Former Ohio Speaker Householder Faces Sentencing in Bribery Scheme

It is, federal prosecutors say, perhaps the biggest public corruption scandal in Ohio’s history, a three-year conspiracy in which one of Ohio’s biggest corporations funneled some $60 million to one of the state’s most powerful politicians in exchange for a $1.3 billion bailout.

And those investigators say they are only coming to the end of Act I.

On Thursday, the former Republican speaker of the Ohio House of Representatives, Larry L. Householder, will be sentenced in federal court in Cincinnati for violating racketeering and bribery laws.

The outlines of the charges have been known since his arrest, with four other men, three years ago: FirstEnergy Corporation, a Fortune 500 electric utility based in Akron, funneled the $60 million though various nonprofit entities. In return, Mr. Householder rammed a law through the state legislature that gave the company the bailout for two troubled nuclear power plants. Prosecutors have recommended a sentence of up to 20 years.

But, as described early this year in a 26-day trial, the alliance between the utility and Mr. Householder, 64, was far more than a bribery scandal. Among other things, prosecutors and experts say, it was an almost cinematic example of how the dark money that pervades both state and federal politics slithers unseen from donor to beneficiary.

It is also a cautionary tale about how state legislatures — second-rung political bodies that are often run by part-time politicians, but increasingly dealing with issues of national importance — are at least as prone to manipulation by special interests as their Washington counterparts.

David DeVillers, who oversaw the federal investigation as the U.S. attorney in Cincinnati until early 2021, said in an interview that the gusher of dark money was crucial to the plot and an issue well beyond Ohio.

“Any time you have a supermajority, whether it’s Republicans or Democrats, and industries that are based on passing laws like marijuana or sports gambling or energy, it’s a formula for corruption,” he said.

In a memorandum on sentencing last week, Mr. Householder’s lawyer, Steven L. Bradley, said that his client had not admitted wrongdoing, and that Mr. Householder genuinely believed that the legislation enacting the bailout “was an important piece of legislation, which is why he advocated and voted for it.” 

The blare of publicity and the ignominy of conviction, Mr. Bradley wrote, had left Mr. Householder “a broken man.” In an email, Mr. Bradley said he plans to “vigorously pursue an appeal with the hope of winning a new trial.”

Mr. Householder, a onetime insurance agent from an impoverished rural county in southeast Ohio, had been House speaker from 2001 to 2004. He left his legislative seat because of term limits and faced a federal corruption investigation after leaving the post then, but was not charged.

After returning to the legislature in 2016, Mr. Householder secretly spent millions in 2018 to support Republican candidates for 21 seats in the State House — more than a fifth of the 99 seats — who would back his insurgent campaign to again become House speaker. He spent more millions on a media campaign to push the nuclear bailout law to passage, and then tens of millions on a scorched-earth crusade to undermine a ballot initiative that threatened to undo it.

By the time he was arrested in July 2020, Mr. Householder was soliciting secret contributions from others seeking legislative favors — and plotting to change the State Constitution’s term limits clause to extend his tenure by 16 years.

At each step, a web of political action committees and dummy nonprofit organizations called 501(c)(4)s, after their place in the federal tax code, ensured that money fueling the schemes could not be traced to Mr. Householder or FirstEnergy.

“The scope of the conspiracy was unprecedented,” prosecutors wrote in their sentencing memorandum. “So was the damage it left in its wake, both in terms of its potential financial harm to Ohioans and its erosion of public trust.”

In a wiretap disclosed during the trial, a lobbyist charged in the affair, Neil Clark, boasted to undercover F.B.I. agents about his handiwork.

“I spent close to $20 million in the last eight weeks, $20 million,” he said. “FirstEnergy got $1.3 billion in subsidies, free payments.”

He later added: “So what do they care about putting in $20 million a year for this thing?”

FirstEnergy had sought state subsidies for two nuclear power plants on the shore of Lake Erie for years when Mr. Householder returned to the State House in 2016. The company claimed that renewable energy and cheaper fuels had made both plants unprofitable.

Mr. Householder left little doubt that he wanted his old job as speaker back. After his 2016 election, FirstEnergy’s chief executive at the time, Chuck Jones, invited him to fly on the company’s private jet to attend the inauguration of President Donald J. Trump.

Over several days of socializing at high-end restaurants, prosecutors said, they discussed a deal: Mr. Householder needed money to regain the speaker’s post when its occupant left office in 2018. The company needed a legislative solution to its nuclear power woes.

What began with a handshake became a multimillion-dollar political operation, with the money laundered through nonprofit groups allowed by the tax code to conceal donors’ names.

