FirstEnergy Corp.

Case Details

Class Period: February 21, 2017 - July 21, 2020
Date Filed: July 28, 2020
Case Number: 2:20cv03785
Jurisdiction: Ohio Southern District Court

Case Summary

The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding FirstEnergy’s internal controls, business practices and prospects. Specifically, defendants touted FirstEnergy’s legislative “solutions” to problems with its nuclear facilities, but failed to disclose that these “solutions” centered on an illicit campaign to corrupt high-profile state legislators in order to secure legislation favoring the Company. Over a nearly three-year period, FirstEnergy and its affiliates funneled more than $60 million to prominent state politicians and lobbyists, including Ohio Speaker Larry Householder, in order to secure the passage of Ohio House Bill 6 (“HB6”), which provided a $1.3 billion ratepayer-funded bailout to keep the Company’s failing nuclear facilities in operation. In addition, defendants falsely represented that they were complying with state and federal laws and regulations regarding regulatory matters throughout the Class Period, exposing the Company and its investors to the extreme undisclosed risks of reputational, legal and financial harm. As a result of defendants’ false statements and omissions, the price of FirstEnergy stock was artificially inflated to a high of more than $50 per share during the Class Period, and Company insiders were able to sell more than $17 million worth of their FirstEnergy shares at these artificially inflated prices. Then on July 21, 2020, federal agents announced the arrest of Householder and four others persons, including a prominent FirstEnergy lobbyist, in connection with a $60 million racketeering and bribery scheme. The 82-page criminal complaint and affidavit detailed an alleged pay-to-play scheme in which FirstEnergy corrupted every facet of the legislative process in order to ensure the passage of HB6, including defending the bill against a citizens ballot initiative. Prosecutors described the case as involving the “‘largest bribery, money-laundering scheme'” in Ohio history. On this news, the price of FirstEnergy stock plummeted, trading as low as $22.85 per share on July 22, 2020, down 45% from its closing price of $41.26 per share on July 20, 2020.