Lawmakers approve bill allowing businesses to object to ACC subpoenas for documents

PHOENIX — State lawmakers are moving to curb the ability of regulators to seek documents from some private companies.

SB 1145, given preliminary House approval Monday, would allow any company that gets a subpoena from the Arizona Corporation Commission to object to it and challenge it in court.

It also would allow the company to claim that some of what the commission wants is a trade secret.

Commission lobbyist Nick Debus said that could result in delays of months, if not longer, in shutting down frauds and schemes that are taking money from Arizona residents.

More significant, Mark Dinell, the commission’s securities director, said it effectively gags his agency. “It stops us from warning the public if something is going wrong,” he said.

Rep. Pamela Powers Hannley, a Tucson Democrat, sided with the commission, saying the agency “has been doing a good job for the most part.” She worried about “unnecessary delays” in curbing the activities of bad actors.

But the majority agreed with Rep. Travis Grantham, R-Gilbert, who said some curbs are necessary.

“We have to be very careful about the power we give a commission to just reach into people’s lives and take personal property from them,” he said.

The legislation exists because of Timothy and Stacey Wales, the owners of Kadima.Ventures, who told lawmakers about the multi-year fight they have had to shield their records from the commission.

More significantly, they said they have no investors, which should make their business interests off-limits to the commission’s securities division, which is seeking the documents.

Dinell, whose agency is supposed to protect investors from fraudulent schemes, provided lawmakers with no specifics of the nature of the inquiry.

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As to the claim the commission has no authority, Dinell said Timothy Wales refused to tell investigators whether or not he had investors.

“He took the Fifth Amendment, which is his right,” Dinell told lawmakers.

According to the company’s website, the firm is involved with the development and release of new technologies, marketing, software development and consulting.

Timothy Wales told lawmakers he has about 20 employees and anywhere from 100 to 190 independent contractors. And he told them they need to curb the commission’s powers.

“There’s zero oversight,” he said.

“We’re just the first one to stand up to them.”

And he said the commission has been sneaky: He said the subpoena was sent to the firm in a FedEx box listed as coming from someone in Alaska.

Dinell did not dispute that.

He said subpoenas are normally sent by certified mail. When people refuse to accept, Dinell said, they are served by commission law-enforcement personnel.

And if that fails, Dinell said the commission resorts to other methods.

The measure now needs a final roll-call vote in the House. The Senate already has approved virtually identical language.