John Damschroder: Ohio Corruption Intersects

On Apr 27, 2021

Ohio corruption has crossed state lines. Thanks to excellent reporting by the Energy and Policy Institute on the FirstEnergy annual filing with the Federal Energy Regulatory Commission, we learn utility customers in Pennsylvania, New Jersey, Maryland and West Virginia helped to pay for the Ohio bailout bribes.

FirstEnergy’s FERC filing says it misallocated expenses to all 14 of its power providing companies for more than a decade, allowing those companies like Toledo Edison to pass the cost along to rate payers. FirstEnergy says it is working with state utility regulators such as the Public Utility Commission of Ohio (PUCO) to identify the improper costs and to make refunds to customers.

SEC filing may indicate plea agreement may be in the works

After informing FERC of years of accounting fraud to fund a felony at the Ohio Statehouse, FirstEnergy’s latest Securities and Exchange Commission (SEC) filing indicates negotiations are underway for a plea agreement by the utility to possible charges connected to its role in the $61 million bribery scandal behind the forced rate payer bailout of Davis Besse, Perry Nuclear power plants and two coal burning plants.

More:Damschroder: How Ohio corruption hurts Fremont

Essentially, FirstEnergy is making sure current and potential investors know the fines they’ll pay with the corporate guilty plea are coming out of shareholders pockets.

It actually would be unfair to FirstEnergy to hold company leaders personally responsible for corporate crime. That precedent was established in the global financial collapse of 2008, when fraudulent securities were sold to naïve buyers like Ohio’s public pensions who believed the ratings agencies stamp of approval and had no idea the brokerage houses were selling and even holding derivatives that paid on the collapse of the pension purchased asset.

Moreover, just like the nuke plant bailout bribes, the door to the vault was opened by powerful political figures, in this case, soon to be Gov. John Kasich.

The largest private sector employer in Columbus, by far, has shown corporate crime is no longer an impediment to growth. JP Morgan Chase is a five-time felon and America’s biggest bank. There may be a connection between those two facts.

Work on teacher retirement, PERS

Since the State Teacher Retirement System of Ohio (STRS) rivals PUCO for cluelessness, the Ohio Retired Teachers Association (ORTA) raised $75,000 to hire an auditor it trusts. Ed Siedle, the most financially successful SEC whistleblower in U.S. history, is heading down a path I paved at the Ohio Public Employees Retirement System (OPERS) with a lawsuit before the Supreme Court of Ohio seeking an order that contracts between STRS and alternative fund managers be produced as required by the state public records act.

More:Ohio nuclear plants’ owner paid $1.9 million to help save $1 billion bailout

Like OPERS did, STRS argues the contracts in question are protected trade secrets of the fund managers they’ve invested with. Siedle is making the alternative fund managers come to court and defend that proposition.

Meanwhile, the STRS board will vote next month on an in house investment staff bonus policy that sets the mark for extra, performance-based pay, at the incredibly low benchmark of the Russell 3000 index minus 1%. This is the equivalent of being accepted to Ohio State’s main campus for signing your name correctly on the admission application.

Bonus standard raises the bar

Incredibly, this standard for bonus money raises the bar. Heretofore, STRS investment managers’ benchmark was literally whatever performance they achieved. The culture of every child gets a trophy becomes every investment manager gets a large bonus.

The election for current and retired teachers to the STRS board is underway now. Unsurprisingly, the teachers who put up money for a forensic audit are supporting candidates who would tie staff bonuses to resumption of cost of living adjustments for retirees. Since I broke that story back in 2017 it has received almost zero media attention, but is a source of hardship to retired teachers across the state.