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FirstEnergy reaches agreement to resolve department of Justice Investigation

By Pavankumar on Jul 25, 2021 | 03:35 AM IST

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FirstEnergy resolves previously disclosed matter, building on meaningful actions already taken to enhance compliance program, strengthen leadership team, and implement more robust oversight of governmental affairs engagement

AKRON, Ohio – FirstEnergy Corp. (NYSE: FE) today announced that it has entered into an agreement with the U.S. Attorney’s Office for the Southern District of Ohio to resolve the previously disclosed investigation. The deferred prosecution agreement has been filed in federal court.

“FirstEnergy’s Board of Directors moved swiftly and decisively to investigate this matter and, along with the management team, has cooperated and will continue to fully cooperate with the U.S. Attorney’s Office that is investigating the matter,” said Donald T. Misheff, nonexecutive chairman of FirstEnergy’s board of directors. “This resolution and the actions we have agreed to implement build on the substantial steps we have taken over the past several months to strengthen our leadership team, ensure we have a best-in-class compliance program, and significantly modify our approach to political engagement as we work to regain the trust of our stakeholders. We thank the office of the United States Attorney for the Southern District of Ohio for its professionalism and engagement with FirstEnergy throughout this process.”

“FirstEnergy’s core values and behaviors include integrity, openness, and trust. As an organization, we are redoubling our commitment to live up to these values and the standards that we know our stakeholders expect of us,” said Steven E. Strah, FirstEnergy president and chief executive officer. “Moving forward, we are intently focused on fostering a strong culture of compliance and ethics, starting at the top, and ensuring we have robust processes in place to prevent the type of misconduct that occurred in the past.”

Under the three-year deferred prosecution agreement, FirstEnergy has agreed to pay a penalty of $230 million, and has agreed to the government’s filing of a single charge of conspiracy to commit honest services wire fraud. The charge will be dismissed, provided FirstEnergy abides by all terms of the agreement. The payment of the $230 million fine will be split equally between the U.S. Treasury and the Ohio Development Service Agency for the benefit of Ohio utility customers. The company expects to record a charge in this amount for the second quarter this year. This fine will not be recovered in rates or charged to customers.

From the onset of the investigation, as noted in the agreement reached with the U.S. Attorney’s Office, FirstEnergy provided substantial cooperation with the investigation, including conducting a thorough internal investigation; proactively identifying issues and facts that would likely be of interest to the government; sharing information that would not have been otherwise available to the government; and making such material available to the government on an expedited basis.

FirstEnergy has taken substantial remedial actions across four broad categories, including employment consequences for executives and employees who engaged in misconduct; enhancements to the company’s compliance program; improvements to the company’s policies and procedures; and monetary remediation to ratepayers. Specific efforts, detailed by the government in the resolution agreement as part of its decision to defer prosecution, include, among others:

•Establishing an executive director role for the Board of Directors, which supports the development of enhanced controls and governance policies and procedures;

•Hiring a new chief legal officer, who oversees the company’s legal and internal audit departments;

•Separating the chief legal officer and chief ethics and compliance officer (CECO) functions, and hiring a new CECO who reports directly to the Audit Committee of the Board and administratively to the chief legal officer;

•Working to establish a culture of ethics, integrity, and accountability at every level of the organization;

•Creating a Compliance Oversight Subcommittee of the Audit Committee to implement compliance recommendations received from outside counsel; and

•Reviewing and revising political activity and lobbying/consulting practices, including requiring robust disclosures about lobbying activities.

The company will continue to build a best-in-class compliance program and, in accordance with today’s agreement, provide annual reports to the United States Attorney for the Southern District of Ohio. Moving forward, the company continues to take important steps to ensure a strong culture of compliance.

FirstEnergy is dedicated to integrity, safety, reliability and operational excellence. Its ten electric distribution companies form one of the nation's largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. The company's transmission subsidiaries operate more than 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions.


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