Shareholders of FirstEnergy Corp., an Akron-based utility company with $11 billion in annual revenue, have filed multiple complaints in Ohio federal court alleging a $60 million bribery scheme to Ohio lawmakers in exchange for a $1.3 billion ratepayer-funded bailout.
Specifically, allegations relate to certain FirstEnergy executives, including CEO Charles E. Jones, that acted fraudulently by inflating the Company’s financial results between February 21, 2017 and July 21, 2020 by illegally channeling more than $60 million to prominent state officials and lobbyists, including Ohio Speaker Larry Householder. Court documents state the Company was looking to secure the passage of legislation – specifically Ohio House Bill 6 (“HB6”) – that would provide a $1.3 billion ratepayer-funded bailout to keep the Company’s failing nuclear facilities in operation.
The bribery scheme was exposed on July 21, 2020 when federal agents announced the arrests of Speaker Householder and four other individuals, including a noteworthy FirstEnergy lobbyist. The 82-page criminal complaint detailed an alleged “pay-to-play” scheme in which FirstEnergy corrupted numerous facets of the legislative process in order to ensure the passage of HB 6. Prosecutors described this case as the “largest bribery, money laundering scheme” in Ohio history.
The immediate aftermath was a significant drop in FirstEnergy’s stock price, falling to $22.85 per share on July 22, 2020, down 45% from its closing price of $41.26 per share on July 20, 2020. The price of FirstEnergy’s stock had peaked at $52.52 in early 2020, during which the alleged activities were taking place.
The above actions led to the initial investor court complaint that was filed on July 28, 2020 in USDC Ohio (Southern). Shareholder class actions can often take years to navigate the court system before any potential investor recoveries are to occur; ISS Securities Class Action Services will closely monitor this case and continue to report substantive updates to its clients.
By Jeff Lubitz, Executive Director, ISS Securities Class Action Services