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'Unholy alliance' led to $61M racketeering scheme, prosecutors say

Ohio House Speaker Larry Householder, four co-conspirators accused in bid to serve Akron-based FirstEnergy Corp. a billion-dollar nuclear energy bailout in the guise of House Bill 6.

COLUMBUS — It was a $61 million “unholy alliance” between Ohio House Speaker Larry Householder and Akron-based FirstEnergy Corp. that paved the way for a billion-dollar nuclear energy bailout in the state and tipped close House races toward politicians in Householder’s camp, according to a federal affidavit.

David DeVillers, U.S. attorney for the Southern District of Ohio, on Tuesday outlined a three-year conspiracy in which Householder and other close associates allegedly forced passage of Ohio House Bill 6 — a controversial, more than $1 billion bailout for FirstEnergy’s failing nuclear power plants in the state, which became law in July 2019 — used underhanded tactics to quash a public referendum to reverse that bill and paid for advertisements attacking election opponents of those loyal to Householder — all using nearly $61 million in FirstEnergy “dark money.”

“These allegations are bribery, pure and simple. This was a quid pro quo. This was pay-to-play,” DeVillers told reporters during a Tuesday afternoon briefing.

An 82-page federal affidavit unsealed Tuesday brings racketeering charges against:

• Householder, 61, of Glenford, Ohio’s 72nd House District representative, who is accused of coordinating the enterprise and operating a corporate entity that received $61 million in undisclosed donations from FirstEnergy;
• Mathew Borges, 48, of Bexley, a former Ohio Republican Party chair turned lobbyist alleged to be the “key middleman” in the effort to kill a ballot initiative to reverse the bailout bill;
• Jeff Longstreth, 44, of Columbus, Householder’s longtime campaign and political strategist, whom the affidavit alleges was “instrumental” in HB 6’s passage and operated myriad bank accounts used to shuffle and obfuscate the illicit cash flow;
• Neil Clark, 67, of Columbus, head of Ohio-based lobbying firm Grant Street Consulting, who referred to himself as Householder’s proxy and “hit man” — the one who will do the “dirty shit,” according to the affidavit;
• Juan Cespedes, 40, of Columbus, a lobbyist retained by FirstEnergy Solutions, a now-former FirstEnergy subsidiary that operated failing nuclear plants in Perry and Oak Harbor, who was “central” to the passage of HB 6 and who tracked Ohio political candidates to receive laundered FirstEnergy funds, according to the affidavit.

The defendants were arrested Tuesday and appeared before judges that afternoon. Householder was ultimately released on his own recognizance and ordered against contact with the codefendants. He must be approved to travel outside the Southern District court’s jurisdiction and was made to surrender his passport. He’s set for an Aug. 8 preliminary hearing.

Authorities said Householder was “cooperative” during his arrest at his Glenford farm, but didn’t offer a statement.

If convicted, the alleged conspirators in the case face up to 20 years in prison.

Chris Hoffman, special agent in charge of the FBI’s Cincinnati office, said Tuesday the case marks the first time a public official has faced racketeering charges in Ohio’s Southern District court, and Householder is the first state house speaker in 10 years to be arrested in an FBI investigation. 

“[Racketeering] charges are reserved for the most egregious conduct,” he said. “You’ve probably heard about it in a lot of mob cases.

“All forms of public corruption are unacceptable,” Hoffman said. “When the corruption is alleged to reach some of the highest levels of our state government, the citizens of Ohio should be shocked and appalled.”

You can read the full complaint below. To open a full-size version, click the icon in the upper-right:

 

THE LEGISLATIVE SOLUTION

In 2016, FirstEnergy’s future in nuclear power generation looked “grim.” FirstEnergy Solutions — which was cut loose from its parent company and later re-emerged from bankruptcy as Energy Harbor — faced hundreds of millions of dollars in losses, the affidavit states.

During a Q4 2016 earnings call, FirstEnergy executives told shareholders they were seeking a “legislative solution” to keep the plants open, which prosecutors suggest later became HB 6.

At the same time, Householder was re-entering Ohio politics. He served as Ohio’s 72nd district representative 1997 to 2004, and as speaker from 2001 to 2004, before resigning due to media reports of “alleged corrupt activity” — though he was never formally charged, according to the affidavit.

Householder won back the 72nd district seat in 2016, then set his sights on the speakership.

He and the accused conspirators later formed what the affidavit calls “Team Householder,” identifying allied candidates and financial backers and developing a campaign strategy.

Between March 2017 and March 2020, FirstEnergy secretly poured $60,886,835.86 into Householder’s efforts, in exchange for the more than $1 billion bailout promised by HB 6.

Clark, in a recorded conversation, said FirstEnergy operated as the enterprise’s “bank” and that its “deep pockets” to funnel funds to the alleged conspirators were “unlimited.”

