Outside donors, 'dark money' influenced Ariz. races

Editor's Note: The story has been changed to accurately reflect attorney Mike Liburdi's role with outside fundraising groups. Liburdi provided legal work for the Free Enterprise Club.

Nearly 40 years ago, a small group of Arizona's most influential men ran the state's political world. They determined who ran for office, funded their campaigns and set their agenda once they won.

The Phoenix 40 included heads of the local media, legal, banking and development industries. They molded state politics in backrooms at the Phoenix Country Club and the Biltmore. Critics saw it as an exclusionary and self-dealing all-White-male club, but members said the homegrown group backed policies and politicians that moved the state forward.

As Arizona grew and prospered, the Phoenix 40's influence waned, and for 30 years no single group wielded comparable control over state politics.

With the recent advent of outside campaign-spending groups and the return of unlimited contributions, some political observers say a new era of backroom politics controlled by a small group of politically elite individuals and companies has arrived.

Some of these used outside groups to pour more than $28 million into Arizona's 2014 elections. In November's governor's race, outside groups, including "dark money" non-profits that do not disclose their donors, spent $9 million, nearly twice what the candidates themselves did.

As the Arizona Legislature begins its 2015 session this week, it's not clear what these donors hope for in return for the millions they poured into helping elect candidates from Gov. Doug Ducey to lawmakers like Rep. Eric Meyer, D-Paradise Valley, Sen. Steve Farley, D-Tucson, and Rep. Eddie Farnsworth, R-Gilbert.

But unlike the Phoenix 40, the new influencers are often not Arizonans who have lived here for generations. Some don't live in Arizona. And critics say the new crop is interested primarily in furthering a specific political ideology, a national agenda or their own bottom line, not in unifying for the state's greater good.

"People used to criticize the Phoenix 40 because it was this secretive, backroom group of self-appointed kingmakers," said former Republican Attorney General Grant Woods. "Well, they're looking pretty good now. They were people who lived here and worked here and built the community. At least we knew who they were and where they were coming from. They were Arizonans, they had a big stake in the future of Arizona.

"The money interests now dominating the political races are coming from unnamed sources who have little or no connection to Arizona," Woods said. "And it's not just happening here. It's happening in states across the country."

It's early, but the new political players have given some indication of their influence.

— Ducey had the support of many business leaders, and made cutting corporate taxes a key part of his platform despite budget problems. The deficit is projected to be $1 billion next fiscal year.

— Millionaire Scottsdale businessman Jack Biltis donated $4,300 to the campaigns of state lawmakers who later helped get Biltis' proposal to limit federal reach on the ballot as Proposition 122. Voters passed the initiative.

— APS parent company Pinnacle West routed $425,000 to a group intent on getting Republican Attorney General Mark Brnovich elected. The attorney general has review powers over the Corporation Commission and its regulation of utilities.

— Hospital companies poured money into the campaigns of Republican lawmakers who supported Medicaid expansion.

— Major donors and money bundlers are emerging with key roles in the new Ducey administration, including new chief of staff Kirk Adams. Ducey's new general counsel Mike Liburdi during the election did legal work for an outside spending group that played a key role in supporting Republican candidates in several races.

'Things got done'

In the 1970s in Arizona, organized crime was rampant, particularly land fraud.

Seeking to get a handle on that problem and others confronting the fast-growing state, Arizona Republic Publisher Eugene Pulliam in late 1974 sent letters to 37 of the Valley's most influential business leaders inviting them to a meeting at the Biltmore.

Nearly all of them came. Members included APS Chairman Bill Reilley, Valley Bank President Jim Mayer, attorney Frank Snell, construction-company owner Maurice Tanner, KOOL-TV Radio Inc. President Tom Chauncey, and Western Savings and Loan CEO Junius Driggs.

Two weeks later, the star witness in the land-fraud trial of Ned Warren Sr. was assassinated. A year after that, Arizona Republic reporter Don Bolles, who had investigated organized crime, was murdered with a car bomb.

The group, which had initially discussed transportation, education and crime, narrowed its focus to targeting organized crime. The Phoenix 40 was eventually credited with establishing a statewide grand jury and border task force to fight the flow of drugs from Mexico and toughening land-fraud laws to combat organized crime, among other things.

