( PR4US.com | Press Release | 2019-08-05 00:38:14 )
(AKRON, OHIO) -- August 1, 2019 -- The following objection in the FirstEnergy Solutions Bankruptcy case currently being litigated in Akron, Ohio, Before Judge Alan M. Koschik. has been filed in the format of the following letter by Ohio citizen Jeff Barge of Cleveland Ohio:
August 1, 2019
Judge Alan M. Koschik
United States Bankruptcy Court
John F. Seiberling Federal Building Courthouse
455 U.S. Courthouse
2 South Main Street
Akron, OH 44308
Re: FirstEnergy Solutions Corp. (18-50757)
Objection to Bankruptcy Plan
Dear Judge Koschik:
I have been watching the FirstEnergy "Solutions" bankruptcy with much interest, and would like to raise objections to the bankruptcy plan as presented on behalf of the citizens of Ohio and the ratepayers of Ohio.
According to testimony provided to the Ohio State Senate last month by Ohio Consumers Counsel, a state agency, FirstEnergy increased its dividends from $152 million to $375 million, an increase of $223 million. dis.puc.state.oh.us/TiffToPDf/A1001001A19F14B63203J01876.pdf blogs.edf.org/energyexchange/files/2019/07/OCC-testimony-June-29 .. (Page 8)
In July, FirstEnergy announced it was maintaining that high level of dividends for a second year, "unjustly enriching" itself by a further $223 million this year, again, money that should have to pay its unsecured creditors.
I am making a motion to the court to "claw back" this $446 million in unjust and unethical fraudulent conveyance that should have been put into the account of FirstEnergy Solutions to pay its creditors.
I realize that FirstEnergy has agreed to provide some $780 million in compensation to its secured lenders, and that seems a solid offer that deserves to be accepted. But to the unsecured creditors, apparently all they are offering is stock in the new FirstEnergy Solutions. A $1.4 billion subsidy was just approved by the state of Ohio to FirstEnergy Solutions, but that will only last for several years. After that point, FirstEnergy Solutions stock will become worthless and the plants will close.
Bank of New York Mellon Trust Company, Wilmington Savings Fund Society, BNSF Railway, Enerfab Power, PKMJ Technical Services, and Schwebel Bakery Co, all will benefit from clawing back this money, as will the citizens of Ohio. The citizens of Ohio will benefit because the $1.4 billion subsidy is dependent on a yearly audit, and if this $446 million in fraudulent conveyance to FirstEnergy shareholders is clawed back, that will mean that ratepayers across the state who are otherwise scheduled to pay this money will not have to.
I understand that the agreement between FirstEnergy and FirstEnergy Solutions bars FirstEnergy Solutions from bringing any claims for fraudulence conveyance. I understand that the law firm of Milbank Tweed supported this waiver from bringing claims for fraudulent conveyance. They are thus leaving $446 million on the table that their clients could get back if they were doing their job properly instead of taking the easiest past, which seems to be failing their clients.
Fundamentally, this is not how we do business in Ohio and this Court would be setting up a precedent establishing that major fraud in Ohio is acceptable. But here is a company, FirstEnergy, that borrowed money from entities such as Bank of New York Mellon Trust and Wilmington Savings Fund Society promising to pay it back, based on the laws of the United States and the state of Ohio.
Instead, what they did was split their company in two, with one half laughing all the way to the bank and increasing its dividends to its shareholders, mostly Wall Street private equity firms, by $446 million based on no increase in operating profits. The other half of the company, First Energy “Solutions,” could have had this $446 million to pay its bills, but instead ends up stiffing its creditors, who believed in the financial strength of FirstEnergy of which it was a time a part, by $2 billion.
How this is acceptable in Ohio baffles me. I can’t split myself into two entities, give one entity all the money and give the other entity all the debts and problems. It wouldn’t be legal, and to me, this seems the greatest form of bankruptcy fraud imaginable.
As a final point, I would like to note that in the agreement between FirstEnergy and FirstEnergy Solutions, FirstEnergy has decided to “forgive” $4 billion in debt that it allegedly gave FirstEnergy Systems, even though it was part of the same company when these loans were made. You can’t loan yourself money and then write it off and take a $4 billion tax-deduction. It’s fraud. FirstEnergy has received up to $13 billion in subsidies from the State of Ohio, and now it wants to take this $4 billion tax write off so that it probably won’t pay taxes to the State of Ohio for half a decade. This is a matter that needs to be referred to the U.S. Attorney for investigation.
I attach a number of recent newspaper articles, including one written by myself, that back up what I have been arguing.
On behalf of the State of Ohio, its citizens, and FirstEnergy ratepayers, I ask that the bankruptcy settlement be amended so that this $446 million in dividends that FirstEnergy shadily gave to its shareholders to keep it out of this bankruptcy proceeding be clawed back and distributed to unsecured creditors and the ratepayers based on the audit required by the new state subsidy for First Energy Solutions. Additionally, I ask that FirstEnergy Solutions be put up for auction once again now that is has gained assets potential in excess of $1 billion.
P.S. You might subpoena the FE board of directors minutes to find evidence of fraudulent intent in its $446 million dividend distribution.
Cc: Evan R. Fleck, Esq.
Dennis F. Dunne, Esq.
Parker Milender, Esq.; Alexander B. Lees, Esq.