Revelations that Mills had defrauded business partner in Florida and conflicting messages from his campaign that muddied his position on Arizona’s employer sanctions law have set the stage for attacks against him in the Republican gubernatorial primary.
Republican consultant Constantin Querard said Mills’ campaign has been damaged, and the negative image will get worse if he doesn’t address the issue more thoroughly.
“It does have the potential to cost him the race,” Querard said.
Most damaging, perhaps, was the news on April 26 that a Florida judge ruled in 2001 that Mills had defrauded a business partner during the sale of his telecommunications company.
According to court documents, Mills bilked business partner John Mortellite out of several million dollars by arranging the sale of OPM-USA, Inc. without telling Mortellite and then buying out Mortellite’s 10-percent share of the company for much less than it was worth. Mills and his wife, Sonja, owned 90 percent of the communications company.
Florida’s 12th Judicial Circuit determined in 2003 that Mills owed Mortellite $4.6 million. The judgment was vacated when Mills and Mortellite reached an out-of-court settlement, which included a confidentiality agreement.
Camilla Strongin, Mills’ campaign manager, said no fraud took place and Mills characterized the incident as a disagreement between majority and minority stockholders, which is common in the business world.
“It’s not news that a successful businessman got sued,” Mills said in a press statement. “I thought I was right. He thought he was right. So we went to court. And after five years of haggling I still thought I was right, but I was pretty fed up of dealing with lawyers and court dates and documents, so we settled and everybody walked away happy.”
A local blogger first picked up on Mills’ court battle, and the incident made headlines after news outlets dug deeper into the various court rulings.
Mills also took flak from bloggers and rival candidates over the statements he made about the employer sanctions law. At an April 8 candidate forum hosted by the Arizona Farm Bureau, Mills told the crowd, “I’m not your guy for employer sanctions.”
“If you want employer sanctions, you’ve got to go somewhere else,” Mills said. “That is a failure on the part of the feds that has made you the policeman. We need a different system.”
Strongin said Mills uttered the type of “misstatement” that could happen to anybody who makes as many public speeches as he does. She said Mills does, indeed, support employer sanctions.
But at an April 27 forum in Ahwatukee, Mills once again criticized the law for putting the onus on employers to for enforce illegal immigration laws. Even when employers check applicants through the federal E-Verify system, he said, sometimes an illegal immigrant can pass the screening, and businesses need a remedy to protect them when that happens.
Mills said he would enforce all the laws on Arizona’s books, and Strongin said Mills would not support overturning the employer sanctions law. But conservative bloggers nonetheless took Mills to task for being soft on the law. The employer sanctions flap comes at a time of heightened attention to illegal immigration thanks to S1070, which Gov. Jan Brewer signed on April 23.
It was the legal tangle with Mortellite, however, that appeared more damaging. John Munger, a rival candidate for the Republican nomination, went as far as asking Mills to withdraw from the governor’s race, saying the fraud case made him unelectable and raised serious questions about his fitness to govern.
“At a time when there is already widespread distrust and anger toward government in general, your continued presence in the governor’s race will only do further damage to the reputation of our state and the Republican Party,” Munger wrote.
Mills, unsurprisingly, did not accede to Munger’s request.
“As a lawyer, John Munger should know the difference between accusations made in depositions and testimony, and a decision that was vacated by a judge,” Mills said in a press statement. “But since his flailing campaign needs attention, I guess this is his attempt at getting some.”
Munger has trailed Mills in every publicly released poll on the Republican primary race for governor. Both are traditionally funded candidates, but Mills has a significantly larger war chest after putting $2 million of his own money into his campaign.
Pollster Bruce Merrill, an Arizona State University professor who runs the Cronkite/Eight Poll, said the fraud ruling has the potential to damage Mills’ campaign.
“In a primary race, it certainly could hurt,” Merrill said. “I think the key thing would be whether one of his opponents would use it as the basis for a commercial or something like that.”
Mortellite was a neighbor of the Millses in 1995 when the three of them formed OPM, which was created to build cellular towers and sell them to communications companies. Mortellite bought a 10 percent share of the company for $100,000.
Mills’ dispute with Mortellite began in 1997 after Mills began talks with American Tower L.P. to sell OPM-USA, which he ultimately sold for $105 million. But he bought out Mortellite for just $1.5 million without telling him about American Tower’s offer or disclosing OPM’s full value, according to court documents. Mills even told Mortellite to extend a vacation for several weeks to keep him from finding out about the negotiations with American Tower.
When Mortellite returned from vacation, Mills fired him. Later, at an August 1997 board meeting, Mortellite agreed to leave the company and take the buyout based on an incorrect assumption about the company’s value, according to court documents. Mills didn’t tell Mortellite about American Tower’s offer, even when Mortellite’s attorney asked at the board meeting whether OPM was involved in any pending transactions.
In a 2001 ruling, Logan wrote that Mills deceived Mortellite into thinking that there had been no negotiations to purchase OPM stock, with the intention that Mortellite would act to his own detriment. That nondisclosure, Logan wrote, led Mortellite to forgo a valuation of OPM’s stock that he was entitled to under his original stock purchase agreement.
“Mortellite was, therefore, fraudulently induced to sign the release and the (stock redemption agreement),” Logan wrote.
According to the documents, Mills told American Tower executive James Eisenstein that he had a 10 percent shareholder to buy out but that it would not be a problem “Don’t worry. He has no idea what this is worth,” Mills told Eisenstein, according to court documents.
Strongin said the statement, which Eisenstein attributed to Mills during a deposition in the case, was untrue.
Mills moved to Arizona in 1999 and bought Gunsite, a tactical firearms training school in Paulden. Mills said it was a longtime dream to move to Arizona, and the sale of OPM — which got him out of the telecommunications business for good — gave him the opportunity to do so. He became a candidate for governor earlier this year.