investigating lawyers also provided legal advice, the matters discussed were confidential.
“This law provides that communications between clients and attorneys about information are privileged to the extent that the information is related to legal advice,” they wrote in a court filing Friday. “Requiring witnesses to testify about information obtained solely from their attorney would also disclose the attorney’s work product, including the attorney’s assessment of the materiality of the information, the credibility of the evidence, and the conclusions drawn from the attorney’s review of the evidence.”
