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Exelon now warns it and ComEd are at criminal or civil risk

Crain's Chicago Business

Thursday, February 13, 2020  |  Article  |  Steve Daniels

ComEd (94)

For the first time since news broke last summer that federal investigators had subpoenaed Exelon and subsidiary ComEd in their probe of Illinois political corruption, the company is explicitly warning investors that it could be subject to criminal or civil penalties.

For the first time, Exelon is warning its investors explicitly that it and subsidiary Commonwealth Edison could be subject to criminal or civil penalties in the various federal investigations that have enveloped the energy company.

For months, Exelon has disclosed that it and ComEd received subpoenas from the U.S. Attorney’s Office for Northern Illinois into their lobbying activities and communications with state Sen. Martin Sandoval, D-Cicero, who since has pleaded guilty to taking bribes. But, until now, it said it couldn’t predict any outcome of the probe.

It also divulged that the Securities & Exchange Commission had opened an investigation into its lobbying practices.

In its SEC filing today summarizing its 2019 performance, Exelon wrote, “The outcome of the U.S. Attorney’s Office and SEC investigations cannot be predicted and could subject Exelon and ComEd to criminal or civil penalties, sanctions or other remedial measures.”

In addition, acknowledging what now has become painfully obvious in Illinois, Exelon wrote, “Any of the foregoing, as well as the appearance of non-compliance with anti-corruption and anti-bribery laws, could have an adverse impact on Exelon’s and ComEd’s reputation or relationship with regulatory and legislative authorities, customers and other stakeholders, as well as their consolidated financial statements.”

Since its last quarterly filing Oct. 31, the biggest event potentially affecting Exelon’s exposure to the wide-ranging probe of corruption in Illinois state and municipal government has been the guilty plea last month from Sandoval, who retired from the state Senate at the end of the year. The detail in the plea agreement surrounded red-light camera operator, SafeSpeed, and not ComEd or Exelon.

But Sandoval pledged to cooperate with federal authorities, meaning he must tell investigators everything he knows about the various companies he was involved with. And Sandoval is the only figure ComEd and Exelon have felt forced to identify by name as a subject of federal interest regarding the companies’ involvement with him.

Spokesmen for Exelon and ComEd didn't immediately respond to a request for comment on what had changed to prompt the new wording since its last filing.

The proceedings aren’t far enough along, however, that Exelon can estimate a potential financial impact yet.

“No loss contingency has been reflected in Exelon's and ComEd's consolidated financial statements as this contingency is neither probable nor reasonably estimable at this time,” the company said in the filing. “Management is currently unable to estimate a range of reasonably possible loss as these matters are subject to change.”

Exelon CEO Chris Crane didn’t say anything today about these developments in the company’s quarterly earnings call with analysts. He merely reiterated the company’s promise to cooperate fully and added that Exelon takes the matter “very seriously.”