Horne defends delay in ceding 1 Fiesta case

Attorney General Tom Horne did not recuse his office from handling a Fiesta Bowl investigation involving powerful political allies until after one of his deputies recommended misdemeanor charges against them, documents obtained by The Arizona Republic show.

Horne said Wednesday he had no knowledge that charges had been drafted in the cases and transferred the cases immediately last fall after learning they involved lobbyist Kevin DeMenna and a political-consulting and lobbying firm, HighGround. No HighGround employees were specifically identified in a draft indictment drawn up by Horne's office.

"I don't have any motives here other than to avoid being involved with people whom I knew," Horne said.

HighGround's founder and president is noted GOP strategist Chuck Coughlin, a close adviser to Gov. Jan Brewer whose firm assisted with the attorney general's 2010 campaign. DeMenna has had a professional relationship with Horne since the attorney general served in the Arizona Legislature from 1997 to 2001. DeMenna also is a key fundraiser for the Republican Party.

Though Horne said he handed over the investigation of HighGround and DeMenna to Maricopa County Attorney Bill Montgomery as soon as he became aware they were involved, documents show Horne was informed months earlier the case involved several lobbyists.

A Maricopa County Attorney's Office memo obtained by The Republic shows Horne was present at a late April 2011 meeting where the investigation of the Fiesta Bowl lobbyists was discussed. Earlier that month, he was questioned by The Arizona Republic about his relationship with lobbyists and whether that could influence his investigation. Those events occurred roughly six months before he turned the lobbyist investigation over in October to Montgomery's office.

During that same April 2011 meeting, Horne withdrew from another Fiesta Bowl-related investigation involving state legislators who took tickets and accepted free trips to out-of-state college football games, citing a conflict of interest. But he wanted his office to investigate Fiesta Bowl lobbyists, according to a Maricopa County Attorney's Office memo.

Horne's position regarding the lobbyists changed last fall, when he declared a conflict of interest. On Oct.24, his office sent an assistant attorney general's research documents and charging recommendations regarding the lobbyist cases to Montgomery. By then, Montgomery was well into his investigation of the referred case regarding lawmakers who had received Fiesta Bowl gifts.

In December, Montgomery announced he would not prosecute legislators or lobbyists, citing vagueness in state laws and the lack of "evidence leading to criminal liability." When asked recently about his decision not to prosecute the lobbyists, Montgomery said there was no reasonable likelihood of convicting DeMenna or HighGround.

The lobbyists said Montgomery's decision was correct because they and their firms did nothing illegal. DeMenna said he was unaware until he was recently contacted by The Republic that he had been identified for charging by a prosecutor in the Attorney General's Office.

"The (state) prosecutor in this case was wrong," Coughlin said. "We complied with the law. There is confusion about this law in some circles. Not here. Not here at HighGround."

According to Coughlin, it was the duty of the Fiesta Bowl's primary lobbyist to report the expenditures for which HighGround was later questioned. Coughlin said he reported those expenditures to the person he considered the bowl's primary lobbyist, Gary Husk.

Portions of the state's draft indictments, obtained by The Republic through a formal request to Montgomery's office, alleged HighGround and DeMenna, as lobbyists, knowingly failed to report expenditures benefiting lawmakers during out-of-state trips paid for by the bowl from 2002 to 2004 and 2007. The penalty for such misdemeanor violations is a fine of up to $20,000 for a business, and up to six months in jail or a $2,500 fine for an individual.

The records indicate Horne took a much different approach in waiting so long to declare a conflict of interest in the lobbyist cases, as opposed to the early declaration of conflict in the elected officials' cases.

"Attorney General Horne has been inconsistent on when he does and when he doesn't have a conflict of interest," said former U.S. Attorney Paul Charlton, who has tangled with Horne's office over legal matters involving the state Independent Redistricting Commission. "A more careful attorney general would have decided that (conflict-of-interest) fact far earlier."

