State can freeze assets of former utility regulator who allegedly received $4.3 million bribe.

State can freeze assets of former utility regulator who allegedly received $4.3 million bribe.

The state can freeze the assets of former utility regulator Samuel Randazzo, the Supreme Court of Ohio ruled today.

Randazzo, the former Public Utilities Commission of Ohio (PUCO) chairman, allegedly accepted $4.3 million from FirstEnergy Corp. As part of a federal public corruption case, FirstEnergy essentially admitted to the U.S. Attorney’s Office that it made a payment to influence Randazzo.

The Supreme Court unanimously reversed a Tenth District Court of Appeals decision, which found a trial court too hastily agreed to restrict Randazzo’s access to his bank and brokerage accounts. The Supreme Court reinstated a Franklin County Common Pleas Court order to prevent Randazzo from moving money out of the accounts.

Writing for the Court, Justice R. Patrick DeWine explained the Tenth District took issue with the way the trial court granted the Ohio attorney general’s request to freeze Randazzo’s assets before notifying Randazzo. After Randazzo was granted a hearing to oppose the state’s actions, the trial court upheld the “attachment orders” the attorney general sought. The Supreme Court explained that because Randazzo obtained a hearing after his assets were frozen, Randazzo could not object to the trial judge’s earlier decision to freeze his assets without a hearing. 

Chief Justice Sharon L. Kennedy and Justices Michael P. Donnelly, Melody Stewart, and Jennifer Brunner joined the opinion. Second District Court of Appeals Judge Ronald C. Lewis, sitting for Justice Joseph T. Deters, also joined the opinion.

While agreeing with the decision to freeze Randazzo’s assets, Justice Patrick F. Fischer issued a concurring opinion to voice his concern with the attorney general’s office having incorrectly followed the law in notifying the banks and brokerage accounts that the state had won a judgment against Randazzo. The attorney general’s office had blamed the clerk of courts for forcing the state to use an incorrect form to notify the financial institutions. Justice Fischer wrote the attorney general could have acted to ensure the office properly followed the law.

Federal Corruption Probe Prompts State Legal Action
In 2020, the U.S. Attorney’s Office announced it was charging FirstEnergy and others, but not Randazzo, for bribery and corruption. The Ohio Attorney General’s Office followed by filing a civil lawsuit against FirstEnergy and others for violating the Ohio Corrupt Practices Act. In February 2021, the civil case was stayed as the pending federal criminal cases proceeded.

During the criminal proceedings, FirstEnergy entered a deferred prosecution agreement with the U.S. attorney, and as part of the agreement, the company revealed that just weeks before Randazzo was named PUCO chairman, it paid Randazzo and his consulting company $4.3 million. Based on the release of the information regarding Randazzo, the state attorney general amended its lawsuit to add Randazzo.

Court Freezes Accounts
About the same time that the attorney general added Randazzo to the lawsuit, the office used an ex parte proceeding to seek prejudgment attachments of Randazzo’s accounts without notifying Randazzo. An attachment allows a court to seize a person’s property to pay a court judgment. A prejudgment attachment permits the seizure before a judgment in the case is issued.

The attorney general told the trial court that there was probable cause the state would win a judgment against Randazzo. It argued that the FBI raided Randazzo’s home in late 2020, shortly after Randazzo resigned as PUCO chairman, and FirstEnergy admitted to bribing Randazzo in its deferred prosecution agreement. The attorney general indicated that after the FBI raid, Randazzo transferred a house valued at more than $500,000 to his son for free; sold two Florida properties for $4 million; and sold two Ohio properties for about $800,000.

The attorney general claimed there was a “present danger” that Randazzo would transfer assets to make them unreachable, should the state win a judgment against him. The trial court granted the attachment orders. As part of the procedure, the trial court issued garnishment orders, which the attorney general was required to present to the banks and brokerage company, instructing them to freeze Randazzo’s accounts.

Former Regulator Opposed Court Orders
Once the trial court granted the ex parte attachment order, it was required to notify Randazzo and offer him a hearing on the matter. Randazzo sought to vacate the attachment and garnishment orders. The trial court held a hearing on Randazzo’s request at which Randazzo offered no evidence to dispute the allegations but instead presented legal theories for why the attachment orders were improper.

