Bribery case snares key East Valley players - SanTan Sun News SanTan Sun News

Bribery case snares key East Valley players

June 22nd, 2017 development
Bribery case snares key East Valley players

By Gary Nelson

After years of shadowy suggestions that something might be rotten at the Arizona Corporation Commission, the first indictment boils down to something most people can understand: A bald-faced case of quid pro quo bribery.

The indictment, of course, is only a list of charges that must be proved in court by federal prosecutors.

But it describes in detail a pattern of alleged criminal conduct in 2011 and 2012 involving prominent East Valley political and business figures – and is the latest allegation of wrongdoing by a troubled real estate developer and state regulatory officials.

A federal grand jury handed down the eight-count indictment on May 23.

It asserts that developer George Johnson bribed Gary Pierce, a former Mesa legislator and member of the Arizona Corporation Commission, in order to obtain favorable votes on rate hikes for his water and sewer company serving Johnson Ranch, southeast of Queen Creek.

Pierce’s wife, Sherry, and prominent Republican lobbyist Jim Norton were indicted as well.

Prosecutors said Johnson funneled $31,500 through Norton to Sherry Pierce, under auspices of a sham “consulting” job, in exchange for her husband’s votes on behalf of Johnson.

The indictment also alleges that Pierce was to have received money from Johnson to buy land valued at $350,000, but it does not reveal whether that purchase ever was consummated.

Sherry is the $58,000-a-year deputy district director for U.S. Rep. Andy Biggs, a Republican who previously represented Gilbert in the legislature. Previously, she held that job for retired U.S. Rep. Matt Salmon, a Republican from Mesa.

Biggs said through his spokesman he has suspended Sherry Pierce without pay.

The spokesman noted the case involves alleged acts that are six years old and that “they are not in any way related to her current position.”

The defendants, through their attorneys, have denied the allegations, which appear to be based largely on information provided by an unnamed, unindicted co-conspirator mentioned prominently in the indictment.

Ivan Mathew, an attorney for Norton, said in a statement: “The motivation behind these allegations will become transparent when the identity of the ‘unindicted co-conspirator’ is revealed.”

Regulators in turmoil

There is no way to tell whether that motivation is connected with recent turmoil at the Arizona Corporation Commission, a five-member elected panel that regulates utilities and other businesses.

Gary Pierce served on the commission from 2007 through the end of 2014, including a stint as chairman from January 2011 through 2012 – the period of alleged illegal activity cited in the indictment.

In 2015, the FBI opened an investigation into the role that he and others may have played in the 2014 election that decided two seats on the corporation commission.

A whistleblower at the commission had alleged wrongdoing involving campaign contributions from Arizona Public Service, which supplies electricity to wide swaths of the Valley and is regulated by the corporation commission.

During that 2014 election, an estimated $2.2 million in “dark money” – campaign contributions from unidentified sources – is believed to have played a big role in the election of two pro-business Republicans.

In addition, one of the defeated Democratic candidates in the 2014 election, Sandra Kennedy, had publicly aired concerns that APS sought favorable action from the corporation commission by contributing to the campaign of Pierce’s son Justin, who had represented Mesa in the Legislature and was running that year for secretary of state.

Gary Pierce denied that allegation and investigators never filed charges in connection with it.

But during his tenure on the commission, Pierce developed a reputation as one of APS’ biggest supporters, and media reports in 2015 suggested he had formed inappropriately close relationships with its executives.

Apart from that, the corporation commission for the past several years has been one of Arizona’s most troubled public entities, beset by conflict-of-interest allegations and concerns over dark money in commission elections and decisions.

These kinds of contributions have been legal ever since a 5-4 U.S. Supreme Court ruling in 2010.

That decision, commonly called Citizens United, said corporations, labor unions, nonprofits and other associations cannot be prohibited from attempting to influence elections via “independent expenditures” – money spent separately from regular political campaigns.

Critics of the decision have said it greatly enhanced the ability of special interests to sway public policy in their favor.

Jim Norton, the lobbyist who was indicted along with Pierce, is managing partner of Axiom Public Affairs, which he formed in 2015 in association with East Valley political operative Sean Noble and several others.

Noble has been a national player in distributing hundreds of millions in independent expenditure money from conservative and corporate sources, most notably billionaire brothers Charles and David Koch.

Troubled developer

Over the years, the other key player in the indictment, George Johnson, has had his own set of problems.

He has built homes across the East Valley, most notably in the development southeast of Queen Creek that bears his name. He bought the first chunk of land for Johnson Ranch from the Arizona Land Department in the mid-1990s.

Water for Johnson Ranch is supplied by Johnson Utilities, owned by the developer himself. Johnson Utilities has repeatedly been cited by regulators for violations ranging from poor water quality to operating new wells and pumping groundwater without approval.

Johnson Utilities is the focal point of the federal indictment.

It alleges that, contrary to corporation commission staff recommendations, Pierce advocated increasing Johnson Utilities’ “rate base” by more than $18 million. The measure, which increased customers’ rates, was supported by a majority on the commission.

Pierce also pushed for a provision to allow Johnson to pay his personal income taxes directly from money paid by his utility customers. A commission majority also eventually supported that policy change.

The owners of some small utilities in Arizona have argued in favor of that tax break because large, corporate-owned utilities fold their tax expenses into their rates. Consumer advocates have objected to the practice.

Johnson’s most notorious run-in with the law came in 2005.

He faced a multi-count civil action from the state attorney general in connection with his proposed developments in Pinal and Apache counties. Johnson was accused of illegally bulldozing state and private land, destroying archaeological sites and native plants, polluting several waterways and causing a disease epidemic that killed at least 21 rare Arizona desert bighorn sheep.

Many of the violations were in connection with what Johnson had hoped would be a 175,000-resident city called La Oso Ranch in Pinal County. That proposal eventually collapsed amid a storm of opposition from neighbors, environmentalists and others.

In 2007, Johnson agreed to settle the state’s claims for $12.1 million, against damages that the state estimated at $200 million.

In response to last month’s indictment, Johnson told the Arizona Corporation Commission he is stepping aside from managing his utility company in order to defend himself.

– Howard Fischer of Capitol Media Services contributed to this story.


Photo credit: George Johnson and Gary Pierce/Special to SanTan Sun News

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