"What we are today, we are because of the Phoenix 40," said Governor's Office of Highway Safety Director Alberto Gutier, who has been active in state GOP politics for decades. "We all got along and things got done. At the end of the day, what was good for Arizona was good for everybody."

Members of the political machine used their money to get candidates elected, and their influence to encourage them to do what they wanted.

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"There were no campaign-finance laws, no donor disclosure," said political consultant Nathan Sproul. "It didn't take a lot of money to control the Legislature."

But it was also criticized as an old-boy network drunk with its own power and fraught with corruption.

"One of the reasons that I won the 1986 election to become the 17th governor of Arizona was my promise to take the power in government back from the Phoenix 40 and govern in behalf of all of the people," former Gov. Evan Mecham wrote in his 1998 self-published memoirs, "Wrongful Impeachment."

With the death of Pulliam, the national banks buying out locally owned banks and the booming population, the political machine faded away.

"They (the Phoenix 40) were beat up and criticized for controlling everything, and they disbanded," said O'Neil. "Near as I can tell, except in rare instances, they've been sort of a tea and marching society. Once in a while, when the Legislature does something so outrageous that it can potentially hurt the economy of the state, you'll hear from them."

The timing coincided with Arizona voters in 1986 establishing campaign-contribution limits. Then, a statewide scandal known as AzScam unfolded in 1991, sending several state lawmakers to prison for accepting bribes. In the aftermath, voters in 1998 passed a law creating the state's publicly funded clean-elections system and further limiting campaign contributions.

The Phoenix 40's waning influence left a vacuum. It was evident during the 2010 debate over immigration measure Senate Bill 1070. State business leaders seemed caught off-guard by the backlash against the state over the law, which the Legislature had passed and Gov. Jan Brewer had signed with little public involvement from the corporate community.

"The big story in this town long term is do these guys ever reassert their role in Arizona politics?" Tempe political pollster Mike O'Neill said. "They've sure been on the sidelines for 10 or 20 years."

But starting in 2010, things began to move in another direction.

The U.S. Supreme Court in Citizens United vs. Federal Election Commission allowed unions, corporations and other groups to spend unlimited amounts on behalf of candidates as long as they don't coordinate directly with the candidate. And in 2013, the state Legislature boosted campaign contributions from $488 per donor for legislative candidates to nearly $2,500.





Today's kingmakers

Emboldened by looser campaign-finance laws, a new crop of kingmakers is emerging, say political insiders. But they don't — at least so far — fit into a single category, and their motivations are yet to be fully revealed.

They include the last vestiges of the old guard, who wield influence by name and reputation. Jerry Colangelo has been mentioned as among them, as has Tucson auto dealer Jim Click.

But they are increasingly being outspent by a wealthy few individuals — from inside and outside Arizona — dumping their own dollars into campaigns, as well as an emerging group of campaign experts like political consultant Sean Noble skilled at connecting the money and the candidates.

"The people who have sunk so much money into this governor's race, I don't believe have had any interest whatsoever in the well being of the average Arizonan," said Woods, who backed unsuccessful Democratic gubernatorial candidate Fred DuVal. "Their interest is that they have free rein to continue to succeed themselves."

Noble agreed that a new crop of business leaders backing the Ducey administration is different from the old guard that held sway under Brewer.

"Where the business community was into Medicaid expansion and Common Core with Brewer's administration, it will be markedly more conservative next session because the business agenda will follow the governor's agenda," he said. "The big spenders in Brewer's political-action committee are the health-care industry. They won't be as influential."

The top donating business executives in this cycle have come from a variety of industries.

Linda McMahon, a Connecticut resident and former World Wrestling Entertainment executive, gave $250,000 to the Republican Governors Association Arizona PAC to help Ducey.

Sheldon Adelson, the Las Vegas billionaire casino mogul, donated $190,000. The money went to the Gov. Jan Brewer-backed Arizona's Legacy committee, which supported the Republican lawmakers who backed Medicaid expansion. He also gave money to the Republican Attorneys General Association Arizona Political Action Committee to help Attorney General Mark Brnovich.

