Utility Regulator Bribery

Former Arizona utility regulator Gary Pierce and his wife, Sherry, leave federal court after being arraigned on bribery and fraud charges June 7, 2017, in Phoenix. Pierce was accused of accepting payments from a water company owner in exchange for favorable treatment in a utility rate case.

PHOENIX — Gary Pierce was doing political work, at least indirectly, for the owner of a Pinal County water and sewer company even as he was serving on the Arizona Corporation Commission which regulates utilities, according to emails written by his wife, Sherry.

The disclosure came in federal court Thursday as jurors hearing a fraud-and-bribery case got to Sherry Pierce’s emails written to Kelly Norton.

Kelly Norton’s husband, Jim, was lobbying for George Johnson and the water and sewer company that bears his name at the time. And Kelly Norton said it was Johnson who, in exchange for giving her a contract for $6,000 a month, required she pay $3,500 of that to Sherry Pierce.

Federal prosecutors contend that the consulting contract with Sherry Pierce was really a sham, designed to funnel money from Johnson through Kelly Norton and Sherry Pierce to Gary Pierce in exchange for his favorable votes on matters affecting Johnson Utilities at the commission. Prosecutors also say that Gary Pierce was aware of the fact that the money coming to his wife originated with Johnson.

But Thursday’s testimony goes a step beyond, with the emails saying some of the work Sherry Pierce was supposed to be performing for that $3,500 monthly fee she was getting from Johnson was actually being done by her husband, all while he was serving on the commission that regulates utilities and voting on matters affecting Johnson Utilities.

For example, one email from Sherry Pierce concerned efforts by Johnson to set up a nonprofit organization that could put money into political campaigns, but in a way to legally avoid having to disclose the true identity of donors. The goal of putting together such a “dark money” committee, Kelly Norton said, was “to support candidates that are running for the Arizona Corporation Commission.”

In her email, Sherry Pierce said her husband helped her with that chore.

Another email involved putting together a memo about the powers and duties of the Arizona Corporation Commission.

“Gary emailed this to me last night while I was working on Christmas cards,” Sherry Pierce wrote to Kelly Norton.

There was another email that Sherry Pierce wrote to Kelly Norton about an updated list of contacts at the commission Sherry was preparing.

“I’m still going to have Gary check over the list again today to see if he has any other changes or revisions,” Sherry wrote in her email.

And finally there was what Kelly Norton said was a document being prepared of corporations that could be contacted to contribute to the nonprofit that would put money into political races. Asked by prosecutors who was working on that, she said, “Sherry, Gary and me.”

Kelly Norton said there were other instances where Gary Pierce was providing input to Johnson about who he should back for Pinal County supervisor.

But evidence that Gary Pierce was doing work for Johnson actually could work against prosecutors who are trying to prove that he is guilty of accepting a bribe.

In this case, prosecutors say that the reason Johnson created a method of getting money to the Pierces — $31,500 in all through the contract with Sherry Pierce — was to secure his vote on two issues before the commission in 2011 through 2013.

One was a change in policy, championed by Gary Pierce, to allow the owners of companies like Johnson Utilities to pass along the costs of their personal income taxes to their customers. The other was a vote by the commission increasing the book value of Johnson Utilities, a move that entitled the company to increase its rates.

But defense attorneys say that federal bribery laws do not apply when actual work is performed for a payment. And if jurors believe that both Pierces were compensated by Johnson for things they actually did, it may be difficult to get a conviction.

That also could let Jim Norton, who was indicted for his role in helping to arrange the plan through Kelly Norton’s consulting firm to get Johnson’s money to Gary Pierce, off the legal hook.

Kelly Norton was never charged for her role in the scheme. She agreed to testify for prosecutors in exchange for immunity.

To this point, Kelly Norton has been questioned only by prosecutors. The four attorneys for the four defendants will get their chance on Tuesday.

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