Lambert highlighted the arrest of Ohio House Speaker Larry Householder, a Republican, and four associates in a Federal indictment on charges involving over $60 million in racketeering, bribery, and money laundering, making it the biggest political corruption prosecution in Ohio history. We’re highlighting this case partly to offer a break from Covid-19 coverage, but also as a window into the ugly side of American politics. It also offers stark proof of political scientist Tom Ferguson’s “Golden Rule” theory of politics, that it is moneyed interests that drive legislation and regulations.
Needless to say, this is one of those rare occasions where powerful individuals engaged in bad conduct are being held to account. Each of the defendants could spend as long as 20 years in prison. Although one robin does not make a spring, the unsealing of the Householder filing follows New York kingmaker Sheldon Silver has been sentenced to 78 months in prison…although oddly his term doesn’t start for another month.
We’ve embedded the filing below. The short version is that Householder and his four lobbyist/operative allies took payments from FirstEnergy Corp to get House Bill 6 passed and defend it against a ballot initiative. House Bill 6 provided for a $1.3 billion bailout of zero carbon energy producers…with nearly all the money going to keep two of FirstEnergy’s nuclear plants from going bankrupt.
$60 million might seem an awful lot to get a bill passed. In fact, over $2 million was still left in the coffers of Generation Now, the main slush vehicle secretly controlled by Householder, set up as a not-for-profit so as to avoid pesky PAC disclosure requirements. $1 million went into the personal brokerage account of one of the defendants, political strategist Jeff Longstreth. Over $500,000 allegedly went to Householder, for campaign expenses, fix-ups to his Florida house, and to pay off credit card debt. And all those lobbying fees too!
Nevertheless, the filing describes a long campaign, first to fund Republican primary candidates for House seats who understood they were expected to back Householder as Speaker (Householder had lost to a termed-out departing Speaker who’d named a successor) and then to support their campaigns in the general election. For instance, the indictment describes how Householder’s team estimated that it would take $2.5 to $3 million to win the primary battles; FirstEnergy obligingly ponied up over $2 million by the date of the primary and Generation Now spent $1.8 million, including $90,000 on Householder’s bid.
The day Householder was sworn in as Speaker, he vowed to establish a subcommittee on power generation. Three months later, junior representatives he’d helped get elected introduced HB6. Note that similar legislation had failed in 2017. More money was deployed, first to pass the bill in the House, then the Senate, then to beat back the ballot initiative seeking to overturn the legislation.
The indictment has lots of gory elements: numerous schedules of payments to show timelines, texts between the principals, quotes from conversations with legislators. The indictment consists almost entirely of the affidavit of the lead FBI investigator, Blane Wetzel. The details also show that the FBI was investigating Householder and his allies as they were moving the bill through the legislative process. For instance, the document repeatedly mentions recorded conversations, suggesting the FBI had warrants issued early on. That suggests that some Representatives and/or employees of FirstEnergy had a sense something crooked was afoot and acted as whistleblowers.
The document is full of juicy tidbits, like when Wetzel interviewed Representative 7 the day HB6 went to the Rules and Regulations Committee, chaired by Householder:
“Clark” is Neil Clark, a lobbyist, “one of Householder’s closest advisors,” and one of the defendants. Representative 7 viewed it as “unusual and odd” that Clark rather than a House aide had been tasked by Householder to work with a this representative on a different bill but he and Clark had nevertheless become friendly:
More gory details include the successful campaign to beat back the ballot initiative, which including hiring 15 signature-gathering firms to conflict them out, and depicting the initiative as a Chinese plot. From a mailer:
From TV ads:
The indictment also discusses the close coordination between EnergyFirst (Company A) and the Householder group (called the Enterprise in the filing), such as the timing and amount of money demands, as well as:
One wonders when these EnergyFirst officers will be indicted…or is the plan to offer them immunity to testify against Householder and his four fellow defendants? It would seem the Feds at most only one knowledgeable executive to perfect its case. The VP of External Affairs ought to do.
A compelling section comes late in the affidavit, when the Householder group is tearing its hair because they aren’t able to get good numbers on how many signatures the ballot initiative is gathers. So one of the defendants, Matthew Borges, tried to bribe one of members of the ballot campaign to provide the information. At this point, the FBI apparently had such heavy surveillance of defendants that Agent Wetzel was able to encourage the prospective bribe recipient to turn down the payoff. The target provided texts of the exchange.
The FBI then asked Wetzel to tell the target to express interest in receiving the bribe. After some phone calls and texts, he met with Borges, wearing a wire. The target took a check and continued to provide information of the additional communications. The “Enterprise” also got straws to offer $2500 plus plane fare to signature collectors to quit. This full-court press worked. The proponents were unable to collect the 1000 signatures needed to get the initiative on the ballot.
