The opinion
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
Jennifer L. Miller, ) CASE NO. 5:20CV1743
)
Plaintiff, ) JUDGE JOHN R. ADAMS
)
-vs- )
)
Michael J. Anderson, et al., ) ORDER
)
)
Defendants. )
At the first in-person hearing in this matter, the Court noted:
There’s a presumption of openness, transparency. That’s what is [] going to occur.
We’re going to be transparent.
…
So I hope everybody understands we start with the presumption of openness,
transparency, including at the discovery phase. We’re not going to keep things off
the docket or out of the record if it isn’t required.
Doc. 166 at 20. The Court stressed that this need for transparency was all the more important
based upon the nature of the complaint.
I. The Allegations
The complaint alleges a bribery scheme executed by senior executives at FirstEnergy that
resulted in the unlawful payment of millions and millions of dollars to elected state officials,
including then Speaker of the House Larry Householder.1 The complaint includes a quote from
the chief prosecutor in the Southern District of Ohio who noted: “This is likely the largest
bribery, money laundering scheme ever perpetrated against the people of the state of
1 The Court notes that Mr. Householder has been indicted, but he has not been convicted of any
crime to date. Accordingly, these accusations remain allegations against him and are not proven
facts.
Ohio…bribery, pure and simple. This was a quid pro quo.” Doc. 75 at 8. The complaint alleges
that the people of Ohio were directly impacted in several ways. First and foremost, the bribery
scheme was designed to influence the passage of House Bill 6, a bill described in the complaint
as providing “a billion-dollar-bailout for FirstEnergy’s uncompetitive power plants funded by
monthly ratepayer surcharges.” Doc. 75 at 10. When a statewide ballot referendum threatened
to repeal House Bill 6, FirstEnergy funneled more than $38 million dollars to its alleged co-
conspirators to assist in defeating the citizen initiative.
As alleged, the bribery scheme was designed to directly take money out of the pockets of
millions of Ohioans. Moreover, when the scheme came to light, Householder was criminally
indicted for his role. As a result, the public’s confidence in the political process was
undermined. The public heard allegations that their politicians were for sale to the highest bidder
and that House Bill 6 was only passed through the unlawful transfer of millions and millions of
dollars from FirstEnergy.
The complaint then goes on to detail what FirstEnergy executives received in exchange
for their alleged wrongdoing. During the course of the scheme, the compensation Defendants
allegedly received was as follows:
Defendant Charles Jones - $55,207,422
Defendant Michael Anderson - $1,031,757
Defendant Steven Demetriou - $704,538
Defendant Julia Johnson - $953,825
Defendant Donald Misheff - $1,224,230
Defendant Thomas Mitchell - $978,193
Defendant James O’Neil - $739,825
Defendant Christopher Pappas - $1,009,482
Defendant Sandra Pianalto - $452,838
Defendant Luis Reyes - $948,601
Defendant Leslie Turner - $314,836
Defendant James Pearson - $22,803,462
Defendant Robert Reffner - $2,467,891
Defendant Steven Strah - $16,848,974.
In total, these Defendants are alleged to have received over $105 million during the
course of the alleged bribery scheme.
II. Admissions
While the complaint contains only allegations, the Court takes note of the fact that
FirstEnergy made numerous admissions in its deferred prosecution agreement (“DPA”) with
the United States Attorney Office in the Southern District of Ohio. On July 20, 2021,
FirstEnergy formally signed its DPA. In the DPA, FirstEnergy “stipulate[d] and agree[d]
that if this case proceeded to trial, the United States would prove the f acts set forth below
beyond a reasonable doubt.” FirstEnergy then admitted that it “conspired with public officials
and other individuals and entities to pay millions of dollars to and for the benefit of public
officials in exchange for specific official action for FirstEnergy Corp.’s benefit.”
Among numerous other facts, FirstEnergy admitted to paying more than $59 million to
Generation Now and more than $22 million to companies owned by “Public Official B,” the
then Chairman of the Pub lic Utilities Commission of Ohio. FirstEnergy admitted that paying
these millions of dollars was intended to influence official action, namely the passage of House
Bill 6.
The DPA contains nearly 30 pages of facts that FirstEnergy agreed would be proven
beyond a reasonable doubt if the prosecution moved forward against it. These facts detail the
financial transactions and electronic communications of both unnamed FirstEnergy executives
and unnamed public officials. While FirstEnergy’s admissions are not conclusive upon the
defendants named in this action, they provide a clear and concise road map to litigate this matter
fully and fairly.
III. Settlement on the Eve of Depositions
Based on the serious allegations raised, their impact on both the shareholders and the
public at large, and FirstEnergy’s prior factual admissions, the Court told the parties during their
first in-person hearing that it “intend[ed] on moving this case in an expeditious way.” Doc. 166
at 27. To move the case forward efficiently, the Court made space in the federal courthouse
available for conducting depositions. Plaintiffs used this offer from the Court to provide a
schedule that included depositions of 22 individuals, including each of the named Defendants.
