Former Chairman of the Arizona Corporation Commission Gary Pierce and water company owner George Johnson, among others, were indicted in federal court on charges of bribery, conspiracy and fraud.
Former Chairman of the Arizona Corporation Commission Gary Pierce and water company owner George Johnson were indicted this week in federal court on charges of bribery, conspiracy and fraud.
The charges filed in U.S. District Court on Tuesday said Pierce approved higher rates for Johnson Utilities in the East Valley and Pinal County in exchange for $31,000, which the company funneled to his wife.
Also named in the eight-count indictment were Sherry Pierce and lobbyist Jim Norton, who the indictment said “agreed to act as a conduit” between Johnson and Gary Pierce.
The indictment also describes a plan for Pierce to buy a $350,000 land parcel with funds that actually were coming from Johnson, though the indictment does not indicate that transaction was completed.
Pierce voted in 2011 to allow a rate increase for Johnson Utilities that the staff at the Corporation Commission opposed, and he voted in 2013 for a controversial change that allowed the utility to raise customer rates to pay the personal income tax of the company owners. Both hikes were approved by majority votes of the commission.
Other water companies subsequently filed for similar increases allowing the collection of their owners’ income taxes through utility rates.
Norton, a managing partner at Axiom Public Affairs, wields considerable influence at the state Capitol, where he lobbies for business interests. He also has a strong personal relationship with Gov. Doug Ducey, whom he has known since college. Photos of the two appear on Norton’s Facebook page.
Neither Pierce nor Norton immediately responded to The Arizona Republic’s request to discuss the indictment. Johnson declined to comment.
MORE: Read the indictment
The indictment said Norton, then working for R&R Partners, was offered the opportunity to buy land for Pierce for $350,000, using Johnson’s money.
The plan involved a co-conspirator, who was not named or indicted, who charged Johnson $6,000 a month to act as a consultant. That co-conspirator would give Sherry Pierce simple tasks and have her submit monthly invoices of $3,500 from November 2011 through August 2012, the indictment said.
“The purpose of this consulting arrangement was to conceal the direct payment of funds by defendant George Harry Johnson to defendant Gary Leonard Pierce,” the indictment said. This was done “in order to hide the conspiracy and scheme to defraud,” the indictment said.
It was not known whether the indictments grew out of that investigation.
The indictment is another black eye for the regulatory body that sets utility rates and policies in Arizona. The commission’s former chairwoman, Susan Bitter Smith, resigned amid a conflict of interest controversy in 2015. Former Chairman Bob Stump was involved in a dispute regarding text messages he deleted and therefore couldn’t be provided as part of a public-records request, and two Republicans elected in 2014 have been accused of being helped in their campaigns by the state’s biggest utility, Arizona Public Service Co.
The indictment still was a surprise to some with close ties to the organization, including Paul Walker, who has represented several companies with rate cases at the commission.
“This constant stream of problems coming out of the Corporation Commission I hope raises the interest of the Legislature and governor and voters to really start to look at whether we want to continue to elect people to the Corporation Commission, or follow the lead of many states and have them appointed and confirmed by the Legislature,” Walker said Thursday.
Gary Pierce: Served on the Corporation Commission from 2007 to 2014, including as chairman. Also served as a majority whip of the Arizona House of Representatives and as a Yuma County supervisor. He is a former teacher and business owner. Among his more controversial votes on the commission was the 2013 decision to begin charging a special monthly fee to solar users for APS. It was among the first of such charges in the country.
Jim Norton: The lobbyist has represented myriad clients with his current partners at Axiom Public Affairs and with R&R Partners previously. Active clients include the Arizona Chamber of Commerce and Industry, city of Phoenix, APS, Arizona Auto Dealers Association, Arizona Coyotes and Raytheon Co., according to state records.
George Johnson: The owner of Johnson Utilities has been involved in several high-profile matters considering the small size of his utility, which has about 20,000 customers. Last year state environmental regulators warned that water from his company was unsafe for infants. Johnson also was involved in a 2007 record settlement with the state for $12.1 million for environmental damages. A report earlier this year said the utility ranked No. 2 in violations among the state’s 10 largest water systems with at least one violation.
Sherry Pierce: The wife of Gary Pierce has her own political connections, in addition to their son, Justin, who served as a state representative and unsuccessfully ran for secretary of state in 2014. She served as the deputy district director for former U.S. Rep. Matt Salmon and holds that same position today for U.S. Rep. Andy Biggs.
Republic reporter Yvonne Wingett Sanchez contributed to this article.
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