Wednesday, June 3, 1998
BY SANDY THEIS
Enquirer Columbus Bureau
COLUMBUS -- Over the past two years, a consulting firm headed by Paul Mifsud received at least $453,700 from an Akron-based electric company, federal energy records show.
The governor's former chief of staff is among dozens of politically connected consultants hired by Ohio Edison, a firm whose survival could hinge on the outcome of pending legislation to deregulate Ohio's electric utilities.
While Ohio Edison laid off about 400 people last month to cut costs, it paid its consultants $9.3 million last year, including $303,700 to Kingwood Consulting Group, of which Mr. Mifsud is president. The payments are listed in records filed with the Federal Energy Regulatory Commission in Washington, D.C.
Critics say the payments showcase the power of political connections in the state capital, the weakness in Ohio's ethics laws and the high stakes involved as Ohio lawmakers wrestle with the complex issue of deregulating electric companies.
The hefty fees have prompted Rep. Jeff Jacobson, R-Brookville, to push for passage of a law that would expand disclosure requirements for lobbyists and address what he called "consultants who are little more than carefully disguised lobbyists."
It is unclear, however, whether the state can force more disclosure of consultants -- such as Mr. Mifsud -- who are not lobbyists as well, he said.
Ohio law defines lobbyist as a person who has "direct communication" with elected officials, department heads, agency officials or other staff members of a public office for the purpose of influencing the agency's decisions.
Mr. Mifsud has argued that he is not a lobbyist but a consultant for Ohio Edison and other businesses regulated by the state.
"Sometimes it's a difficult job," Legislative Inspector General Tom Charles said, "because you don't know when they might cross the line from consulting to lobbying." Mr. Charles registers and monitors lobbyists.
Mr. Mifsud resigned as Republican Gov. George Voinovich's chief of staff in July 1996. In August that year, Kingwood received its first $30,000 installment from Ohio Edison.
He pleaded guilty Sept. 3, 1997, to misdemeanor charges involving efforts to conceal a $100,000 home remodeling discount from a state contractor. Four felony charges were dropped.
Mr. Mifsud is among a cadre of well-connected Ohio Edison consultants that includes:
Edward Flask, former director of the Mahoning Valley Sanitary District (MVSD). He received $30,000 in 1995, $24,000 in 1996 and $22,000 in 1997, according to Federal Energy Regulatory Commission documents.
In August 1997, Ohio Auditor Jim Petro released a special audit of MVSD that accused Mr. Flask of violating Ohio law by collecting more than $1.9 million in legal and consulting fees from some of the same vendors he hired to work at the district. Mr. Flask is challenging the report and maintains he did nothing improper.
Vern Riffe Jr., the now-deceased Democratic House speaker. He retired in January 1995. That same year, Ohio Edison signed up Vern Riffe & Associates, paying it $15,000 that year, $58,000 the next and $60,000 last year, according to federal records.
Sen. Roy Ray, R-Akron, received $124,000 from Ohio Edison, then sponsored deregulation legislation favorable to Ohio Edison and others that want to recover billions of dollars in investments in nuclear power plants. After public disclosure of the consulting fees, Mr. Ray announced he would not vote on any electric deregulation bills pending in the General Assembly. He also disclosed a 1995 opinion from the Joint legislative Ethics Committee that said a consulting contract between a legislator and utility company was proper, within certain guidelines.
Alex Arshinkoff, Summit County GOP chairman and a major fund-raiser for Mr. Voinovich and other Republican Party candidates and causes, heads a firm that received $55,000 in 1996 and $65,000 in 1997, federal records show.
Neither Mr. Mifsud, Mr. Arshinkoff nor Mr. Flask returned calls.
Helped with mergers
Ralph DiNicola, Ohio Edison's manager of public relations, said the company employs the consultants to advise officials on a range of topics.
"We have gone through a very tough time in our company's history," he explained. Ohio Edison recently merged with Cleveland Electric Illuminating Co., and Toledo Edison, forming the parent company, First- Energy.
Some consultants, such as Sen. Ray, helped with local issues involving the merger.
As a former Akron mayor, Sen. Ray "helped us balance cost control with maintaining a local presence," Mr. DiNicola said.
Mr. Flask dealt with a very narrow regional issue, he said, that had nothing to do with deregulation.
Mr. Mifsud's firm "provides us with strategic and business consulting on a range of issues," he said, that he described as "primarily state issues."
When asked whether deregulation is among them, he replied, "could be."
Mr. Arshinkoff provides the company with "political and strategic advice on state and local issues," he said. He also is a registered lobbyist for the company.
Sen. Bruce Johnson, R-Columbus, co-chairman of a legislative panel that is handling the deregulation bills, said he cannot recall another issue that has generated so many lobbyists, consultants and other interested parties.
"Virtually everybody in the lobbying industry has been hired to represent one side or the other, and there are several sides in this issue," Mr. Johnson said.
Much is at stake, including about $11 billion a year for the electric utility industry.
The goal of the legislation is to allow competition -- not the current system of government regulation -- to determine the price and packaging of electric service.
Just as consumers now have the option of choosing long-distance services, eventually they could be offered a choice of electric companies.
One of the major points of contention is who should pick up the tab for utility companies that invested in now non-productive nuclear power plants.
FirstEnergy is saddled with such costs. Cinergy and Columbus' American Electric Power are not, making them better positioned to compete in the short term, according to industry analysts.
Deregulation delay likely
Mr. Johnson still hopes to approve a deregulation bill this year, but concededs that is doubtful.
"Most of the lobbyists who have been hired, have been hired to delay, so that makes it very difficult to move things," he said. Delays would help FirstEnergy, giving the firm more time to improve its financial condition and better compete with down-state utilities.
Despite the influx of lobbyists and consultants, Mr. Johnson isn't among those who thinks Ohio needs to tighten disclosure requirements.
"When we write a bunch of regulations, we only punish the honest people because the dishonest people don't pay attention to the regulations," he said.