And this merry band of looters had new worlds they planned to conquer:
If you read or even skim the indictment which I strongly urge you to do (it’s an impressive piece of work), you might notice how much effort is devoted to describing how the defendants worked together. That appears critical to the racketeering charges:
My layperson understanding is that prosecutors don’t often file racketeering claims even when they might seem to fit because they are harder to prove than garden variety frauds. The penalties for racketeering typically include civil forfeiture of the ill-gotten gains. I hope knowledgeable parties will pipe up, but one motivation here, aside from the behaviors sure looking like classic racketeering, is that I would assume that the prosecutors could seek an order that assets that are arguably racketeering proceeds be frozen. That matters here because Generation Now has over $2 million in its accounts and the various lobbyists look easily to have pulled out millions in fees. Those funds could be dissipated in mounting a legal defense. No point in letting EnergyFirst’s money be used twice for bad ends if that can be forestalled.
However, it does not seem likely that the definition of “Enterprise” as in the racketeering organization, will be amended in subsequent filings to include EnergyFirst. Companies are almost never indicted because it is usually a death sentence for the business. That’s disappointing, since Ohio taxpayers are out $1.3 billion that it would be nice to claw back.
Or will the legislature simply rescind HR6? The language of in the Cincinnati Enquirer suggests that most of the funds have yet to be paid: “The bailout is expected to cost the state’s utility ratepayers $1 billion.” If that’s the case, the bill will have become too toxic to Team R for them not to do everything they can to limit the damage with elections mere months away. If so, the FBI would have done vastly more good than just taking down a particularly dirty pol.
00 Ohio-House-complaint
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Perhaps someone can explain: how does this differ from regular campaign donations? I thought most US campaigns were financed this way – companies and rich individuals donate money, and in return their causes are taken on by the politicians.
Is there some legal line that these people crossed? Like, your supposed to hint at which laws you want passed but not say so explicitly?
Did you read the post or the indictment?
First, they used a tax exempt corporation illegally to shield their donors. That’s not kosher. They should have set up a PAC, which would have then shown that EnergyFirst was spending $60 million.
Second, Generation Now was lobbying. It should have registered as a lobbyist. And IIRC only one of the four principals was registered as a lobbyist.
Third, some of the tax exempt money was used directly for personal enrichment, the $1 million to Longstreth’s personal brokerage account, the $500,000+ for Householder’s legal bills, Florida house, credit card bills, and campaign (which should have gone through his campaign and been disclosed….but it would also have been subject to donor limits). There’s probably more.
Fourth is the bribery.
Thanks for the reply, I read the post but not the indictment. I don’t know much about this at all.
Does this mean that disclosure is a big part of the problem? It would be legal to give 60 million in return for a bill, as long as goes through the proper (publicslly visible) channels and all if it is used for the campaign?
Whatever, you are trying to get at, the answer is no. And why is it that I think you know that. Do you have some involvement in this, legally protected or not? Do you work for any of the principals past or present? In the end if acts had he been conducted in a straightforward legal manner the only conclusion one could make was it was still sleazy and deceitful. Nuclear may very be ‘carbon free’, legally, but that is not its’ common usage or understanding, of that term, or what people want out of the concept. It seems quite plain.
He, like I, find their behavior rather routine. The story is not that this is happening but that the Feds actually gave a rat’s butt about it. When are they going to indict the other 49 House Speakers? When they do, wake me, because then they are serious.
Sorry, I think this is a misunderstanding.
I am not American. I am, in general, amazed by the amount of money from interests in US politics. I am also worried about it, because out local politicians are very impressed by the big money campaigns of the US. They often send young advisers to volunteer for US campaigns, to learn new tricks. And obviously, there are plenty of interests who would be willing to pay, if the legal and public acceptance of campaign donations moved further towards the American standard.
In that light, I am interested to learn where Americans draw the line. This case is clearly “over the line”, both legally and in acceptance by the public, so it makes for useful comparison.
I understand the part about personal enrichment, as opposed to campaign donations. Thats a clear line here, and apparently in the US as well. But I am surprised that much of the coverage is not about the personal enrichment part. Apparently, the campaign donations have also crossed a line, and I am honestly not sure where that line is drawn.
For example, Yves says that the money was not send through a PAC, and some of the principals where not registered as lobbyist. Is that an importsnt line? You can donate 60 million to a campaign to get a law passed, if you register in the right place and use the proper legal vehicle?