The first of these depositions was set to begin at 9:30 a.m. on February 10, 2022. Instead of
moving forward, at 4:16 p.m. on February 10, 2022, the parties sought to stay this matter while
they sought approval of their settlement in a later-filed action in the Southern District of Ohio.
As a result, those persons that received over $100 million in compensation were not
required to sit in a room, swear under oath, and answer honestly about the actions they took. The
settlement also reveals that none of these alleged wrongdoers will be required to contribute even
$1 to the ultimate settlement. At the same time, it remains unknown how much FirstEnergy will
actually receive from the settlement. While Plaintiffs continue to tout the recovery of $180
million, the settlement agreement allows Plaintiffs’ counsel to seek up to approximately $48
million in attorney fees and costs.2
IV. Hiding the Ball
With the above in mind, the Court hoped to gain a better understanding of what led to
settlement in this matter and what drove the amount of the settlement. The Court began its quest
with a simple question to counsel to determine whether the identity of those actively approving
the alleged bribes had been learned through the lawsuit. Counsel indicated that he had learned
this information, but he refused to provide the Court with any names when directly asked who
had paid the bribes alleged in the complaint. Specifically, counsel claimed the information was
subject to the mediation privilege and made vague references to other confidentiality agreements.
When asked to brief the privilege issue that counsel claimed prevented him from
answering the Court’s question, none of the parties offered any reasonable argument that the
Court’s factual question infringes on any mediation privilege. Instead, Plaintiffs responded that
“this privilege bars disclosure of information responsive to the Court’s questions concerning why
and how the parties’ mediation process ultimately resulted in the precise terms of the Proposed
Settlement[.]” Doc. 288 at 3. Contrary to such an assertion, the Court made no inquiry
regarding the mediation process. Rather, the Court asked a direct question about whether
discovery had demonstrated who paid the alleged bribes at issue in this matter. Answering that
2 Any recovery in this matter must viewed against the backdrop of the losses suffered by
FirstEnergy. The DPA required FirstEnergy to pay a fine of $230 million. To date, FirstEnergy
has not recouped any of the $105 million in salary and benefits paid to the executives that are
alleged to have perpetrated this scheme. FirstEnergy has incurred attorney fees in the criminal
action against it, in at least three derivative lawsuits including this one, and in numerous
securities fraud lawsuits. FirstEnergy also incurred costs in forming and supporting the Special
Litigation Committee. It remains unclear what liability may ultimately flow from the securities
fraud lawsuits, but damages could easily stretch into the millions in that suit. Finally,
FirstEnergy directly lost value when its stock plummeted and its goodwill was tarnished when
news of this scheme became public. As the initial complaint in this matter alleged, the total
losses incurred by FirstEnergy “may well stretch into the billions of dollars.” Doc. 1 at 3.
question cannot reasonably be interpreted to even tangentially touch upon the mediation process
generally, let alone fall within its privilege.
Counsel then attempted to transition away from the mediation privilege and claim that the
parties’ protective order prohibited him from answering the Court’s question. However, in so
doing, Plaintiffs ignore the plain language of the protective order:
Any and all documents that may have been subject to sealing during discovery or
motion practice will not enjoy a protected or confidential designation if the matter
comes on for hearing, argument, or trial in the courtroom. The hearing, argument,
or trial will be public in all respects.
Doc. 195 at 6 (emphasis added). The protective order continues:
Nothing in this Order or any action or agreement of a party under this Order limits
the Court’s power to make any orders that may be appropriate with respect to the
use and disclosure of any documents produced or use in discovery or at trial.
Doc. 195 at 7 (emphasis added). During its March 9, 2022 hearing, the Court very clearly
ordered counsel to publicly provide an answer to a question surrounding information provided
during discovery. As the Court’s order falls squarely within its authority in the protective order,
counsel’s claim that the protective order inhibits disclosure has no legal or factual basis.3
Finally, Plaintiffs suggest that answering the Court’s question would infringe upon their
work product privilege. The work product privilege protects documents “prepared in anticipation
of litigation ... by or for another party or its representative.” Fed. R. Civ. P. 26(b)(3)(A). This
Court’s test “asks (1) whether a document was created because of a party’s subjective
anticipation of litigation, as contrasted with an ordinary business purpose, and (2) whether that
subjective anticipation of litigation was objectively reasonable.” United States v. Roxworthy, 457
F.3d 590, 594 (6th Cir. 2006). This Court’s inquiry regarding whether certain facts were learned
3 Plaintiffs also suggest that a similar protective order entered into in the Southern District may
also prohibit disclosure. However, it is clear that the parties could not agree in either District to
restrict the release of information to the District Judge presiding over each matter. Accordingly,
the protective order in the Southern District imposes no restrictions on an order from this Court.
during discovery does not touch upon counsel’s work product. Accordingly, the work product
privilege does not support counsel’s refusal to answer the Court’s question.
