Top Ohio Utility Regulator Resigns Amid Bribery Scandal

(Bloomberg) -- The head of the commission that regulates Ohio utilities resigned in the wake of a widening federal racketeering case tied to subsidies for two struggling nuclear plants.

Sam Randazzo stepped down from the Public Utilities Commission of Ohio on Friday. It came one day after the reactors’ ex-owner, FirstEnergy Corp., disclosed that former top executives made an improper payment in early 2019 for a consulting agreement tied to someone who was later appointed as an Ohio state regulator.

The corruption case has rocked Ohio’s political landscape and triggered a shake-up at FirstEnergy, whose former subsidiary, now called Energy Harbor Corp., benefited from the state’s $1 billion-plus nuclear bailout. In the wake of the scandal, FirstEnergy fired Chief Executive Officer Charles Jones and two other senior executives, saying they violated company policies.

The company’s stock has plunged more than 30% since mid-July, when Ohio House Speaker Larry Householder and four political associates were arrested on federal racketeering charges involving almost $61 million in bribes tied to the nuclear subsidies. Two of the associates, including a lobbyist for Energy Harbor, pleaded guilty in October, according to the U.S. attorney’s office for the southern district of Ohio.

Randazzo’s resignation comes after federal authorities raided his home on Nov. 16. He was a lawyer in the utility industry before becoming a regulator in April 2019.

“The impression left by an FBI raid on our home, the statement included in FirstEnergy Corp.’s filing with the Securities and Exchange Commission yesterday and the accompanying publicity will, right or wrong, fuel suspicions about and controversy over decisions I may render in my current capacity,” Randazzo said in his resignation letter.

FirstEnergy declined to comment. The company’s shares fell as much as 6% Friday.

Guggenheim Securities LLC called FirstEnergy’s disclosure of the payment “a strong negative.” Bank of America downgraded the stock, saying more states could open investigations. Fitch Ratings cut the company to junk status.

Katie Bays, an analyst for FiscalNote Markets, said FirstEnergy’s close relationship to Randazzo may “further embroil” the company.

What Bloomberg Intelligence Says

“This may be the worst disclosure yet, ratcheting up the company’s potential conflicts with regulators and politicians.”

- Kit Konolige, senior industry analyst

Read the full report here

In July, when the scandal broke, prosecutors said the bribes came from a corporation -- identified in court papers only as “Company A” -- in exchange for supporting the measure.

The company was widely believed to be FirstEnergy. At the time, FirstEnergy sought to distance itself from the corruption case, saying it had done nothing wrong and was cooperating with the investigation. Ohio’s Attorney General has since filed a civil lawsuit against FirstEnergy and Energy Harbor, accusing them of “corrupt activity” in connection with the bailout.

FirstEnergy said Thursday it had identified “material weakness” in its internal controls, but said that those didn’t result in a “material misstatement” of its annual or interim consolidated financial statements.

“We view these violations of company policies very seriously,” said company spokesperson Jennifer Young.

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