Settlement questioned

A Northeast Ohio federal judge is questioning the proposed shareholders lawsuit settlement with FirstEnergy that could give the Akron utility as much as $180 million in an insurance payout tied to the House Bill 6 scandal.

U.S. District Court Judge John Adams says the utility and others first need to answer numerous questions he has about the proposed settlement, which the parties want to take place in the Southern District of Ohio court in Columbus and not in front of Adams in Akron.

Adams late on Friday ordered an in-person meeting with all parties to discuss the issues 2 p.m. March 9 in his Akron courtroom, with public written information on his questions due by Feb. 22. The proposed settlement was announced last Thursday by FirstEnergy, which said it anticipated, pending court approval, receiving a $180 million insurance payout minus legal fees.

FirstEnergy on Monday said it does not comment on pending litigation and related court matters.

Adams noted the parties involved in the settlement talks asked his court to stay their proceedings before him while seeking approval of the settlement with the Southern District of Ohio. Adams denied their motion.

"It is entirely unclear why the Southern District is the appropriate forum to seek approval ..." Adams wrote. He noted, among other things, that FirstEnergy's headquarters is in Akron and related court proceedings are taking place in the Summit County Common Pleas Court.

Adams said besides his questions on why the Southern District court is considered the venue for the case, the proposed settlement agreement came about despite incomplete findings and information, including identifying "possible missing communications on defendant Charles Jones personal electronic devices."

Jones, fired in late October 2020 as FirstEnergy's chief executive officer in the earlier stages of the ongoing federal and state HB 6 $60 million bribery and racketeering investigation, has said in court documents that he apparently is missing texts on a new iPhone he obtained for personal use after being dismissed from FirstEnergy.

Lawyers for Jones told the court that based on texts that have since been recovered, along with texts on other defendants' phones, they do not believe there is any evidence that Jones has been sending case-relevant text messages since FirstEnergy fired him.

They also said Jones produced more than 2,400 additional pages of documents in January on the case, has continued good-faith negotiations on document searches and is negotiating to produce additional documents.

Adams said the proposed settlement came about despite what he said was incomplete written discovery, no testimony under oath from defendants or witnesses, an incomplete forensic examination of Jones' personal electronic devices and more.

Among the items Adams ordered the parties to produce in a public filing no later than Feb. 22:

• The total amount of available insurance funds at the time settlement was reached.

• Allocation of damages among the defendants.

• The reasons why six board members are not running for re-election and why they were picked not to run.

• Whether plaintiffs identified any individuals who gave or received bribes and/or payments as detailed in a federal deferred prosecution agreement.

• Any and all contacts with the Southern District court, formal or informal, in which the parties discussed their chosen methodology for seeking settlement approval.

The proposed settlement agreement stems from numerous shareholder derivative lawsuits, filed on behalf of FirstEnergy, that were consolidated. The lawsuits said FirstEnergy was damaged because of HB 6-related activities. Because the lawsuits were filed on behalf of the utility, a negotiated insurance settlement payout would go to FirstEnergy pending court approval.

The proposed settlement, if approved, also will lead to other changes at the utility.

The settlement calls for six longtime members of the FirstEnergy board to not be reelected at the utility's upcoming annual shareholders meeting. Also, FirstEnergy's executive team will be reviewed by a special board committee, the company's political and lobbying activities will get more oversight, and executive pay and compensation will be aligned with the compliance measures.

FirstEnergy last year paid a $230 million fine as part of a deferred prosecution agreement in which it admitted it bribed Larry Householder, the former speaker of the Ohio House, and others to pass and support House Bill 6.

Householder, who has been thrown out of office, is accused of running a criminal enterprise that took $60 million funneled through dark money groups to pass the bill. The scandal broke in the summer of 2020.

Beacon Journal reporter Jim Mackinnon can be reached at 330-996-3544 or [email protected]. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ.