Ohio Politics Today | Murray Energy's limited disclosures leave big questions unanswered on Ohio conspiracy case

For-profit corporate structure of Hardworking Ohioans, Inc. keeps veil on how companies use money to influence energy policy.

By Kathiann Kowalski

This article provided by Eye on Ohio, the nonprofit, nonpartisan Ohio Center for Journalism, in partnership with the nonprofit Energy News Network.

While an Ohio-based coal company has contributed $100,000 to an organization that may have been involved in an alleged bribery operation to pass a power plant bailout law last year, company officials said in a bankruptcy filing that they don’t know how the money was spent.

A bankruptcy court ruled last week that Murray Energy can move ahead to seek approval of its reorganization plan, subject to a representation that its officers and directors have no knowledge about how money it gave to a dark money organization might have been used to promote the Ohio coal and nuclear bailout law at the heart of a federal conspiracy case. 

The ruling is a partial victory for environmental and citizen groups, who had objected to a more limited disclosure statement proposed by Murray Energy and its related debtors on Aug. 6. But creditors or others can’t independently verify that statement or dig into other questions about the extent to which the company may have spent funds to influence Ohio energy policy.

“If we do not have the ability to verify, we should not trust,” said Catherine Turcer, executive director of Common Cause Ohio, paraphrasing a Russian proverb.

"Company B" in federal complaint

Murray Energy has been identified as “Company B” in the federal government’s July 21 complaint, which alleges that $100,000 was wired from a company to “Dark Money Group 1” on Oct. 26, 2018. Murray Energy’s bankruptcy filings show a $100,000 cash contribution that day to Hardworking Ohioans, Inc. That organization, which is registered as a for-profit corporation, allegedly spent $1.5 million on political ads supporting Republican candidates in 2018.

Murray Energy did not respond to a request for comments for this article.

The Environmental Law & Policy Center, Ohio Environmental Council, and Ohio Citizen Action had asked Bankruptcy Judge John Hoffman, Jr., to require disclosures about Murray Energy’s possible involvement in the federal case. Murray Energy’s Aug. 6 filing stated that the case had been filed, that so far it was unaware of contacts with the authorities that had filed the complaint, and that it had previously disclosed all gifts and charitable contributions.

Criminal charges against the company generally would not be wiped out by bankruptcy, so they might impair the financial viability of the reorganized company. That information could be important to creditors, the environmental and citizen groups stressed.

Moreover, if the government should bring criminal charges, Murray Energy might be unable to complete its mine closure obligations, the groups argued. If that happened, the state fund set up as a backstop lacks sufficient money to cover the estimated costs of more than $200 million for that work.

It’s unclear whether those liabilities will be discharged in bankruptcy — and thus limited to the reorganized company’s assets going forward.

“The question is still before the court, and we will object to the plan on the grounds that it is not feasible and does not comply with federal law,” said attorney Margrethe Kearney at the Environmental Law & Policy Center. Ohio’s current bond pool has never been approved under the Surface Mining Control & Reclamation Act, she explained.

What’s disclosed — and what’s not

The revised statement required by Judge Hoffman’s Aug. 7 order specifically notes the payment to Hardworking Ohioans, Inc. It also says that, to date, Murray Energy and its affiliated debtors and their officers and directors “have no further knowledge regarding how Hardworking Ohioans Inc. spent the contribution.”

That  representation raises the question of why the company paid $100,000 to the organization. Because Hardworking Ohioans is set up as a for-profit corporation, there’s no way to find out who its directors and officers were, unless that company voluntarily discloses the information.

J. Anthony Kington, the attorney who signed for Taft Service Solutions Corp. as the Hardworking Ohioans’ incorporator and agent for service, has not responded to a request for comment.

The bankruptcy court’s required disclosure statement also calls only for Murray Energy to indicate whether it had communications from authorities about the federal criminal case. It does not require any statements about communications the coal company, its officers or directors may have had with the defendants named in that case, including Ohio Rep. Larry Householder, a Republican from Glenford.

There have at least been some contacts over the years, although topics of any discussions are unknown. For example, an attendee list from an executive roundtable at a 2015 conference for Republican governors shows both defendant Jeff Longstreth and attorney Eric Lycan as guests of Murray Energy. Jamie Corey, a senior researcher at the watchdog group Documented, uncovered the material from a public records request. Lycan has been treasurer of both Generation Now and the Growth and Opportunity PAC, which are alleged to have funneled money in the federal court case.

“Federal authorities have made clear that their investigation into the events surrounding the passage of House Bill 6, which benefited Murray Energy, is ongoing and they will follow the evidence where it leads,” said Dave Anderson, policy and communications manager for the Energy & Policy Institute.