“They can give as much or more to the (c)(4) and nobody would ever know,” the lobbyist, Mr. Clark, told Mr. Householder in another wiretapped conversation. “So you don’t have to be afraid.”

Weeks later, Mr. Householder established a 501(c)(4) called Generation Now. Other nonprofits, both new and old, were rolled into the scheme: a PAC called Hardworking Ohioans, two new nonprofits and many more.

Rivers of anonymous money — most, but not all, from FirstEnergy — began to flow. In one typical transaction, Generation Now shunted $1 million of FirstEnergy donations to the newly formed Coalition for Growth and Opportunity, whose only reported officer was a Kentucky lawyer who oversaw other nonprofits. The Coalition for Growth and Opportunity donated $1 million to its separate PAC, which spent it on media campaigns supporting Republicans friendly to Mr. Householder and opposing unfriendly ones.

And so it went: At least $3 million spent in 2018 to elect Republicans backing Mr. Householder’s speaker ambitions. Nearly $17 million more in 2019 on a successful media campaign supporting House Bill 6, the legislation bailing out FirstEnergy nuclear plants.

Clean energy advocates and the natural gas industry opposed the $1.3 billion measure, which propped up two unrelated coal-fired plants and solar energy projects besides the $1 billion nuclear subsidy. And when they began collecting signatures for a ballot initiative to overturn the bailout, FirstEnergy devoted another $38 million to quash that effort.

The money paid for a private detective and bullies to disrupt signature gatherers, as well as a saturation advertising campaign claiming that China was “quietly invading our energy grid” with the help of opponents of the bailout.

Backers considered it money well spent. When House Bill 6 became law in July 2019, Mr. Jones, the FirstEnergy chairman, sent a picture of Mount Rushmore to Samuel C. Randazzo, then the chairman of the state Public Utilities Commission. Supplanting the mountain’s four presidents were faces of the two men and executives at FirstEnergy and another utility.

Below that, prosecutors said, was an all-capital-letters caption that extolled their political clout with a common sexual vulgarity.

Meanwhile, Mr. Householder’s Generation Now nonprofit was already plowing new ground. In a wiretapped conversation in 2018, Mr. Householder said he was “expecting big things in (c)(4) money from payday lenders,” an industry that has lobbied federal and state officials against regulating high-interest loans to the poor.

For some, the cost of exposure has been heavy.

FirstEnergy fired its top executives. Later, it paid $234 million in fines to federal agencies and surrendered another $115 million in ill-gotten gains after admitting to large-scale fraud.

Mr. Clark, the lobbyist, died by suicide in 2021 after publishing a book that alleged a lifetime of dirty deals in state politics.

Federal prosecutors say their inquiry is continuing, although they have not said where it might lead.

In what was, in effect, a plea bargain with federal prosecutors, FirstEnergy confessed that it had given Mr. Randazzo $4.3 million “to further FirstEnergy Corp.’s interests” on nuclear and other issues in 2019, weeks before Gov. Mike DeWine named him to head the state Public Utilities Commission.

Mr. Randazzo, who denies wrongdoing, has not been charged.

Court filings and related lawsuits have referred to Governor DeWine and Lt. Gov. Jon Husted, who have said they were unaware of the illegal payments. Both supported House Bill 6, and Mr. DeWine benefited from hundreds of thousand of dollars in get-out-the-vote support from FirstEnergy during his 2018 election campaign. The company also donated $75,000 to his daughter’s failed bid for a local elective office.

FirstEnergy, meanwhile, faces investigation by the federal Securities and Exchange Commission and shareholder lawsuits.

And in the five states where it owns electric utilities, utility commissions are likely to require tens of millions of dollars in refunds to customers, in part involving scandal-related spending.

On Wednesday, the company said in a statement that it “has accepted responsibility for its actions related to House Bill 6 and has taken significant steps to put past issues behind us.”

“Today we are a different, stronger company with a sound strategy and focused on a bright future,” it added.

Mr. DeVillers, the former U.S. attorney, said that nonprofits like those central to the FirstEnergy scandal have been largely ignored by law enforcement. Enforcement of restrictions in the federal tax code on 501(c)(4) groups has been lax.

Dave Anderson, the communications director of the Energy and Policy Institute, a watchdog group that follows the energy industry, said that might now change.

“This is a case that really illustrates how they can be used for criminal malfeasance,” he said, referring to nonprofits. Now, he said, lawyers who told clients that 501(c)(4) groups are safe conduits for secret cash may be “holding their breath and thinking, ‘Maybe the convictions will be thrown out.’”