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The Resistible Rise of Nuclear Gangsters…and Their Downfall

Photograph Source: Davis-Besse NPP.jpg: Nuclear Regulatory Commission. Original uploader was Theanphibian at en.wikipedia – Public Domain

It would be tempting to describe last week’s nuclear scandals — in three states — as something out of the Wild West. But Al Capone’s Chicago would be a more accurate analogy.

While no actual shots were fired, some pretty powerful metaphorical ones were, warnings that engaging in criminal racketeering and fraud to fleece ratepayers over failing nuclear plants would not go unpunished.

Over the course of just a single week, politicians, lobbyists and nuclear industry executives in Illinois, Ohio and South Carolina were reeled in and, in some cases, charged with high crimes for covering up illegal schemes that bought power, votes, legislation and huge bailouts for foundering nuclear power plants while squeezing ratepayers for the bill.

First to be implicated, on July 17, was Illinois Speaker of the House, Michael Madigan, a Democrat accused of (but so far not criminally charged for) being at the center of a vast criminal enterprise. Federal prosecutors allege that Chicago-based Commonwealth Edison dished out jobs and contracts worth $1.3 million to associates of Madigan to ensure passage of a 2016 $2.35 billion nuclear bailout bill. Those costs are to be passed on to customers for ten years. Federal prosecutors have confirmed only that Madigan remains under criminal investigation.

So far, with no clear charges leveled at him, Madigan has refused to resign. ComEd, a subsidiary of Exelon, has agreed to pay a $200 million slap-on-the-hand fine to settle the bribery allegations against the company. It also faces a class-action lawsuit seeking $150 million in reimbursements for its defrauded customers.

On July 21, the drama moved to Ohio, where it was the Republican Speaker of the House, Larry Householder, who went down, along with four co-conspirators so far, arrested for his evident involvement in what amounts to the biggest criminal racketeering conspiracy in Ohio history.

That plot revolves around $61 million in dark money provided by a certain ‘Company A’ to Householder and his cronies, again to secure passage of a bailout bill that provided $1.5 billion to keep two aging and uneconomical nuclear power plants in the state open — Davis-Besse and Perry.

The bailout, which became law in October 2019, is, like the one in Illinois, to be funded via a surcharge on electricity customers. The bill also decimated renewable energy development and energy efficiency implementation.

Householder, who refused to resign, was dismissed from his position as Speaker on July 30 in a unanimous 90-0 vote in the Ohio House.

Two days after the Householder indictment, things went south in South Carolina, where Steve Byrne, the former CEO of SCANA, pled guilty in a massive nuclear conspiracy that defrauded ratepayers of at least $2 billion in costs, deceived regulators and misled shareholders.

Byrne is charged with lying about progress on two reactors under construction — and since abandoned — at the V.C. Summer site, where costs ballooned to $9 billion. The lies were necessary to make the case that the two new reactors would be finished on time, thereby qualifying the company for $1.4 billion in future federal tax credits.

Again, it was ratepayers who shouldered the financial burden as the project faltered and finally collapsed.

Byrne, who began cooperating with investigators about two years into their now three year-long investigation, could face jail time and a fine, but will likely testify against his co-conspirators to reduce his punishment.

All three stories have a lot of moving parts with likely many more shoes still to drop. But what remains abundantly clear is that a financially desperate nuclear power industry can neither maintain its existing fleet nor build new reactors without engaging in outlandish, criminal schemes.

The Ohio story is by far the most fascinating one of the three, sometimes descending to levels of almost laughable absurdity. Householder, a straight-from-central-casting villain, appeared menacing, camo-clad and wielding a large gun in television campaign ads. But what he apparently enjoyed wielding even more, according to investigators of his crimes, was power.

Householder’s scheme — which included a climb back up the political ladder to regain the House Speaker’s chair — is laid bare in an 81-page criminal complaint. It was busted open by a year-long, detailed and covert investigation by the US Attorney’s office and the FBI, looking into illegal activities leading up to and including the Ohio nuclear bailout bill, known as HB6.

FirstEnergy Solutions, the then owner of Davis-Besse and Perry, had threatened their closure if bailout money was not forthcoming.

The reactors are currently owned by Energy Harbor, which was spun off from FirstEnergy Solutions, itself a spinoff from FirstEnergy. ‘Company A’, cited in the criminal complaint as the source of the $61 million, is believed to be FirstEnergy itself, but if you sense a shell game here, you are probably on the right track.

The $61 million slush fund, according to the criminal complaint, was used to bankroll political elections to ensure the right people would be in office when it came time to pass HB6 in July 2019. It was also used to engage in the sometimes violent suppression of citizen efforts to overturn it via a petition seeking a November 2019 ballot initiative. And some of it was simply pocketed by Householder and others for their personal use.

The crimes with which Householder and four political advisors and lobbyists have been charged constitute “a shameful betrayal of public trust,” said FBI special agent, Chris Hoffman, during a July 21 press conference announcing the arrests and indictment.

It was also, “likely the largest bribery money-laundering scheme ever perpetrated against the people of the state of Ohio,” said US Attorney for the Southern District of Ohio, David DeVillers at the same press conference, whose department led the investigation alongside the FBI.

The racketeering scheme that the justice department uncovered found a money trail of $61 million flowing from ‘Company A’ into a 501(c)(4) fund named Generation Now. Generation Now has also been charged with racketeering conspiracy.