Horne spokeswoman Amy Rezzonico said the office conflicted itself out of the investigation involving Fiesta Bowl lobbyists as soon as Horne became aware of involvement of HighGround and DeMenna, and the charging decision ultimately was up to Montgomery.

"The timing is not suspect," Rezzonico said. "At the time it became personal knowledge for Tom Horne is when we conflicted off. ? It was nothing more than when the information was delivered to him."

But records and news reports indicate Horne knew his office was investigating HighGround and other lobbyists about six months before he declared the conflict of interest.

An April7, 2011, Arizona Republic story said HighGround employees were contributors to Horne's 2010 campaign. That story also said HighGround principals hosted a fundraiser Horne held at Rezzonico's home on March28, 2011, the same day the Fiesta Bowl turned over to the Attorney General's Office details of an internal investigation of wrongdoing at the bowl. That Fiesta Bowl report mentions HighGround or Coughlin 39 times.

Horne was asked about a potential conflict of interest with lobbyists, according to the April7, 2011, story. He responded then that campaign contributions do not "have anything to do with investigating criminal activity."

Records obtained from Montgomery's office also indicate that on April27, 2011, Horne attended a meeting with prosecutors in his office and Montgomery regarding the Fiesta Bowl investigation.

Horne said Wednesday he had "no memory" of that April meeting. When a Maricopa County Attorney's Office memo was read to him over the phone noting his attendance, Horne then said he may have attended. However, he added, his focus at the time was not on HighGround or DeMenna. Instead, it was on Husk, who remains under investigation by Horne's office but has denied any wrongdoing and has not been charged.

The memo, written by County Attorney's Office detective Mark Stribling, makes clear Horne made reference to a group of lobbyists.

"AG Tom Horne again stated that he intends to retain jurisdiction of all matters including those involving lobbyists," the memo says.

An April 28, 2011, Arizona Republic story also raised questions about Horne's relationship with Fiesta Bowl lobbyists, including HighGround. At that time, Horne dismissed insinuations from the Democratic Party chairman that his office could not be impartial in its investigation of the lobbyists, saying it was his job to be nonpartisan.

Attorney General's Office investigation

The Attorney General's Office, under a previous administration, had been investigating the Fiesta Bowl since summer 2010 to determine whether bowl employees had illegally been reimbursed for making campaign contributions to politicians.

The state investigation ramped up after the bowl in March 2011 -- a few months after Horne took office -- released its own investigative report. That report alleged widespread financial mismanagement, disclosed that gifts had been given to elected officials and concluded employees had been reimbursed for making campaign contributions.

In early April 2011, the chairman of the Arizona Democratic Party publicly questioned Horne's integrity in investigating the Fiesta Bowl, accusing the Republican attorney general of being too cozy with lobbyists at the center of the probe. One of the lobbying firms identified at that time was HighGround.

Horne brushed aside the criticism and allowed his office to continue the investigation of Fiesta Bowl lobbyists. That same month, however, he asked Montgomery to investigate the elected officials who had received gifts or traveled at the bowl's expense, citing a conflict of interest because some of the politicians could be his clients as attorney general.

For roughly the next seven months, from April to October 2011, Assistant Attorney General Todd Lawson and special investigators worked on the Fiesta Bowl case. During that time, indictments were drafted against HighGround and DeMenna, and cases also were built against current and former Fiesta Bowl employees who were subsequently charged with crimes.

The Attorney General's Office declined to allow Lawson to comment for this story.

A state prosecutor since May 2000 who specializes in white-collar fraud cases, Lawson recommended one misdemeanor charge against HighGround and three misdemeanor charges against DeMenna. To support his recommendations, Lawson wrote lengthy memos and provided dozens of pages of documentation.

Rezzonico said the assistant attorney general's recommendations regarding HighGround and DeMenna never were vetted by supervisors, and she said it is common for prosecutors to draft indictments that are never taken to a grand jury.

