Charges hint at big scandal
Indictment alleges major players in power politics engaged in quid pro quo to raise some water rates
As the week moved gently toward the Memorial Day holiday, a volcano erupted in Arizona politics on Thursday with allegations that Arizona state government has been deeply corrupted. If those allegations prove true, the Arizona Corporation Commission has become a black market for selling votes.
On Friday, reporters were tipped off that federal prosecutors have brought charges against former Corporation Commissioner Gary Pierce, water-company owner George Johnson, lobbyist Jim Norton and Pierce’s wife, Sherry.
The four accused are presumed innocent until proven guilty.
They face serious charges that they ran a quid pro quo scheme to raise rates on East Valley and Pinal County water customers of Johnson Utilities in return for $31,000 for Gary Pierce.
The indictment also outlines a scheme for Pierce to buy a $350,000 land parcel with funds from Johnson, according to Republic reporter Ryan Randazzo. However, it’s not clear that transaction ever went through.
The Corporation Commission has been mired in turmoil for years amid revelations that one regulator, Pierce, was being questioned by the FBI, two others were elected with “dark money” from a utility they regulate, and two more were entangled in either conflicts of interest or potentially unlawful communication with utilities.
But none of those controversies pack near the explosive power of Friday’s indictment, which raises the specter of high crimes and possibly prison for those involved.
What is also remarkable about the news is that it comes at a time when the waters had stilled at one of the most embattled arms of state government.
For the past several years, the Corporation Commission has been ground zero for a bitter conflict between traditional power companies and solar upstarts that eventually gave way to agreement and brighter skies over the commission. The calm is over. The commission is once again gripped with scandal.
The indictment focuses tightly on a 2011 vote Pierce cast to green-light a rate increase for Johnson Utilities.
The Corporation Commission staff opposed that rate hike.
In 2013, Pierce also voted for a controversial change that allowed the water company to increase customer rates to cover the personal income tax of the firm’s owners.
A commission majority approved both increases.
According to the indictment, Norton (the lobbyist) “agreed to act as a conduit” between Johnson (the water-company owner) and Pierce (the regulator) “and in so doing was offered the opportunity to purchase land valued at $350,000” for Pierce.
Further, that arrangement, according to prosecutors, “caused an unindicted co-conspirator to act as a consultant for” Johnson “for approximately $6,000 per month plus expenses” and to hire Sherry Pierce “for approximately $3,500” a month from approximately November 2011 through August 2012.
“The purpose of this consulting arrangement” according to the indictment filed Tuesday in U.S. District Court, “was to conceal the direct payment of funds by Johnson to Pierce.”
Given all the turbulence at the Corporation Commission, the governor and current commissioners need to reassure the public they are taking steps to ensure the commission operates in an ethical and lawful way.
Further, utilities that have aggressively been working to shape the election of commissioners need to understand how that activity looks to an increasingly skeptical public.
The seriousness of this week’s indictment should be a powerful warning that the stakes of trying to preordain or rig the outcomes of commission business have just been raised.
If these charges prove true, we are witnessing one of the biggest scandals in the history of Arizona state government.
Let everyone be on notice.