But while the money clearly came from some iteration of FirstEnergy, the US Attorney’s office and the FBI are not, so far, fingering the corporation as the instigator. As US Attorney DeVillers said of the web of conspirators, “this enterprise went looking for someone to bribe them”.

Generation Now, as a 501(c)(4), was not obliged to declare the source of its funding. If it had been, said DeVillers at the press conference, the criminal enterprise it operated could never have happened. Despite its name, DeVillers said, “make no mistake, this is Larry Householder’s 501(c)(4).”

And a Republican-led operation. Generation Now’s treasurer is D. Eric Lycan, a Lexington, KY attorney with ties to the Kentucky House Republican Leadership Caucus. In addition to the ad buys Generation Now made for FirstEnergy, it also made them for an entity called Strategic Media Placement, run by GOP operative, Rex Elass.

FBI special agent Hoffman lumped Householder and his cronies in with FBI usual suspects like “gangs, child sex trafficking and Chinese spies,” but said that “public corruption is actually the top criminal priority for the FBI.”

Chinese spies were in fact part of the Generation Now misinformation campaign, a scare tactic used to derail efforts by a citizen coalition called Ohioans Against Corporate Bailouts (OACB), which launched a petition drive to repeal HB6.

As the OACB petitioners took to the streets, attempting to gather enough signatures to get a repeal of HB6 onto a November ballot, a “yellow peril-style” racist smear campaign suggested that, among other things, the petition gatherers were in the payroll of Chinese government operatives who were “quietly invading our American electric grid” and that if you signed the HB6 repeal petition, the Chinese government would be capturing “your name, your address, your signature”. National security would also be at risk. Although the ad made no mention of “stealing our precious bodily fluids” it played like something straight out of Dr. Strangelove.

Most ludicrously, the Chinese scare ad, put together by Ohioans for Energy Security (another front group) suggested China, and by definition the ballot petitioners, were “taking Ohio money,” which is precisely what the Householder racket was doing.

It worked. OACB eventually ran out of time and petition gatherers, some having been bought off with a portion of the $61 million. It had been an almost impossibly uphill task from the get-go, sounding a warning for other ballot initiatives in the future.

The OACB lost valuable time — 38 days out of the 90 allotted — to gather signatures after submitting the petition language for approval to Ohio Attorney General, David Yost, who sent it back for improvements.

This was not an unexpected development, says Rachael Belz, Executive Director of Ohio Citizen Action. “Everybody knows in Ohio, after a hundred years of this system, that the first time you submit a thousand signatures with the language, it is never approved the first time,” she said. “Everybody knows you will lose time.”

Nevertheless, the OACB sued for more time, eventually asking the Ohio Supreme Court to rule on whether the Ohio constitution guarantees citizens the full 90 days to gather signatures and whether restrictions by lawmakers were constitutional.

But in October 2019, OACB withdrew the initiative and its court appeal. The bigger problem, in the end, was not so much time, as money. A petition requires “at least $3 million just to get out of the gate,” Belz said. But the petition blockers who roamed the streets, bribing away OACB’s signature gatherers and even, in at least one case, roughing one of them up, were fueled by countless millions of dollars.

“I’ve never seen anything like this before,” Belz said before the arrest of Householder. “And I’m afraid it will start happening elsewhere.”

While petition blockers are legal, their tactics in Ohio, as the criminal complaint now lays out, strayed outside the law. “It was a saturation of fear,” said Belz, who described one of her own directors, who was gathering signatures to repeal HB6, being offered a $1,000 bribe to ditch the petition and go home “on her very first day.” Others were offered, and took, upwards of $10,000 to $20,000 in bribes.

“Probably no one could have done it,” said Belz of the petition drive. “It was a question of who was going to spend more money and it was always going to be FirstEnergy.”

HB6 effectively became law. And it still is.

That’s the worst part of the news. Householder and others may pay a fine, or even see jail time, but the people of Ohio remain in danger. Davis-Besse and Perry are two of the most seriously degraded reactors in the country and should have been shut down long ago.

The $1.5 billion subsidy, says Toledo public interest attorney, Terry Lodge, “didn’t go to ensure safe nuclear plant operations for the next five years, but instead was paid to investors as dividends once the FirstEnergy bailout was over.”

Can HB6 be undone, given it was passed based on ill-gotten gains?

On July 30, Republican Ohio governor, Mike DeWine, a previous supporter of the bill, called for its repeal. Leaders in both the Ohio House and Senate are working on new legislation to undo it. However, it is not clear that any new version would strip out language that awards subsidies to nuclear power. The lawmakers simply want a “clean” bill, even if it still keeps dangerous nuclear reactors running.

On the Republican side, they could also be motivated by yet another dirty discovery. Prior to the vote on HB6, a Trump operative, Bob Paduchik, had pressured “at least five members of the Ohio House of Representatives,” to vote ‘yes’ on HR6, according to Politico.

“The message is that if we have these plants shut down we can’t get Trump reelected,” one senior legislative source told Politico.

Governor DeWine has reiterated his support for nuclear power in the state in recent days. Any new version of HB6 will almost certainly still include nuclear bailout money. But will citizens groups have the energy and resources, and even the democratic opportunity, to fight it once again?

Linda Pentz Gunter is the editor and curator of BeyondNuclearInternational.org and the international specialist at Beyond Nuclear. She can be contacted at linda@beyondnuclear.org.

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