Perhaps this sounds like trolling to Americans, but I honestly do not know the answer. This scheme sounds shady as hell to me, but a remarkable part of US political finance sounds shady to me but gets accepted by Americans, or even defended as free speech etc
Campaign funds once received can be spent on pretty much anything or nothing. In olden times politicians could still get in trouble (but not jail) for “the appearance of impropriety,” which like Caesar’s wife was a fluid standard of purity. Now of course we have no standards, with impropriety unutterable as long as you’re, for example, the presumptive Democratic nominee for president, whose son and brother famously trade on the family name in return for . . . nothing! They’re useless! No appearance of impropriety.
I am an American and I am going to write the following without being cynical or sarcastic at all:
A lot of the practical effect of campaign finance laws (if not the real intent) in the US, especially regarding disclosure, seems to be that the donors do not get scammed but actually get their money’s worth, rather than protecting the sanctity of the legislative process.
For instance, a state legislator in my state has been indicted on a felony and is facing serious prison time because he took money from campaign donations and used it for personal expenditures. The issue is the misuse of funds per se, not that his legislation was improperly influenced.
More mundanely, if you donated to a political campaign or any other cause and they used the money for something that had nothing to do with it, wouldn’t you be upset? I think this becomes more relevant now with the rise of small donors who are sincere and not engaging knowingly in a kind of roundabout bribery.
Zamfir
July 22, 2020 at 9:00 am
Thanks for the reply, I read the post but not the indictment. I don’t know much about this at all.
Does this mean that disclosure is a big part of the problem? It would be legal to give 60 million in return for a bill, as long as goes through the proper (publicslly visible) channels and all if it is used for the campaign?
The simple answer to this is yes
Hmmm…I wonder how much of that bribery, and personal enrichment, expenses paid, and such was reported as income to the IRS.
Probably the least of those indicted, problems.
Corruption is legal in the US, but you have to do it legally, carefully following the rules. The rules are complex, so you need a bevy of lawyers to vet everything and make sure the structures are in place. Citizens United blew the bank vault doors open for the amount of money that could wash through the system.
Its similar to the old Wall Street adage: Bulls make money; Bears make money; Pigs get slaughtered. These people just did a very sloppy job and got caught with their hands in the till.
For example, the Trump campaign has large sums of money going to Trump properties, but it is all made to seem above board by being for the type of costs that they would normally pay a hotel or restaurant for. Since there are very few rules on what “customary expenses” would be, they can make sure that the campaign is paying top dollar with little negotation on rates.
Ohio’s subsidy of $900M to FirstEnergy is chump change when compared to Andrew Cuomo’s bailout of $8.7 BILLION to Exelon Nuclear. Cuomo’s carbon free subsidy for Exelon’s 4 plants in upstate NY is over $800M per year.
An interesting tabulation of $15B from individual states for nuclear corporate welfare here.. This doesn’t include Virginia’s recent handouts.
3 of the Exelon plants are from the 1960s, GE Mark 1 reactors (same as Fukushima), granted extensions of the 40 year NRC license out to 60 years. They contain up to 4x the nuclear waste in their structures.
IIRC, Cuomo’s handouts to Exelon were through actions by the NY State Public Service Commission and did not require explicit legislation. If Exelon’s plants did not receive the subsidy, they would all likely be shut down. Dirty politics for dirty energy.
Everybody knows the cost of living is higher in NY than in OH. $900 million is not chump change to Ohioans.
Not really. Central and western NYS are in many ways more Midwestern than Eastern.
Thanks, upstarter, I forgot about that. Was it partially a payback to the industry for having shutdown Indian Point and/or protecting the dicey economies in impoverished, mostly Republican, rural areas? I’d guess both.
Carl, Rochester NY
Indeed. My mother was from Buffalo. She considered herself more of a Midwesterner than an East Coaster.
Yep. Fortunately, NYC doesn’t realize that anything north and west of Albany exists, so the coronavirus refugees from NYC ignored upstate NY and went to places along the Eastern Seaboard, including Florida. We largely escaped the Wrath of Covid so far.
The $600/week federal unemployment insurance on top of NYS unemployment has been a godsend to many people in this area who have been able to pay off bills etc. due to the low cost of regulary monthly expenses.
If I have one thing to live for it is to see ‘Mike in Illinois’ go to prison. A ComEd (Exelon) scandal now unfolding.
Chump change? The people of Ohio could sure use that money spent towards public health, education, unemployment…. FirstEnergy and company went to a great deal of illegal bother for “chump change”.
