The energy company hasn’t had control over decisions made by the former unit swept up in the investigation for several years, CEO Charles E. Jones said after news of the scandal broke last week. But “numerous, material financial entanglements” still exist among FirstEnergy and its former subsidiaries, according to the complaint filed in the U.S. District Court for the Southern District of Ohio.
Federal officials arrested Ohio House Speaker Larry Householder (R) and four others, including “a prominent FirstEnergy lobbyist,” on racketeering charges July 21, the complaint says.
“FirstEnergy brazenly corrupted every facet of the legislative process in order to ensure the passage” of a bill that provided subsidies to nuclear facilities owned by its former FirstEnergy Solutions unit, now part of Energy Harbor Corp., the investors say.
The company hasn’t been named as a defendant in the ongoing criminal matter.
FirstEnergy declined to comment on the securities suit Wednesday, but said, “ethical behavior and upholding the highest standards of conduct are foundational values for the entire FirstEnergy family.”
“We strive to apply these standards in all business dealings, including our participation in the political process,” its spokesperson said.
The complaint says FirstEnergy failed to tell investors that it had “orchestrated a $60 million campaign to corrupt the political process in order to secure the passage of legislation favoring the Company and its affiliates.”
FirstEnergy also didn’t disclose that it hid its involvement in a “massive, misleading advertising campaign” connected to the bill, the investors say.
FirstEnergy’s stock price fell 45% in the days after the criminal probe became public, according to the complaint.
Causes of Action: Exchange Act §10(b)—Using a manipulative or deceptive device or contrivance for a securities transaction in violation of SEC rules (15 U.S.C. §78j); SEC Rule 10b-5—Employing a device, scheme, or artifice to defraud, making untrue statements or omitting facts, or engaging in any act, practice, or course of business which operates as a fraud or deceit (17 C.F.R. §240.10b-5).
Relief: Damages with interest; attorneys’ fees; court costs.
Potential Class Size: Hundreds or thousands who acquired FirstEnergy common stock between Feb. 21, 2017, and July 21, 2020.
Attorneys: Murray Murphy Moul & Basil LLP and Robbins Geller Rudman & Dowd LLP represent the investors.
The case is Owens v. FirstEnergy Corp., S.D. Ohio, No. 20-cv-03785, complaint filed 7/28/20.