Several of the defendants used some of what Borges called “Monopoly money” on themselves, according to the affidavit. Householder put more than $400,000 passed through accounts controlled by Longstreth toward legal fees, his campaign staff and his Florida home, prosecutors allege.

GENERATION NOW

But for the scheme to work, that money needed to stay hidden, DeVillers told reporters Tuesday.

Following a trip on a FirstEnergy private jet in January 2017, Householder first began receiving quarterly payments of $250,000 into the bank account of a 501(c)(4) tax-exempt corporation called Generation Now, which prosecutors believe was operated by Householder.

Though 501(c)(4) entities are designated for social welfare programs, Householder and associates used it like a shadowy political action committee, prosecutors allege. Unlike PACs or SuperPACs, 501(c)(4) entities are overseen by the IRS and don’t have to publicly report contributions to the Federal Election Commission, DeVillers said Tuesday.

“The millions paid into the entity are 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,” reads the affidavit.

Householder’s enterprise allegedly targeted 2018 primary and general election races involving supporters of Householder’s rival for the speakership, Ryan Smith of Bidwell, who was backed by then-Ohio House speaker Cliff Rosenberger. They wanted the new blood to be loyal to Householder and willing to push HB 6, prosecutors allege.

Generation Now poured a total $2 million of FirstEnergy’s “dark money” into those races for about 20 candidates, making ad buys attacking those candidates’ opponents and sending campaign mailers.

Those candidates are not identified in the affidavit, though Federal Election Commission filings indicate the districts in which ad dollars were spent. None represented the Mahoning Valley, but reached neighboring Stark County.

FEC filings show Generation Now gave more than $1 million to the Growth and Opportunity PAC, which attempted to influence the Republican primary in House District 50, between Reggie Stoltzfus of Paris Township and Josh Hagan of Marlboro Township, the brother of current Ohio 13th congressional district candidate Christina Hagan.

According to the documents, the political action committee spent more than $80,000 on attack ads against Stoltzfus. The Canton Repository reported Stoltzfus had said he would not support Householder’s bid for speaker, and that Hagan was endorsed by Smith, Householder’s opponent for the speakership.

“The plan worked,” the affidavit states. Most of those candidates won their races and nearly all of them later voted for Householder to become speaker and voted for the FirstEnergy bailout, which was introduced three months after Householder took the House’s top seat, according to the affidavit.

Ohio Secretary of State filings show the late State Rep. Don Manning of New Middletown, who died in March of this year, also received political contributions from Householder and FirstEnergy.

The speaker's political committee, Friends of Larry Householder, contributed $5,000 to Manning shortly after he defeated Democratic challenger Eric Ungaro in the 2018 general election. Manning also received $1,000 from FirstEnergy PAC in March of this year.

Manning was the only local legislator who voted in favor of HB 6.

RECORDED CONVERSATIONS

FirstEnergy wired nearly $17 million to Generation Now while the bill was pending, according to the affidavit. Householder’s enterprise also leaned on the Ohio Senate for passage, prosecutors allege.

FirstEnergy gave another $38 million to help “Team Householder” defeat a ballot initiative seeking to pull back the passed bill, which appeared months before HB 6 was set to take effect in October 2019.

The affidavit includes recorded conversations and phone calls and logs of text messages between Householder and his associates, as well as unidentified FBI informants who were connected to the alleged conspiracy.

In a recorded statement, Clark claimed to have spent $450,000 in a single day contracting signature collection firms and “[hiring] them not to work,” the affidavit states.

“Let’s get all the good ones?” Cespedes wrote in a June 2019 text message to Longstreth, later adding, “I was hoping that we could take out all the big players and limit their chances. It’s impossible to referendum proof. … We can make it tougher.”

Generation Now also spent $4 million on media companies that bought TV ads and mailed hundreds of thousands of fliers to Ohioans’ homes claiming that petitioners were connected to the Chinese government, which was trying to take over the country’s energy grid — a conspiracy theory that has since been debunked.

One flier read, “Who’s knocking on your door? … Foreign entities have infiltrated our energy grid. They want to kill our jobs and raise our rates so they can make more money. Now, their front group has hired out-of-staters to roam our neighborhoods and ask for your personal information for their petition. ... Tell them no! Decline to sign!"

That flier cites a February 2019 Business Journal article that references foreign funding efforts for the Trumbull Energy Center, developed by Massachusetts-based Clean Energy Future.

Prosecutors also allege the enterprise paid $15,000 to a ballot official for insider information on the referendum and offered to pay signature collectors $2,500 cash to stand down.

“It is so important, it is so important, that they are not successful, because when the legislature votes on something it needs to stay law,” Householder said during a September 2019 meeting, which was recorded.

A staffer replied, “'it's the beginning of your speakership; it sets a bad precedent for the next six years, what we need to make them realize is that you (Householder) can't be [expletive] with.”

FirstEnergy is not directly identified in the 82-page affidavit — rather, presumed to be referenced as “Company A” — and has not been formally charged. In a brief statement released Tuesday, however, the company acknowledged it has received subpoenas “in connection with the investigation” into HB 6.

“We are reviewing the details of the investigation and we intend to fully cooperate,” the statement reads.

STUNNED STATEHOUSE

In separate statements Tuesday, Gov. Mike DeWine and Attorney General Dave Yost called for Householder’s resignation.

“I am deeply concerned about the allegations of wrongdoing in the [release] issued today by the U.S. Attorney’s Office,” DeWine said. “Every American has the presumption of innocence until proven guilty. Because of the nature of these charges, it will be impossible for Speaker Householder to effectively lead the Ohio House of Representatives; therefore, I am calling on Speaker Householder to resign immediately.

"This is a sad day for Ohio."

Yost said if Householder refuses to step down, the House should invoke constitutional powers to eject him.

“Larry Householder sold out the people of Ohio in exchange for power and dirty money. The 81-page sworn affidavit filed today shows plainly he cannot be trusted to act in the public interest, or trusted with public authority,” he said.

"He is entitled to a presumption of innocence regarding the criminality of his acts, but he is entitled to no presumption of continuance in office. He should resign immediately.”

DeVillers told reporters Tuesday there is no evidence suggesting DeWine the alleged scheme “touches the governor’s office.”

He said his office has briefed prosecutors in Franklin County as well as the U.S. Northern District of Ohio court.

“We’re not sure where this is all going to lead. We’re continuing to investigate this case,” he said.

Members of the Statehouse Republican majority leadership said in a statement they did not have contact with Householder on Tuesday.

“We were shocked to learn of the charges filed today against Speaker Householder. The Ohio House of Representatives remains open, and the members and staff are continuing their work to serve the people of Ohio,” reads the statement, attributed to Speaker Pro Tempore Jim Butler, Majority Floor Leader Bill Seitz, Assistant Majority Floor Leader Anthony DeVitis, Majority Whip Jay Edwards and Assistant Majority Whip Laura Lanese.

“We are reviewing the allegations. To our knowledge, no other member of the Ohio General Assembly is under investigation in connection with these allegations.”

Republican State Rep. Al Cutrona of Canfield, who in May was chosen by a Householder-led committee to fill the 59th House District vacancy left after former Rep. Don Manning’s death, said in a statement Tuesday he is “truly appalled” by the allegations against Householder.

“As an attorney, I anticipate and hope for a swift process within this crucial case,” he said. “While every person deserves their day in court, if indeed corruption is found and proven, I will move quickly to address this matter. As this is not a Republican or Democrat issue, but rather a bipartisan concern.”

Mahoning Matters on Tuesday sought comment from other local representatives but only heard back from State Rep. Michele Lepore-Hagan of Youngstown, D-58th.

From her perspective, the scandal was able to take place due to the unchecked power of the Ohio Republican Party.

“When you don’t have give and take, it destroys the checks and balances that are set into our government,” Lepore-Hagan said. “Then things like this happen.”

While she noted Householder is innocent until proven guilty, Lepore-Hagan said he should resign either way.

Additionally, in response to the scandal, HB 6 should be repealed, she said.

She added the money Householder collected should be given to environmental causes, as House Bill 6 rolled back renewable energy standards.

The Ohio Environmental Action Fund, which opposed HB 6 in 2019, on Tuesday also called for its immediate repeal.

“House Bill 6 has always been a bad deal for Ohioans, sticking us with dirtier air and higher utility bills while gutting our clean energy future,” said President Heather Taylor-Miesle. “As we’ve suspected all along, the billion-dollar bailout, strong-armed through the General Assembly by Speaker Householder, appears to have been fueled by corrupt pay-to-play dealings with corporate utilities.

“Despite the fact that Ohioans overwhelmingly opposed HB 6, the disastrous legislation passed, ensuring that FirstEnergy and its corporate investors benefited on the backs of Ohio taxpayers. When Ohioans fought back against the bad bill, they experienced outrageous, unprecedented attacks — funded by the same interests — that interfered with their democratic right to pursue a referendum at the ballot to repeal the bill.”

Lepore-Hagan said the material prosecutors released Tuesday could be just the tip of the iceberg.

“I am waiting for things to start unfolding,” she said. “We all have to just see what happens and how deep this is.”

— Reporter Jess Hardin contributed to this report.



Justin Dennis

About the Author: Justin Dennis

Justin Dennis has been on the beat since 2011, covering crime, courts and public education. Dennis grew up in Poland and Salem and studied journalism and communications at Cleveland State University and University of Pittsburgh.
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