V. Public Interest
The bribery scheme giving rise to this case involved a publicly elected official receiving
bribes from a publicly held company resulting in the passage of legislation that impacted the
citizens of Ohio. The parties were informed early on that confidentiality agreements and
protective orders would not be used to shield information from the public.
In response to the Court’s most recent order, FirstEnergy through its Special Litigation
Committee (“SLC”) strenuously argues that public disclosure of facts will cause it more harm.4
The SLC contends that the criminal investigation will resolve any lingering doubt about
the facts surrounding the bribery scheme. The Court fundamentally disagrees with this
assertion. To genuinely begin to rebuild FirstEnergy’s image with the public, and therefore
begin to restore the value the company has lost, there must be some recognition that
FirstEnergy knows how certain events occurred. The public cannot b egin to trust – or even
evaluate – the corporate reforms proposed through the parties’ settlement agreement if there
is no indication that FirstEnergy actually knows what shortcomings existed that allowed
for this scheme to occur and demonstrates th at the reforms will remedy those
shortcomings. Moreover, given that it is alleged that FirstEnergy executives perpetrated a
scheme that impacted nearly every Ohioan, the Court cannot agree that FirstEnergy’s
4 This position is particularly disconcerting. FirstEnergy’s prior Board of Directors twice
defeated shareholder proposals in 2015 and 2016 that would have increased disclosure,
transparency, and accountability for FirstEnergy’s lobbying expenditures. The SLC now seeks a
return to secrecy surrounding FirstEnergy’s conduct.
interests are the sole interests that should be taken into account in this matter.5
It is not only the trust of FirstEnergy that must be rebuilt. This bribery scheme
has undoubtedly shaken whatever trust that Ohioans may have had in the political process
used by their elected officials.6 The public has a right to know how it is that the political
process was so easily corrupted.
VI. The Court’s Role
Because this was filed as a derivative action by shareholders on behalf of FirstEnergy, the
Court would ordinarily review any proposed settlement to ensure that it is fair, reasonable, and
adequate. At the preliminary approval stage, “the court is required to determine whether ‘the
proposed settlement discloses grounds to doubt its fairness or other obvious deficiencies and
whether it appears to fall within the range of possible approval.” In re: Regions Morgan Keegan
Sec., No. 08-2260, 2015 WL 11145134, at *3 (W.D. Tenn. Nov. 30, 2015)(quotations and
alterations omitted). To date, the parties have attempted to deprive the Court of any role in
ensuring that any resolution of this case is fair, reasonable, and adequate. Rather than present
their settlement for this Court to analyze, they have actively engaged in forum shopping to
present their settlement to another district judge in a later-filed action. The parties have refused
to provide information to the Court despite requesting a stay in which they offered to provide
information: “Counsel are available to discuss the Settlement and this request with the Court at
the Court’s convenience should the Court have any questions.” Doc. 273 at 6.
5 Given the SLC’s contention that all the same information will be made public through a
criminal investigation, it is unclear how that very same information becoming public in this
litigation could be deemed harmful to the company.
6 The Court reiterates that these are merely allegations against elected officials. While
FirstEnergy has admitted that they made payments with the intent to influence official actions,
the elected officials have denied engaging in such conduct.
By attempting to deprive the Court of any review of the settlement in this matter, the
parties undermine any public confidence in their outcome. All of the purported goals in the
complaint – holding Defendants accountable and making FirstEnergy whole again chiefly among
them – are thwarted. The public will have no confidence that a fair resolution was reached when
so few details are made public, especially when the parties have gone to such great lengths to
attempt to shield discovery from the public. While the parties may attempt to dilute the Court’s
role in this case, the Court will not shirk from its responsibility to ensure a fair and reasonable
outcome.
VII. Conclusion
It has now been more than 100 years since Supreme Court Justice Louis Brandeis
penned his most famous statement in a 1913 Harper’s Weekly article titled “What Publicity Can
Do.” Brandeis’ statement rings just as true today. “Sunlight is said to be the best of
disinfectants.” Providing the Court and the public with the information learned through
discovery will serve to enhance the public’s trust that any potential resolution of this case is fair.
As such, the Court will grant Plaintiffs’ counsel one final opportunity to comply with the Court’s
order. By no later than 12:00 p.m. on March 23, 2022, counsel shall answer under oath, via
affidavit, the Court’s question by naming the individuals who paid the bribes in this matter, and
thereafter counsel will answer the Court’s further inquiries regarding what fact discovery has
shown to date.
IT IS SO ORDERED.
Dated: March 22, 2022 /s/ John R. Adams_______________
JOHN R. ADAMS
UNITED STATES DISTRICT JUDGE