Commonwealth Edison, a subsidiary of energy giant Exelon Corp. and the largest utility in the state of Illinois, agreed Friday to pay $200 million to settle federal corruption charges that also involve one of the state’s most powerful politicians. The case is a reminder to compliance officers that FCPA-like misconduct can happen right here within the United States, too.
ComEd had been accused of offering lucrative lobbying contracts and no-show jobs to associates of Illinois House Speaker Michael Madigan, a long-time Chicago pol and one of the most powerful Democrats in the state. In exchange, federal prosecutors say, Madigan shepherded several pieces of legislation beneficial to ComEd into law.
The misconduct began in 2011 while ComEd was wheezing under significant financial strain, and continued into 2019, prosecutors say. Madigan has not been charged with any wrongdoing yet, but the feds were delivering subpoenas to his office even as the U.S. attorney for Chicago was announcing the ComEd settlement.
In a statement of facts filed with the court on Friday, prosecutors say Madigan conspired with a former state representative who left public service to be a lobbyist for ComEd. Those two, plus ComEd’s former CEO and other senior executives or company lobbyists, worked to arrange the various favors, which included:
- Two of Madigan’s associates were hired in 2011 as sub-contractors for one of ComEd’s primary lobbyists. That lobbyist then submitted invoices to ComEd showing that all payments were in exchange for “legislative risk analysis,” when in fact some of the money went to no-show jobs for Madigan’s friends. That deal lasted until 2019.
- In 2018, ComEd’s then-CEO Anne Pramaggiore steered another of Madigan’s friends who was retiring from the Chicago City Council into a lobbying job that paid $5,000 a month. Again, said associate was hired as a sub-contractor, so ComEd’s tracking system for vendor payments wouldn’t identify the connection; it only showed that the primary lobbying firm had increased its monthly fee by $5,000 for additional services.
- Perhaps most alarming, starting in 2017 Madigan strong-armed Pramaggiore to put one of Madigan’s associates on ComEd’s board of directors. Pramaggiore first asked whether the associate would accept another part-time job that paid the same salary ($78,000), but Madigan and his cronies insisted on a board seat. Madigan’s associate was named to the board in April 2019. The man, believed to be Juan Ochoa, left the board by April 2020 — after word of the feds’ corruption probe had leaked.
Anyway, you get the idea. Other allegations include favored law firms hired to represent ComEd, youths from Madigan’s district placed in ComEd’s internship program, and so forth. Prosecutors estimate that from 2011 to 2019, payments to Madigan’s friends, all funneled through contracts for lobbying or other services, totaled $1.3 million.
Compliance Saves the Day
ComEd was charged with one count of bribery. The company agreed to the $200 million fine, plus a deferred-prosecution agreement for three years, plus full cooperation against any other individuals who might be implicated in the case. That clearly means Madigan, and probably former ComEd executives as well.
Under the federal sentencing guidelines, ComEd would typically have faced a fine of $240 million to $480 million. So how did the company land at $200 million, 20 percent below the bottom end of the range?
Strong compliance reforms, according to the DPA. Let’s take a look.
First, ComEd provided substantial cooperation, including an expedited investigation, frequent presentations to federal investigators, and disclosure of additional information “that would not have been otherwise available to the government.” Granted, ComEd did not self-report its misconduct voluntarily; all these efforts only came after the company started receiving subpoenas. Still, cooperation matters.
Second, ComEd has parted ways with the employees and third parties involved in the misconduct. This includes former CEO Pramaggiore, who abruptly retired last year from her job with Exelon last October.
Third, the company created the new role of executive vice president for compliance and audit; and hired David Glockner, a former top prosecutor for the U.S. attorney’s office in Chicago, to fill the job.
Fourth, the company implemented a new system to track any request for something of value from public officials, including hiring requests.
Fifth, it established several new compliance policies, such as no more sub-contracting of lobbying or consulting contracts, since that sleight-of-hand was how ComEd hid its no-show jobs from outside eyes. All lobbyists and political consultants who do get hired must be approved by Exelon’s chief ethics and compliance officer, Kristopher Keyes.
And sixth, the usual clause about “ongoing monitoring of all third party lobbyists … to ensure they are providing value to the business.”
Those compliance steps, taken already, brought ComEd’s penalty down to $200 million. The question now is what other compliance steps ComEd will need to take in the future to hold up the rest of its bargain with the feds.
Cooperation and Commitment
Attachment B in the deferred-prosecution agreement lists all the elements of a strong corporate compliance program that ComEd will need to maintain. They are nothing that compliance professionals haven’t heard many times before: policies & procedures, periodic review of the program, training, proper oversight, and so forth. Anyone with any FCPA experience could recite those elements in their sleep.
High-level commitment, however — that’s one element that has me wondering.
One important figure in this drama is Christopher Crane, Exelon’s CEO. Crane has been Exelon’s CEO since 2012, and since Exelon is ComEd’s parent company, he has also served on the board of ComEd since 2012. Moreover, Crane actually began his career with the business in 1998 working for ComEd.
So where was Crane during the 2010s, when ComEd was doing all these favors for Madigan? Where was he when former CEO Pramaggiore put a Madigan crony on the board right next to Crane?
If Crane didn’t know about these shenanigans — which I find hard to believe, since Crane joined ComEd in 1998 — how did he not know? ComEd is a significant Exelon subsidiary, accounting for $5.7 billion of Exelon’s $34.4 billion in revenue in 2019. ComEd is also a Chicago institution. So is Madigan. So is corruption. How could the confluence of those three things slide under Crane’s nose?
In a statement Exelon released Friday, Crane said this:
We are committed to maintaining the highest standards of integrity and ethical behavior. In the past, some of ComEd’s lobbying practices and interactions with public officials did not live up to that commitment. When we learned about the inappropriate conduct, we acted swiftly to investigate. We concluded from the investigation that a small number of senior ComEd employees and outside contractors orchestrated this misconduct, and they no longer work for the company.
That’s great, but there are still questions about leadership and oversight of ComEd. I’m curious to see how the high-level commitment promised in the DPA will intersect with questions about Crane’s role as a ComEd board member.
One detail that worries me not one bit: Glockner’s independence and ability. This is a new role, where Glockner reports directly to the audit committee and the CEO, and he has deep ties to the U.S. attorney’s office running the ComEd investigation. Yes, there’s a whiff of the regulatory-corporate revolving door here — but in this instance, that might work in favor of strong ethics and complaince. ComEd certainly needs the help.