AG wants to oust ACC regulator Bitter Smith

Brnovich contends Bitter Smith is legally “ineligible to serve” as a member of the Arizona Corporation Commission and wants the Arizona Supreme Court to order her removed.

The action is based on state law that says members of the commission cannot have an “official relation” with any entity regulated by the panel. And he said Bitter Smith is a lobbyist for two affiliates of Cox Communications.

Bitter Smith said she argues solely for the cable side of the business, which is not subject to commission regulation. But Brnovich said the company offers bundled service that includes telephone service — which the commission regulates.

Brnovich also cites Bitter Smith’s role — and $150,000 salary — as executive director of the Southwest Cable Communications Association, an organization that includes Cox and other companies that offer phone service regulated by the commission. He said that violates another section of law that prohibits regulators from having a “pecuniary interest” in regulated companies.

He said the legal problems would not be solved if Bitter Smith gave up all of the conflicts. Brnovich said the law prohibited her from being elected in 2012.

But Brnovich, citing an earlier Supreme Court ruling in the case of a different regulator, said none of this invalidates the votes she took on the commission, even if cases were decided on a 3-2 margin with her in the majority.

That’s also the position of Jodi Jerich, the commission’s executive director, who said she expects Bitter Smith to retain her post until the court says otherwise. “It’s business as usual,” Jerich said Monday.

“There will be no delays in the commission’s deliberations and decision-making,” she continued, saying that, “All decisions made between now and the court’s ruling are binding.”

If the justices agree that Bitter Smith is holding office illegally, Gov. Doug Ducey would appoint a replacement to serve out the balance of her term, which runs through the end of 2016. By law, that replacement has to be a Republican like Bitter Smith.

In a prepared statement, Bitter Smith said the whole thing is partisan.

“The complaint was presented to the AG by a Democrat who is connected with a potential Democratic candidate for the commission,” she said. That refers to attorney Tom Ryan, who pulled together reams of information and presented it to Brnovich.

Ryan, however, said he’s a registered independent who is not working with any candidate for the commission.

Bitter Smith also said there’s no basis for the lawsuit.

“I am not now nor have I ever been employed by a regulated entity,” she said. “I am not paid by a regulated entity. I have not lobbied for a regulated entity.”

But Brnovich said that’s not the way the law reads. It prohibits the election of someone to the commission who is “in the employ of, or holding an official relation to a corporation or person subject to regulation by the commission.”

“It’s an ethics statute that’s designed to prevent conflicts of interest and to ensure that our public officials maintain the highest ethical standards,” Brnovich said. He said this is particularly important at the Corporation Commission “because of all the powers, the duties, the responsibilities they have.”

That specifically includes telling regulated monopolies like phone companies how much they can charge customers.

Brnovich said what Bitter Smith does for Cox and its affiliates falls within what’s prohibited by the statute.

“She does, indeed, serve as a lobbyist, not only for those cable companies,” he said. “Those companies have direct affiliates that are controlled by those parent companies.”

More to the point, Brnovich said her role as an authorized lobbyist for Cox “is an official relation” that the statute prohibits. And he specifically dismissed Bitter Smith’s contention that she lobbies only on unregulated cable TV operations.

“At the local level, cable companies’ operations and employment practices do little to distinguish between cable, broadband, and phone,” Brnovich wrote in his filings to the high court.

He also cited a 2008 finding by the commission’s own staff that found Cox’s “unregulated operations are intertwined to a significant extent with its regulated operations.” In fact, Brnovich told the court it would be wrong to see Cox Arizona Telecom, the phone affiliate, as some sort of separate entity from Cox Communications, as it has only one employee.

And if there were any doubt, Brnovich pointed out to the court that Bitter Smith has previously recused herself on some matters involving Cox and Time Warner, another cable TV company that is a member of the cable association. And Brnovich said she later said it was a mistake not to have stepped away from other matters.

Bitter Smith’s claim of some partisan motive is undermined by the fact that she, like Brnovich, is a Republican. And the attorney general said she is not getting any special treatment, either way, because of her affiliation.

“In all my years as a prosecutor, whether I was in federal court or state court, I never once asked anyone what their political party was,” he said. “To me, it always comes back to what does the law say.”

His office also is looking into several other issues at the commission.

• One relates to its review of texts between Commissioner Bob Stump and others, including candidates for office in 2014, an executive with Arizona Public Service and the head of a “dark money” group that spent money to influence the race. That goes to questions of whether there was illegal coordination of campaign spending.
• There also is an inquiry into allegations that former Commissioner Gary Pierce met secretly with APS executives while the utility was in the middle of a rate case. The same complaint said Pierce used his office to coerce commission staffers to expedite the formation of a corporation that Capitol Media Services reported later spent $186,000 in the 2012 election on mailers to drum up support for Stump’s re-election and to help elect fellow Republicans Bitter Smith and Bob Burns.