Four plead innocent to charges in utility-based bribery case

PHOENIX — A former utility regulator, his wife, a water company owner and his lobbyist all pleaded innocent Wednesday to charges of bribery and fraud.

Gary Pierce denied taking money through his wife, Sherry, for his vote on two issues before the Arizona Corporation Commission while Pierce was chairman. The money, according to the federal indictment, came from George H. Johnson, owner of the utility company that bears his name, who prosecutors said benefited financially from the commission action.

The money, the indictment says, was funneled through Jim Norton who was Johnson’s lobbyist.

U.S. Magistrate John Boyle allowed all four to remain free without bond. But he did prohibit them from traveling outside the country without permission of court officials, ordering them to surrender any passports or passport cards.

Boyle set trial for Aug. 1 before Judge John Tuchi, though that easily could be delayed with various pretrial motions and hearings.

Pierce and his wife sped past reporters, hand in hand, after the hearing.

Ashley Adams, her lawyer, told reporters the couple has served Arizona in various public capacities for the past 20 years.

“They are going to vigorously defend these allegations until they’re vindicated or their good name is cleared,” she said.

Norton, accompanied by press aide Matt Benson, stopped briefly to issue a statement.

“I have a strong belief in the judicial system,” he said. “I am looking forward to the full facts of this case coming out and clearing my reputation and my name.”

Johnson had nothing to say to reporters.

One of the first mysteries that could be unveiled ahead of the trial is who is the “unindicted co-conspirator” mentioned in the indictments.

According to prosecutors, this person set up a consulting firm and bank checking account, billing Johnson about $6,000 a month plus expenses.

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“In order to hide the conspiracy and scheme to defraud, the unindicted co-conspirator, while acting under the direction of defendants Johnson and Norton, asked Sherry Pierce to submit monthly invoices for approximately $3,500,” the indictment says. That person gave Sherry Pierce “simple tasks some of which were performed and reviewed by defendant Gary Pierce.”

Sherry Pierce was paid by the unindicted co-conspirator through a separate checking account, the government charges.

What makes all this relevant is that Gary Pierce proposed and pushed through a change in commission rules that allow companies such as Johnson Utilities to pass on the cost of owners’ personal income taxes to ratepayers. That 3-1 vote, with one abstention, was a reversal of commission policy.

The indictment also says that Pierce separately pushed to allow Johnson Utilities to add more than $18.2 million to its “rate base,” also reversing a prior decision.

That rate base is significant since utilities get to set their rates on a reasonable rate of return on their property. A bigger rate base means higher charges to customers.

The indictment now has the current Arizona Corporation Commission looking not only at the change in tax policy but also the finances of Johnson Utilities.

Commissioner Andy Tobin wants the go-ahead from his colleagues for a full audit and review of the company, including whether the rates that it has previously been allowed to charge should be adjusted.

A vote on that is set for next week.

The other open question is what led prosecutors to these particular votes.

It was known the FBI last year questioned Pierce. But he told Capitol Media Services at the time their questions were about the 2014 election in which his son Justin was running for secretary of state.

The younger Pierce had benefited from more than $500,000 that was spent on his behalf by the Free Enterprise Club, an organization that says it does not need to list donors. Wil Cardon, also a candidate in that Republican primary, charged publicly that the elder Pierce was using his position on the commission to get financial support for his son’s campaign from companies regulated by the panel.

Both the younger Pierce and Cardon lost the primary to Michele Reagan.