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In Arizona, a story of secret campaign spending and rising electric bills
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“Marketplace Morning Report” is running a special series, “Secret Money, Public Influence,” on money, politics and whether campaign donors can be “secret Santas” who spend big but don’t have to reveal that they did.
This election cycle, we traveled to Arizona, where voters in a month will decide if some of the biggest campaign spenders should have to reveal their true identities. How this ballot measure got there, what it hopes to achieve and what opponents say about it provide teachable moments about the so-called “dark money” that can sway elections near you — just like it was meant to do in Arizona in 2014, in a case of mystery money and rising electric bills.
It was early on a Thursday in the home stretch of the campaign season. At Sandra Kennedy’s home, the phone wouldn’t stop ringing.
“I finally answered, probably about 7:45, and said, ‘Jeez, you’ve called me three times. What’s going on?’” Kennedy said. “‘Have you seen the TV this morning?’ And I said, ‘No.’”
Kennedy was running for a second term on the public utilities commission that regulates power companies — what Arizona calls its Corporation Commission. She checked the TV. “And there was this commercial,” Kennedy said. “And I sat on the foot of the bed and went, ‘Oh, my God.’”
She said the ad cherry-picked from a lawsuit over the franchise for a Denny’s restaurant in which she had a small stake, where her husband was chief executive and majority owner, a suit later settled. The ad falsely made it look like Kennedy was a cheat or a crook. And Kennedy, who is Black, saw something else in the ad she found disturbing.
“Each time that ad was shown, my face got darker, and darker, and darker,” she said.
The ad seemed to play into racial prejudice. But who was paying for it? At the time, there was no way to tell for sure, since donors in most states can route their campaign funding through nonprofits that don’t need to give out their donors’ names. Given her support of solar power, Kennedy guessed it was someone connected to the monopoly electricity company she regulated called Arizona Public Service.
She went from first place in the polls, 10 points up, to second to last once election results were tallied. And two newcomers — seen as friendly to Arizona Public Service — were elected. The five-member commission would then approve an increase in electricity bills to many customers.
“This is definitely not the way the system should work,” Kennedy said. “We should be regulating. The utility should not be coming down here telling us what to do and how to do it.”
As for Kennedy, her teenage kids implored her to get out of politics. “My son and my youngest said, ‘Please don’t do that to us again,’” she said.
But after her kids graduated high school, Kennedy ran again in 2018 and won. Back as regulator, she was determined to get to the bottom of those televised attacks. It took a subpoena from her commission.
Late one Friday afternoon in the early spring of 2019, five white binders — each filled with documents about seven inches thick — finally arrived at the Corporation Commission.
“I probably took three weeks to go through them,” Kennedy said. “It was devastating.”
They confirmed what Kennedy had long suspected: The source of the money had been not a surrogate, not a troll, but the electric utility APS, through its holding company Pinnacle West Capital. And it was serious money — more than $10 million.
“I stopped adding at $10.2 million,” Kennedy said.
The company declined our interview request and referred us to its political participation policy. By 2020, Pinnacle West had a new CEO, Jeff Guldner, who’d made a promise to regulators.
“I can say that under my leadership, Pinnacle West and APS and any of our affiliates will neither directly nor indirectly participate in any election of any Corporation commissioner,” Guldner said in an Arizona Corporation Commission meeting in January 2020.
That was a pledge Bob Burns, chair of the Arizona Corporation Commission at the time, had demanded. But now, Burns wants more than a pledge.
“It’s good as long as [Guldner’s] there, but he might go tomorrow,” he said.
Burns is a Republican who supported Kennedy, a Democrat, to get the electric company to fess up. Burns wants those that spend on races to say it out loud.
“You’ve got to have sunlight in the election,” he said. “And so if you’re going to spend, you need to report so people know who you’re supporting and by how much.”
Voters in Arizona will decide on a measure next month to make those political nonprofits that gather big money disclose the names of their original donors. There are some parameters on this: It applies to political nonprofits that spend $50,000 or more on a statewide campaign or $25,000 or more on a local campaign. And the original sources would only be made public if they gave $5,000 or more.
Terry Goddard, a former Arizona attorney general, is pushing the measure, Proposition 211.
“If Arizona Public Service had had to say, ‘We’ve read this ad and we support it,’ it actually never would have run, because they would have been accountable, they would have been responsible,” Goddard said. “And what dark money does is it separates accountability from the product.”
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