Marcus Hiles, the Texas luxury-housing developer, Richard Hayne, the Pennsylvania owner of Urban Outfitters, and Christine Toretti, the Pennsylvania resident and former CEO of a land-based drilling company, each gave more than $100,000 to committees that supported Ducey.

McMahon, Adelson and Hiles seem to have no clear ties to Arizona. But all three have been major donors nationally to Republican efforts in recent years.

Other major donors are clearly local.

Randy Kendrick, the wife of Arizona Diamondbacks owner Ken Kendrick, has been among Ducey's biggest supporters. She and other family members gave more than $150,000 to committees benefiting Ducey, Secretary of State Michele Reagan, Attorney General Mark Brnovich and Treasurer Jeff DeWit.





The bundlers

There's also a completely new group gaining power: the bundlers.

These behind-the-scenes campaign experts can produce large amounts of cash for the candidates of their choice. With the elimination of campaign-contribution limits and the ability to donate anonymously through outside groups, they rose in prominence this election.

Noble is the best known of those. He's been nicknamed the "dark-money man" for the tens of millions of dollars he collected from anonymous donors and distributed to conservative political committees across the country backed by the billionaire Koch brothers.

This campaign cycle, Noble was connected to at least four non-profit campaign groups that ran ads against Ducey's opponents. Noble also supported Brnovich.

When asked whether he thinks he's a kingmaker, Noble says he doesn't know who actually drives Arizona politics these days. Perhaps as the Ducey campaign showed, he said, it's an up-and-coming group of business leaders who, unlike the Phoenix 40, aren't primarily connected to banking or development.

"Developers had a lot of control 15 to 20 years ago," he said. "And then we had the advent of Clean Elections, and dozens of people with no connection whatsoever to the business community played a role. Now, the business community again has a chance to get more of a voice at the Legislature."

But this time, he said, no single industry is leading the way.

"We're seeing a diverse set of industry and business guys," Noble said. "That's good for the state."





Buying a fight

It will take a year or two under the new executive branch and Legislature before a fuller picture develops of what the state's new kingmakers bought with their money. But clues have emerged.

Scottsdale millionaire and human-resources company owner Jack Biltis bought a fight with the feds. Biltis in 2012 spent $1.2 million trying to get a measure on the ballot to limit federal authority over states. He failed to get enough signatures.

This election cycle, he got state lawmakers to do it for him, at a much lower price.

Former Arizona Sen. Chester Crandell, R-Heber, who died in August after being thrown from his horse, introduced Proposition 122 as a referendum, which allows the Legislature to put it on the ballot without voter signatures. The proposition allows the state to determine a federal action or program is unconstitutional and then forbid the use of any state or local personnel or money to comply with that action or program.

In 2013, Biltis donated $424 to Crandell's campaign and $2,000 to the campaign of Rep. Brenda Barton, R-Payson, who was also listed as a sponsor. In addition to sponsoring the bill, Crandell pushed it through the Senate committee he chaired.

According to state campaign records, the Biltises had not been major donors in Arizona elections prior to 2013.

Earlier this year, Biltis gave Crandell's campaign another $1,885. He also donated $6,000 to Republican attorney general candidate Mark Brnovich, who will be charged with defending the law in court when a challenge arrives.

And while emerging wealthy influencers like Biltis are beginning to find their political muscle, the old-guard business community appears to be trying to regain its influence.

State Democratic Party Executive Director DJ Quinlan said it was the business community that ultimately convinced Brewer to veto the controversial Senate Bill 1062. And business leaders, particularly those in the health-care industry, added significant weight to the bipartisan coalition Brewer assembled to expand the state's Medicaid program.

Banner Health employees, for example, gave about $6,000 to each of the Republican lawmakers who supported Medicaid expansion. Expanding the program means fewer uninsured patients who may be unable to pay their hospital bills.

Business leaders were vital to Ducey's victory, praising his stance on taxes. The new governor has vowed to do everything possible to lower corporate income taxes. Even as the state faces a $1 billion budget shortfall, Ducey has defended the need for cuts to state corporate taxes.

Despite Noble's protests, Quinlan said he believes the money bundlers are the kingmakers of the moment. "It's really about somebody who can produce resources, support and more money," he said.

