Bribery, money laundering and racketeering may be routine in many nations, but these are serious offenses in the United States. FirstEnergy Corp. (NYSE: FE) is now in the midst of a federal bribery investigation that is tied to the Ohio House speaker and four associates being charged. The FBI has alleged that the group accepted $60 million to support a $1.5 billion government bailout of the utility’s nuclear plants.

With so many good stocks available to the public for investments, many investors immediately run away from companies that run into legal and potentially criminal issues. The market never receives bribery news well. Many investment managers and fiduciary companies even have charters against owning stocks of companies that are in trouble. One man is against anything that is tied to corruption or reputational challenges of this sort, and that man is Warren Buffett.

It seems crazy to imagine that the great Warren Buffett would dare get involved in any company that is alleged to be involved in bribery or money laundering, but there is a chance that he could become a hero in FirstEnergy and in the eyes of justice. Before thinking that Buffett’s team at Berkshire Hathaway Inc. (NYSE: BRK-A) is about to jump blindly into a judicial mosh pit, it is important to consider how and why (and when) that could even come about.

Buffett prefers to buy clean assets in businesses that are simple to understand. He also prefers to have clean management teams with solid reputations and stellar track records. Until this came to light, some may have argued that this was the case with FirstEnergy.

At the start of this week, FirstEnergy was a $41.25 stock. It closed at $34.25 on Tuesday, with 41 million shares changing hands, and it closed at $27.09 on Wednesday, with more than 135 million shares traded. This is not just individuals selling the stock.

As far as any “Buffett Deal” here, the first consideration is that there is probably no way that Buffett and his team would jump in immediately with a high premium bid right at the onset of this storm. More information will need to come to light, but Buffett has been opportunistic during recessions with financings in distressed companies in the past. Buffett and his team also know the utility world quite well, and his past investments have been preferential to the regulated utility segment.

Before counting Buffett out, note the speculation in 2019 that Berkshire Hathaway would consider buying the much more troubled PG&E Corp. (NYSE: PCG). That never seemed to be worthy speculation, as PG&E has a very sketchy history, it is governed in California under rules that other utilities want to avoid, and it is a high-tax state. On top of that, PG&E will not be able to do anything to prevent earthquakes, massive winds and forest fires. It already has exposure out there in PacifiCorp. Berkshire Hathaway eventually put that speculation to bed by saying it does not want the wildfire risks.

FirstEnergy has a market cap of less than $15 billion after the drop in recent days, and that is a loss of more than one-third of the entire equity value of FirstEnergy’s stock. The utility’s dividend yield of 5.7% may now even look unsustainable. Its earnings per share of $2.58 in 2020 and its consensus estimates of $2.48 per share in 2020 and $2.63 in 2021 are all currently irrelevant based on this scandal.

What Buffett would try to do in this case is to ascertain what he feels may be a “normalized” earnings per share, and then he would discount the numbers based on the reputational damage. Buffett looks well beyond simple price-to-earnings ratios, but the utility sector is now littered with companies valued at 20 times expected earnings. Buffett has also complained about the cost of acquiring companies outright in the recent past, but now we are in a recession and some assets are much cheaper than they used to be.

As for “clean and simple” companies and bankruptcies, the bankrupt Texas utility called Energy Future abandoned a $9 billion deal with Buffett in recent years. That would leave Buffett and his team potentially in the running among the less-than-clean categories.

Berkshire Hathaway is currently spending about $4 billion to buy natural gas transmission and storage assets from Dominion Energy Inc. (NYSE: D). Including the assumption of debt, the deal totals almost $10 billion. It’s Berkshire’s first major purchase since the coronavirus pandemic and subsequent market collapse in March.

Berkshire Hathaway had $137 billion in cash as of its last meeting, and one issue that would be a worthy argument is that this might not be large enough to move the needle for a company that is worth nearly $500 billion and is already the largest conglomerate.

Berkshire Hathaway Energy’s MidAmerican Energy offers electric and natural gas services in Iowa, Illinois and South Dakota, and it has natural gas service in Nebraska. BHE also offers electric services to roughly 90% of the state of Nevada, and its Northern Natural Gas unit has a natural gas pipeline that sells to 81 utilities stretching from Texas all the way up to Iowa, Minnesota and Wisconsin.

FirstEnergy serves roughly 6 million customers in the Midwest and Mid-Atlantic regions. It has 10 regulated electric utility and distribution operations in Ohio, Pennsylvania, New Jersey, West Virginia and Maryland.

While it likely would be some time before Buffett would step in, if he acted as a white knight of sorts, he could actually help repair the reputational damage that has been caused here. He also could avoid any of the problems related to this scandal in the future by saying “We were the ones who came in and cleaned this mess up.” It is likely that the legal jurisdictions that are involved also would be happier to be dealing with new people who have impeccable reputations.

One last reason that Buffett would want to let the dust settle here is that there will be massive class-action suits against FirstEnergy. FirstEnergy no longer has Elliott Management to deal with, but the utility will be spending a lot more time, money and energy on dealing with legal cases. Credit ratings agency S&P just placed FirstEnergy on CreditWatch for a potential downgrade, which is expected to be resolved “in the coming months” as additional information disassociates or implicates the company in the alleged racketeering activity.

FirstEnergy’s announcement on Tuesday was very short on this matter but confirmed receiving subpoenas in connection with the investigation surrounding Ohio House Bill 6. It said, “We are reviewing the details of the investigation and we intend to fully cooperate.”

FirstEnergy shares traded over 4% at $28.30 Thursday morning, and they now have a 52-week range of $22.85 to $52.52.

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