According to Randazzo, the state had to prove it would suffer an “irreparable injury” if the ex parte freeze on his assets had to wait until after a hearing. He argued the state failed to prove it would be injured. Randazzo also argued the garnishment orders were improper because the documents indicated that the state already won an $8 million judgment against Randazzo, even though proceedings to obtain a judgment were just starting.

At the hearing, the state responded to Randazzo’s arguments and notified the court that Randazzo wired millions of dollars from his brokerage account to an out-of-state law firm. The trial court denied Randazzo’s request and let the attachment orders stand.

Randazzo appealed to the Tenth District. That court rejected several of Randazzo’s arguments but agreed that the attorney general failed to meet the “irreparable injury” requirement to use an ex parte proceeding to get the orders. The Tenth District vacated the trial court’s decision.

The attorney general appealed to the Supreme Court, which agreed to hear the case. The Supreme Court also agreed to stay the Tenth District’s decision, which allowed the attachment orders to remain in effect until it resolved the questions presented on appeal.

Supreme Court Analyzed Attachment Law
Justice DeWine explained the process under state law that allowed the attorney general to seek an attachment order for Randazzo’s property prior to winning a judgment. Under R.C. 2715.043(B), the attorney general was required to prove two things. First, the office must demonstrate probable cause that it would likely win a money judgment from Randazzo and that the property it sought to attach would be used to pay the judgment. Then the state had to show one of 11 grounds for attachment stated in R.C. 2715.011(A).

The attorney general offered three of the 11 possible bases for attachment, claiming that Randazzo would convert the property into money to place it beyond the reach of his creditors; that he is or was going to dispose of property to defraud his creditors; and the money sought by the state was obtained by Randazzo through crime or fraud.

The opinion explained that generally a defendant is given notice and an opportunity to be heard before a court grants a prejudgment attachment. But under R.C. 2715.041, the attorney general could use the ex parte proceeding to obtain the orders unilaterally if there was (1) probable cause the state would win and (2) the state would suffer irreparable injury if the order was delayed until Randazzo could have a hearing.

To find irreparable injury under R.C. 2715.045, the opinion explained that the trial court must conclude that the attorney general proved there is a “present danger that the property will be immediately disposed of, concealed, or placed beyond the jurisdiction of the court,” or the “value of the property will be impaired substantially” if the order is delayed until after a hearing.

The opinion stated that the ex parte order for the attachment does not qualify as a final order that can be appealed. Randazzo’s remedy for an alleged improper ex parte order was to request a hearing, which the trial court granted him, the Court explained. Once the hearing was granted, the only issue that could be appealed to the Tenth District was whether the trial court wrongly refused to vacate the order.

Because the Tenth District based its decision on a matter that could not be appealed, its ruling was invalid, the Court stated. The Court noted that Randazzo failed to establish any other reason why the trial court wrongly granted the attachment orders.

Supreme Court Addressed Faulty Procedure
Randazzo also claimed the procedure to freeze his accounts was improper because the attorney general sent garnishment forms saying the state already obtained a judgment against him. The garnishment orders were on standard forms that are used for the typical notifications after a court judgment is issued. The clerk of courts did not have a separate prejudgment garnishment form, the attorney general explained.

The Court found that Randazzo failed to prove he was harmed by the use of the improper form and that he did not explain how anything different would have occurred had the forms been worded differently.

“The state acknowledges that it didn’t precisely follow the garnishment procedures for prejudgment attachments laid out in R.C. 2715.091. But it’s hard to see how Randazzo suffered any resulting injury because the assets in Randazzo’s accounts would have been frozen regardless,” the opinion stated.

State Should Have Correctly Garnished Fund, Concurrence Maintained
State law instructs how to obtain a prejudgment garnishment, Justice Fischer noted in his concurring opinion. Unless a state law is found to be unconstitutional, “the judiciary is bound to follow it, even if it disagrees with the policies underlying that statute or feel that complying with it would be onerous,” he wrote.

He wrote the state must follow the law, and the failure of the clerk of courts to have the correct form is not an excuse. He wrote there were “avenues available” for attorney general to correct the error rather than using incorrect forms, and that in the future, courts should ensure that parties seeking garnishment orders follow the law.

2022-1286. Yost v. FirstEnergy Corp., Slip Opinion No. 2024-Ohio-101.

View oral argument video of this case.

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