Former Republican House Speaker Kirk Adams, as chairman of the outside-spending group Americans for Responsible Leadership, donated $925,000 to the campaign Ducey led to kill a 2012 sales-tax-hike proposal.

Adams' group got its money from the Center to Protect Patient Rights, which was run by Noble.

Shortly after the election, Ducey named Adams as his new chief of staff.

Adams has experience with the Legislature that Ducey lacks, but critics wonder if Adams' ability to bundle money or his connections to Noble played into the decision.

Ducey has hired Mike Liburdi as his general counsel. Liburdi did legal work for the Arizona Free Enterprise Club. The outside group, which does not disclose its donors, spent more than $1 million on races, including advocating for conservative legislative candidates.

Ducey has so far provided few details on his plans. More may come in Monday's State of the State address or Friday's budget proposal. But during his inaugural speech, he did make one statement:

"The budget will not meet with general approval among special interests -- and if they did approve, I would start to worry…," he said.

Attorney Dan Barr, who successfully overturned the state's ban on marriage for same-sex couples last year, said starting this legislative session Arizonans will see more clearly how the influence of individuals and corporations shapes the state's future.

"Not enough time has gone by," Barr said. "The whole thing about transparency is who is doing what and why. And we don't know the why right now."

Republic reporters Rob O'Dell and Julia Shumway contributed to this article.

Top corporate donors

Here are companies whose employees donated the most during the 2014 campaign cycle.

Totals may be higher than reported below as data the campaigns provide to the Arizona Secretary of State's Office is full of spelling errors, and abbreviations or different corporate names were sometimes used during reporting. Thousands of donors also did not report their employer. These amounts do not include money employees may have given to outside committees that don't have to disclose their donors.

— YAM Worldwide: Employees donated more than $2.35 million. The company oversees the entrepreneurship operations of GoDaddy founder Robert Parsons. Most of it went to Better Leaders for Arizona, a committee that backed unsuccessful governor candidate and former GoDaddy executive Christine Jones, and the Republican Governors Association Arizona Political Action Committee.

— Arizona Public Service Co.: Employees of the utility company donated more than $756,000 to the political-action committee of parent company Pinnacle West, which spread its money among Democratic and Republican parties and candidates.

— TAG Employer Services: Employees of the employment-services company, mostly owner Jack Biltis, donated more than $620,000. Most of it went to Yes on 122, which backed the successful ballot measure to allow the state to refuse to spend state money on a federal program the state deems unconstitutional. They also donated to the Arizona Republican Party.

— Harder Mechanical: Employees of the construction contractor donated more than $419,000 to the committee of the Arizona Pipe Trades union. That committee gave much of its money to Residents for Accountability, which gave its money to Revitalize Arizona, which spent its money primarily supporting failed Democratic governor candidate Fred DuVal and failed Democratic attorney general candidate Felecia Rotellini.

— Jim Click Automotive: Employees of the car dealer and their families donated more than $401,000. Nearly half of it went to Conservative Leadership for Arizona, the committee run by Sean Noble that supported Gov. Doug Ducey, and the state Republican Party. The rest went to several other Republican campaign committees.

— Salt River Project: Employees of the utility company and their families donated more than $377,000. Most of it went to the Salt River Valley Water Users Association PAC, which divided its money among Democratic and Republican committees and candidates.

— Fry's: Employees of the grocery-store chain and their families donated more than $274,000. Most of it went to the United Food and Commercial Workers Union PAC, which divided its money among Democratic and Republican committees and candidates.

— University Mechanical: Employees of the construction contractor donated more than $258,000, most of it to the committee of the Arizona Pipe Trades union. That committee gave much of its money to Residents for Accountability, which gave its money to Revitalize Arizona, which spent its money primarily supporting failed Democratic governor candidate Fred DuVal and failed Democratic attorney general candidate Felecia Rotellini.

— The Pederson Group: Employees of the commercial-shopping-center developer, mostly owner Jim Pederson, and their families donated more than $245,000. Most of the money went to the state Democratic Party.

— AICI Investments: Employees of the investment company, mostly owner David Higgins, and their families donated more than $225,000. Most of the money went to the state Democratic Party and the Restore Arizona's Future PAC, which supported Democratic governor candidate Fred DuVal.

4 charts that explain outside money in Arizona politics