Recommendations for the Legislature

Montgomery, also a Republican, concluded last December that he could not prove criminal intent because of inconsistent state laws, vague reporting requirements for elected officials and lobbyists, and insufficient Fiesta Bowl records to support a prosecution.

However, Montgomery did compile a set of recommendations for the Arizona Legislature to consider to clear up what he called confusion in the law, and he suggested a ban or strict limits on the value of gifts lawmakers could receive.

The GOP-controlled Legislature has not adopted any of Montgomery's suggestions. Additional reform proposals from the Arizona Secretary of State's Office, which governs lobbyist and candidate disclosures, also have not been passed.

The governor supports changes that provide for greater clarity and transparency regarding gifts and interactions with lobbyists, according to a written statement provided to The Republic.

In discussing questions raised in the records received by the newspaper, Montgomery said there may have been a "technical violation of the law." But he reiterated that there was not a reasonable likelihood of conviction.

In Montgomery's analysis, state law is not clear enough in delineating when lobbyists must report their spending on public officials. That leads to questions about whether a conviction is possible.

"One prosecutor's approach to a statute may not be consistent with how another prosecuting agency would approach the issue or agree with the interpretation of a statute," Montgomery said. He declined to disclose what his office's own prosecutors and investigators recommended in regards to charging the lobbyists.

"It doesn't matter. It was my decision," Montgomery said. "I am the only one to be held accountable for that."

Charlton, a former U.S. attorney, agreed that a supervisor may override a line prosecutor's recommendation if there is disagreement over the likelihood of success.

Laws on lobbyists disclosing expenditures

Coughlin and DeMenna said in interviews that neither they nor their firms acted illegally, and that they were not required to make disclosures because they were contractors or consultants, not primary lobbyists for the Fiesta Bowl.

"I can't imagine the basis for a (charging) recommendation," DeMenna said. "I'm a big fan of disclosure and overfiling. But I'm not sure what we would have had to appropriately file."

Coughlin said his firm was not required to report because it was not the "designated lobbyist" for the Fiesta Bowl. As a hired lobbyist, he said, HighGround was only required to report its expenditures on lawmakers to the Fiesta Bowl's primary lobbyist. Had he also reported it, he said, the spending would have been doubly reported.

Coughlin said that Lawson was mistaken in his interpretation alleging violations of lobbyist-disclosure laws, and he suggested that partisan considerations were to blame: Lawson, the assistant attorney general who recommended charges, has been active in the Democratic Party.

Lawson was directed by Rezzonico not to discuss the matter with The Republic.

Amy Chan, the state elections director, said anyone registered as a lobbyist with the Secretary of State's Office has an obligation to report expenditures or anything of value provided to public officials. Both HighGround and DeMenna were registered lobbyists for the bowl when they made the expenditures, according to records from the Secretary of State's Office.

Chan told Coughlin as much in an e-mail exchange Wednesday. In that e-mail, which Coughlin copied to The Republic, Chan also told Coughlin, "I would not expend resources chasing this type of reporting down and asking lobbyists to amend prior reports."

A campaign-finance expert who represented the state said that Arizona laws are clear on what lobbyists must disclose.

"When a lobbyist makes an expenditure for a legislator or a state employee, the lobbyist has to disclose that expenditure," said Jim Barton, who formerly represented the Citizens Clean Elections Commission, the Secretary of State's Office and the Independent Redistricting Commission.

Though Montgomery chose not to prosecute lawmakers or lobbyists citing statutory vagueness, Lawson's investigative analysis concluded that the state campaign-finance laws would permit successful prosecution of bowl employees who made campaign contributions that were reimbursed. The Attorney General's Office pursued those charges.

This year, it obtained guilty pleas from five current or former Fiesta Bowl employees who engaged in a campaign-finance conspiracy. The U.S. Attorney's Office, meanwhile, obtained a guilty plea to a federal conspiracy charge from another former employee.

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