The people of Ohio can also can ill afford the $1.5 billion bailout of FirstEnergy’s nuclear plants that Householder finagled. FirstEnergy was just investing $60 million to save themselves One Thousand Four Hundred Forty Million Dollars.
Here’s more about the potential national significance of this indictment:
Headline: Ohio speaker’s arrest in bribery probe muddies 2020 election
https://apnews.com/89984a1cc1bf9c258442cd6dc831fd3f
Many thanks to Yves for highlighting this story!
Yes, thanks to Yves for highlighting this story.
Householder has also been key, imo, in leading the State Legislature in attempting to impede Gov. DeWine’s (tepid) steps to deal with the pandemic. Good riddance to this crooked “public” representative.
“Carbon Free” Corruption.
“Too Cheap to Meter.”
“New Nuclear.”
“Thorium.”
“Payola.”
Updating “Their profits–your cancer.”
to
“Their payoffs, their profits–your community bankruptcy and your cancer.”
Texas also quietly approved a subsidy to generators, effective in 2019 and 2020, that some estimate at about $4 billion. All it took was relentless lobbying over a couple of years and a bit of blackmail (as in ‘well, we could just have a sudden outage in the middle of a summer afternoon, who knows’).
And thanks for reminding us of how China was used as a boogeyman in Ohio. It is a perfect illustration of how the ‘ready-made enemies, China and Russia,’ underpinned by non-stop propaganda, can be plugged in wherever there is a need.
That advertising campaign was absolutely mind-blowing. We could not BELIEVE the cr*p we were getting in the mail was legal (I don’t watch TV so I’m spared a lot of the worst campaign advertising). We voters were also very aware of the all of the harassment of petitioners who were trying to get enough signatures to get rescinding House Bill 6 on the ballot (several hundred thousand signatures were needed) … We would go out looking for petitions to sign, and couldn’t find anyone collecting signatures. Many impassioned posts and comments on last fall’s Nextdoor about that.
Why didn’t the FBI also arrest John Roberts and other members of the Supreme Court? Haven’t their rulings made what happened in Ohio easier? Montana had a 100 year old law that bannned corporate contributions in politics, and JR & Co ruled it unconstitutional.
Getting rid of a good common sense law on the basis of “legalistic” arguments. For shame.
The FBI does other things besides “Russia, Russia, Russia”? Quelle surprise!
(I’m expecting these crooks to get off with a slap on the wrist and a “tsk, tsk”)
That’s funny. I’m expecting 15-year prison terms for these defendants, and more to come…
Maybe. But a team of attorneys challenging every word in an 82 page indictment, appealing every decision on said words (after asking for extensions so that they may properly consider each and every decision), attacking the laws upon which the indictment is based, along with publicly questioning the morals and motives of every investigative agent involved, can consume years.
See Mike Hubbard, who is still not in prison.
Nah, the moment the FE spigot shuts off, there’s no money to pay the army of high priced lawyers to conduct that kind of blizzard defense. These guys may not even be 1%ers and they’ll go down hard, jail and penury. I’m sure at least one has already flipped.
….It is why FE won’t be prosecuted though, assuming they cooperate. But stranding their nukes after they’ve already lost their coal fleet is gonna hurt them, badly.
Nice precis, Yves, many thanks.
The FBI informed Larry Householder that he would have to surrender his passport. Turns out he doesn’t have one. Maybe he’s never been out of Ohio.
But how can a U.S. passport mean you’re a flight risk when there’s nowhere that will admit Americans now?
Looks like you didn’t read it.
They had wires on the principals since at least May of last year. They have images of texts. Even what is in this indictment is overwhelming and it is significantly REPEATED statements of the principals. I guarantee there is more where that came from.
I agree! No argument from me about the strength of the indictment. Off with their heads!
But, former Alabama Speaker of the House Mike Hubbard is still not in prison despite being tried, convicted, and sentenced years ago.
https://www.al.com/news/2019/12/what-happened-since-mike-hubbard-was-sentenced.html
https://www.alreporter.com/2020/04/14/will-mike-hubbard-ever-go-to-jail-yes-and-likely-soon/
That Alabama prosecution was in state court. This is in Federal court, with the FBI spending two years developing evidence. Completely different kettle of fish.
There is something missing here –
That there is quid pro quo for the large donors be they wealthy individuals or large organizations is a given. And we’ve come to expect that.
What is missing here is a discussion the perverse incentive that large utilities have. The utilities have an incentive to use the the most costly method of generation because although they are regulated by the local Public Utility Commission (PUC) the utilities operate as a cost plus operation. The PUC often sets a cost plus of say 5%. This is an incentive to use the most costly generation which is at this point nuclear.