The lack of information is compounded by a $15.7 million settlement of claims an unsecured creditors’ group had made this spring. At that time, the creditors’ group alleged that company officers had been “grossly overcompensated” and that members of the Murray family had used the company as their personal “piggy bank.” The company had denied the allegations, stating that its claims were “baseless and concocted.”

A July 29 filing in the case includes stipulations that the settlement would be in the best interests of Murray Energy and its creditors. However, the settlement also means there won’t be more public inquiry into the issues it resolves.

“Investigations within Murray Energy's bankruptcy case have identified a larger pot of contributions made between 2016 and 2019 that has not been fully disclosed publicly,” Anderson said. “The bankruptcy court could simply request that the results of these investigations be made public, rather than suppressed as part of a settlement agreement.”

“Ultimately the Murray Energy bankruptcy has broad implications for things like mine clean up funds that are a matter of public concern, and the public deserves to know how this private company spent itself into bankruptcy,” Anderson added.

The bigger question beyond the bankruptcy case is the way companies and others use different organizations to engage in political activity without being upfront with the public about what they’re doing, Turcer said. And that applies, in her view, whether the spending is done through a for-profit limited liability corporation, a tax-exempt group known as a 501(c)(4) corporation, or another type of entity.

“It’s completely infuriating that these entities that are claiming they need to go bankrupt are willing to make investments in political advertisements — and that they expect to operate in secret, so that their debtors wouldn’t even have information about what they’re up to,” Turcer said.

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CPT | Desperate Times: Dark Money, Gatekeepers and the Public Square, Part I

Cuyahoga Politics Today

Cleveland's Crumbling Political Order

The emergence of "dark money" in this year's mayoral campaign is a harsh but illuminating case study on how the intersection of race, power and privilege in Cleveland retards the region's redevelopment into a first class twenty-first century metropolis.

Ironically, this object lesson of primitive politics is on display front and center this week as Cleveland hosts not one but two national conferences focused on smart cities and intelligent planning for urban communities.

We will have more to say about our national visitors in a companion post, but suffice it to say here that they are some of the brightest minds currently operating on the cutting edge of technology, urban planning and intelligent design. Stepping outside their conference headquarters to experience our downtown vibrancy, the more attuned can hear disturbing echoes from the local corridors of power emanating from our airwaves, unlike the soothing welcomes they are receiving from official local representatives.

Like most big cities, a status Cleveland now holds more in memory, longing and pretense, our direction and pace are largely set by the interplay between our business and civic leaders. In healthy communities, these forces are complementary competitors. Like Howard and Hampton, two of the nation’s best historically black universities, they battle fiercely but enjoy both a mutual respect with the understanding that beyond the struggle on the playing field, they each share a common interest in the other's prosperity and well-being.

More than a century ago, Cleveland was at the national forefront of municipal leadership. We had nearly one million residents within our borders. We had a progressive mayor, Tom Johnson, who left a successful business career to run for public office in service to his community — not just to his class. While Johnson is justly celebrated today for his bold, visionary and courageous leadership — his statue adorns our Public Square — his former business associates at the time vilified him for daring to represent the public interest at the expense of their immediate profits.

Mostly since then, it seems that our business community has made it a cardinal principle to ensure that organic leadership in the public interest would never reemerge. The dominance of that first principle has coincided with Cleveland's steady decline ever since 1930.

Cleveland's population growth was fueled first by middle and Eastern European immigrants who came to toil in the filthy factories, foundries and refineries that forged the area's wealth. The unhealthiness of those sweatshops and the griminess of the teeming masses in their ethnic central city enclaves led people with means to seek greener pastures. Even Millionaires Row did not escape the exodus as wealthy Clevelanders moved outward to create some of the world's first and finest modern suburbs: Shaker Heights, Cleveland Heights, East Cleveland.

In so doing, they had to abandon direct control of city politics. By and large, good government forces refocused on emerging suburban city halls, replaced in Cleveland City Hall by waves of competing ethnic politicians sent downtown from their respective enclaves — Little Italy, Slavic Village, Collinwood, Clark-Fulton, and so forth — to gain public power to improve their neighborhood's and living conditions.

A tacit bargain was struck between the business community and the ethnics. The latter could run the city politically but would not interfere with the city's powerful money making apparatus, which was slowly becoming more corporate, with the attendant development of powerful legal and financial service muscle centers.

Cleveland ethnics developed a unique and powerful "Cosmopolitan" political machine, best exemplified by Frank Lausche, who blazed a trail to stunning success as judge, mayor, governor, and ultimately US Senator. (George Voinovich would follow Lausche's Cosmo path a generation later, but even though he took some of his rough and tumble homies along to ride shotgun, his saddlebags always carried a corporate agenda.)

