Whistleblower alleges wrongdoing at Arizona agency

A staffer at the Arizona Corporation Commission alleges he was offered a promotion if he kept silent about a Republican regulator's behind-the-scenes activities.

That allegation is one of several against former Commissioner Gary Pierce, who retired at the end of December, in a seven-page whistleblower letter written by a former executive assistant, who is now listed as a supervisor at the commission.

The letter was sent last Friday to the Corporation Commission and the Arizona Attorney General's office. It was obtained independently by 12 News, but did not contain the whistleblower's name. 12 News has verified the identity of the staffer who filed the complaint.

READ: Whistleblower letter

"It is with a heavy heart I make this disclosure," the whistleblower said in the letter. "With good conscience, I cannot allow certain actions to continue."

Among the whistleblower's allegations:

--Pierce helped a political operative and friend, Ron Ludders of the Conservative Business League, steer money that targeted two Democratic candidates for the commission as election day neared in 2012.

Pierce, who was commission chairman at the time, hired the retired Ludders as a six-month "intern" the next year for research and policy work. Ludders was paid $9,000, according to commission documents obtained in a public records request.

--Pierce's lunch dates with APS Chief Executive Officer Don Brandt may have violated commission rules barring conversations between commissioners and the people appearing before them in cases that set electric rates. That could potentially result in litigation over rate increases, the whistleblower said.

Pierce's appointment calendar, obtained in a public records request, shows he had 13 scheduled meetings with Brandt during his last six years in office. Seven of the meetings were in the two years Pierce was commission chair, 2011 through 2012.

"It doesn't feel right, it doesn't look good, it's shocking," said Tim Hogan. He was an attorney for the Arizona Corporation Commission for almost a decade. For the last 20 years he's been arguing before the commission on behalf of citizens.

"The fact that APS had this kind of access to at least one commissioner is troubling."

Pierce was one of APS' biggest boosters, helping to derail electric competition, cut some solar incentives and push for an end to energy-saving programs.

Along the way, Pierce and his son Justin got entangled in the dark-money controversies surrounding APS in last year's elections.

Current Commission Chairwoman Susan Bitter Smith said Wednesday the allegations will be investigated.

"We take these allegations seriously and we believe an investigation into these matters is warranted," Bitter Smith said in a prepared statement. "We are conferring with legal counsel about appropriate next steps."

12 News had been investigating some of the allegations involving Pierce before the whistleblowers' letter was filed.

"The chairman of the Corporation Commission should be and is a very important position, deserving of great respect," former Democratic Attorney General Terry Goddard said Wednesday. He reviewed the allegations in the letter.

"You don't play favorites and you don't act as a high-priced errand boy for somebody who just needs a favor," Goddard said.

Goddard cautioned that these are just allegations. But the offer of a promotion in exchange for silence, he said, "would be offering gifts for favors, and public officials definitely can't do that."

Pierce has not responded to several requests for comment over the last two days.

"I have not been bashful in my positions," Pierce said last December at his farewell speech after eight years on the commission.

"If you do what is right, no thinking person will be suspicious of your motives."

Helping Ludders 'Destroy' Democrats

The whistleblower's letter says Ludders needed urgent help filing paperwork to set up a corporation in early October 2012. Pierce directed the whistleblower to help Ludders "process the filing immediately."

The whistleblower described what Ludders said and did after the filing was done:

"(He) spoke about the coming election. Mr. Ludders said they had $186,000 in checks to destroy Commissioners Newman and Kennedy. He did so while patting the pocket of his suit jacket."

Democratic Commissioners Paul Newman and Sandra Kennedy would be defeated in the November elections by Republicans Susan Bitter Smith, and Bob Burns. (Campaign finance documents and his appointment calendar indicate Pierce played a role in running the Republicans' campaigns, through his consulting job at Mesa-based Americopy.)

News reports after the election pointed to last-minute spending of about $186,000 on mailers to help Burns, Stump and Bitter Smith. The whistleblower said he read one of those reports in December 2012 and concluded Ludders had a hand in the mailers.

Ludders said in an interview Tuesday he didn't recall saying he had $186,000 in his pocket. But he did confirm he sent out 100,000 mailers promoting the Corporation Commission candidates and other Republicans on the ballot. When I asked him where he got the money for the mailers, he said: "FreedomWorks."

I was not able to confirm a Ludders connection to FreedomWorks or any campaign finance documents connecting Ludders to the $186,000.

[UPDATE 2/20/15: A source employed by FreedomWorks in Arizona during the 2012 election cycle tells me that Ludders never received any money from the conservative advocacy group. The source, who asked to remain anonymous, said FreedomWorks doesn't get involved in state elections.]

According to the whistleblower, Pierce approached him in January 2013 with a plan to remove the top two officials at the commission's Corporations Division. The whistleblower would become deputy director. The whistleblower alleges Pierce told him:

"Commissioner Pierce indicated that if I did as I was told and if I kept secret the things that I knew I would be made deputy director of the Corporations Division. Commissioner Pierce told me an anecdote from his past about keeping secrets and the misfortunes that can befall people that do not keep secrets. I took this as a veiled threat."


The whistleblower's letter also alleges that Commissioner Bob Stump, who was chairman for 2013-14, was informed of several allegations against Pierce in September 2014.

The whistleblower's letter concludes, "To my knowledge, nothing has been done with the information I provided."

Stump said in a prepared statement Wednesday:

"I have not received a copy of the letter and so I have not seen the allegations in it. Rest assured that this Commission takes all allegations seriously and I am confident that a thorough investigation will be conducted."


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