This is simple would the CEO rather get 5% on a wind farm with an installed cost of 100 million or 5% on a nuke plant with a cost of 10 billion ? And not to mention the cost of fuel – some resources are free – wind, hydropower, solar. While others are quite expensive and that 5% can be levied against the fuel cost.
Both EIA and Lazard a good sources for comparison of the levelized cost of electrical generation. Generally speaking nuclear generation is among the most expensive.
Of note is that Householder and his allies initiated the bribery scheme:
So, this is at least as much extortion as bribery.
I didn’t see that in the compliant but the article says there’s a “strong inference”. That might explain the failure to indict EnergyFirst execs.
They had more than enough to indict’ the DoJ may figure it can get who did what when (in terms of the instigation) in discovery.
ComEd in Illinois has admitted to bribery involving Democratic statehouse major-domo Mike Madigan. ComEd’s admission includes the intention to influence electricity rates and “other considerations”. Did “other” include influencing the wrongful death suit involving out-of-code guy wires?
Family questions whether ComEd bribery scheme played a role in state’s decision not to fully investigate electrocution
What’s the world coming to?
“Bidness as usual” leads to criminal charges?
It’s un-American!
I have been investigating official corruption in Florida for years, also involving Republican politicians and about $90 million, and have offered hundreds of pages of evidence to FBI, DOJ, IRS, and HSI (Homeland Security Investigations) for three years, and they have never even replied. I have requested two federal courts to request those agencies to investigate, and they both refused.
So don’t think that the US really investigates these things. The whole government is organized to NOT investigate any such thing. These are clearly a special case, someone who was not engaged in the bribery that was officially sponsored. Bribery is the form of government of the United States.
+1. Amen.
Well, there is a bit of a difference, when it comes to utility regulation. I’d venture to say that the main reason for prosecution is that among the affected parties are businesses. While there have been lots of ‘sweetheart’ deals to help utilities’ bottom line all across the country, such blatant corruption is rare (emphasis on the ‘blatant’).
Is there something special about the Mid-west, though – https://www.utilitydive.com/news/comed-admits-to-bribery-charge-in-illinois-agrees-to-pay-200m-fine/581895/ ?
As AP reports “The 2019 law added a new fee to every electricity bill in the state and directed over $150 million a year through 2026 to the plants near Cleveland and Toledo. The bill faced fierce opposition from both clean energy groups and manufacturers.” (https://apnews.com/6429d6672bced4f5205367f1e72edf3d)
Typically, business interests are very vocal against any increases in the el bills. It’d be interesting to see if and how they could get the bill repealed.
Here’s a California corollary to the Ohio scheme:
https://www.latimes.com/california/story/2020-06-26/arts-district-project
Local, state, or national money drives politics.
Funfact:
“The Northeast blackout of 2003 … proximate cause was a software bug in the alarm system at the control room of FirstEnergy, an Akron, Ohio–based company, which rendered operators unaware of the need to redistribute load after overloaded transmission lines drooped into foliage.” …
“In February 2004, the U.S.-Canada Power System Outage Task Force released their final report, placing the causes of the blackout into four groups:[9]
1) FirstEnergy (FE) and its reliability council “failed to assess and understand the inadequacies of FE’s system, particularly with respect to voltage instability and the vulnerability of the Cleveland-Akron area, and FE did not operate its system with appropriate voltage criteria.”
2) FirstEnergy “did not recognize or understand the deteriorating condition of its system.”
3) FirstEnergy “failed to manage adequately tree growth in its transmission rights-of-way.”
4) Finally, the “failure of the interconnected grid’s reliability organizations to provide effective real-time diagnostic support.”
[https://en.wikipedia.org/wiki/Northeast_blackout_of_2003]
From the post: “The short version is that Householder and his four lobbyist/operative allies took payments from FirstEnergy Corp to get House Bill 6 passed and defend it against a ballot initiative. House Bill 6 provided for a $1.3 billion bailout of zero carbon energy producers…with nearly all the money going to keep two of FirstEnergy’s nuclear plants from going bankrupt.”
Is the FirstEnergy Corp in the legal filing the same FirstEnergy Corp mentioned in the Wiki article on the 2003 blackout? What is the story on all the blackout redactions in the filing?
Ziti. It’s all about Ziti. Yum yum.
Note to money launderers: Don’t get cute with corporate entity names. Using a name like the “Dark Money Group 1” will not go over well during the sentencing phase.
Quote – Tom Ferguson’s “Golden Rule” theory of politics, that it is moneyed interests that drive legislation and regulations – unquote
That should be one of several certainties on the NC masthead – telling it like it is