Black people, eventually to become the area's largest and most indigestible ethnic group, were initially barely a blip on Cleveland's municipal radar. Restricted initially to the city's Central neighborhood, they were only a minor irritant in the civic arena until a modest immigrant from Alabama, John O. Holly, began agitating for equity in 1935. Seemingly overnight he organized 10,000 working class black to support his contention that black lives mattered. Under the banner of “Don’t Buy Where You Can’t Work”, his Future Outlook League forced dozens of businesses in the central area and then downtown, to begin desegregating their workforces by hiring Negroes.

Holly's intrusion into how the city did business had political overtones and fostered the business community's resort to gatekeepers, respectable black people whose primary chore was to keep their unwashed and rebellious kinfolk under control.

This quasi-colonial system has been in place ever since, with continuous refinements that extend until the present day. Its use was instrumental in the undermining of the opposition to the Q deal, and can now be seen in the ferocious effort to derail the populist challenge to City Hall that threatens to put neighborhood native son Zack Reed from sitting in the mayor's seat.

What Cleveland’s civic leaders continually fail to understand its that its adherence to a post-colonial reliance upon a gatekeeper mentality retards our entire community, keeps us in a defensive stance, limits our attractiveness to immigration from anywhere, makes us wholly ill-equipped to compete for Amazon HQ2, and ultimately undermines our most earnest efforts to enter world class competition even at the middleweight level, notwithstanding our enormous public assets.

We approach today the 50th anniversary of the election of Carl Stokes as mayor. We are right to celebrate that achievement: Cleveland was the FIRST big city in America to elect a black man as mayor.

(Richard Hatcher was elected mayor in Gary, Indiana the same night in November 1967; however, Gary barely registered on the roster of the city’s larger cities, Its 178,000 citizens ranked it #70 in 1960, while Cleveland came in as the nation’s 8th largest city, with a population of 876,000. 

Today, Cleveland has shrunk to a ranking outside the top fifty cities, with a population of about 385,000, placing it below such lustrous venues as Tulsa OK, Arlington TX, Colorado Springs CO, and Mesa AZ.)

The Stokes era at City Hall, 1967-1971, busted open the old order. Black people, confined almost exclusively to the overcrowded neighborhoods of Cedar-Central, Hough, Glenville, and Mt. Pleasant, used their concentrated mass to break down decades of exclusion, and to bring a measure of meritocracy to the public space. The establishment, which had long resisted such a development, embraced it in the wake of Stokes’ near-election in 1965, and in fear of the tumultuous conditions erupting nationwide in places like Newark, Watts, and Detroit.

Those were exhilarating years for black people in Cleveland. Doors were kicked open on every front as black people found new opportunities in employment, housing, and the civic space. There was opposition all along the way, but led by Carl and his brother Lou, who became Ohio’s first black Congressman in 1968, the black community stuck together and persevered.

While the Stokes years at City Hall led to unquestioned improvement in the quality of civic life for all Clevelanders, certain problems, most notably in the justice and public education systems, proved intractable even as significant progress was made in other arenas. Hardcore resistance to public school integration was tolerated and even supported by key elements of the business community, and the promise of the Stokes years quickly waned. And when an ambitious, audacious inner city ethnic westside kid named Dennis Kucinich rode the unrest into City Hall, all hell broke loose.

Kucinich was mayor for only two years, every day of which seemed as tumultuous as what we currently observe in the White House. The business community found George Voinovich, a Cosmo Republican, retook control of City Hall and community politics, and found complicit partners it could control with a multifaceted system of financial controls in the form of salaries, grants, contracts, and other more nefarious fiscal tools.

Today, Frank Jackson sits in City Hall as the embodiment of that system. A good man, conscientious, diligent, he is the virtual embodiment of a political metronome. Super dependable, predictable to a fault, he can be counted upon to support almost every business community initiative, irrespective of its merit or the disproportionate aspects of its benefits and burdens.

Jackson has done a lot of good during his unsurpassed twelve years as mayor, but almost everybody knows and believes the baton should be passed.

And therein lies the problem: the natural stream of selection has been corrupted, choked with pesticides, and clogged, perhaps inadvertently but nonetheless primarily as a direct consequence of the gatekeeper system that restricts access, development and advancement of talent, ambition, and potential in the civic, commercial and cultural spaces that matter in Greater Cleveland.

In tomorrow’s post, we will talk more about the gatekeepers. We’re likely even to name at least a couple of the most obvious ones.

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