House Special Prosecutor Melvin McDonald says that former Corporation Commissioner Jim Irvin probably was motivated by his political ambitions when he tried to promote the merger of Oneok and Southwest Gas Co and discourage a merger with Southern Union Co.

In a two-volume, 353-page report released Oct. 7, Mr. McDonald concludes that Mr. Irvin’s activities on the merger and three other situations constituted grounds for impeachment, and his activities in three of the situations warranted him being barred from ever holding public office again.

One of the other situations was the attempted fabrication of evidence for a federal court trial of a lawsuit filed by Southern Union against Mr. Irvin and Jack Rose, a former commission executive secretary and political adviser to Mr. Irvin, for interfering with the proposed merger of Southwest Gas and Southern Union.

In December 2002, the federal court jury decided Mr. Irvin had interfered with the Southern Union merger and ordered him to pay nearly $60.4 million in damages.

Mr. Rose settled out of court with Southern Union and invoked the Fifth Amendment during the trial. Mr. McDonald’s report says Mr. Rose was “like a potted plant” at the trial.

However, the House Judiciary Committee authorized immunity for Mr. Rose on Aug. 28, and the report says he gave sworn testimony for nearly nine hours on Aug. 28 and for an additional five hours on Aug. 29

Mr. Irvin resigned from the Arizona Corporation Commission on Sept. 23, two weeks before the release of Mr. McDonald’s report. Mr. Irvin has since been replaced by Kris Mayes, who had been Governor Napolitano’s chief spokeswoman. Ms. Mayes was sworn in Oct. 7.

“Jack Rose’s sworn testimony provides valuable insight into the activities, knowledge and motives of Commissioner Jim Irvin and has proven to be extremely important and insightful in this House of Representatives impeachment investigation,” says the report.

“His sworn testimony confirmed the factual findings of the federal jury trial against James Irvin and supported the scathing findings against Mr. Irvin by Judge Roslyn Silver,” it continues. “Rose’s testimony confirmed multiple acts of gross misconduct by Commissioner Irvin performing in his official capacity, reinforcing the need for Articles of Impeachment and the ultimate removal of James Irvin from public office.”

Agencies Study Report

When Mr. Irvin resigned, the House investigation, in essence, ended, but on Oct. 7, Speaker Jake Flake, R-Dist. 5, and Rep. Steve Tully, R-Dist. 11, chairman of the House Judiciary Committee who had conducted an initial inquiry before Mr. McDonald was brought in, said the report was being made available to the U.S. Attorney’s Office, Maricopa County Attorney’s Office and Arizona Attorney General’s Office to see if any of them want to pursue criminal charges.

Those agencies later told reporters they were studying the report.

Mr. Tully, who is a lawyer, was asked if he felt the report would lead to criminal charges. “I’m not a criminal attorney,” said Mr. Tully. “That’s for the prosecutors in this state to decide.”

Mr. McDonald was not at the press conference when his report was released.

Irvin’s Aspirations

The first volume of Mr. McDonald’s report deals mainly with the Southwest Gas merger and provides insight on the relationship between Mr. Irvin and Mr. Rose and Mr. Irvin’s desire for a higher office.

“Contrary to his testimony, Irvin had aspirations for higher office” says the report. “He had missed becoming Arizona’s … governor by a handful of votes and had told many close associates of his desire to one day run for that position. He had also flirted with the idea of a possible run for Congress. Additionally, he had an active interest in seeking a federal appointment to the Federal Energy Regulatory Commission.”

In 1994, Mr. Irvin ran in the Republican primary for secretary of state and lost by 8,818 votes to Jane Hull, who was subsequently elected secretary of state and became governor following the resignation of Fife Symington.

Mr. Irvin then ran for the Corporation Commission in 1996 and was elected. Mr. Rose played a key role in Mr. Irvin’s campaign, according to the report.

“Rose became an important Irvin fundraiser, speechwriter and strategist,” says the report. “He traveled with Irvin throughout the state. Although Commissioner Irvin claimed in an interview on Aug. 20, 2003, that Rose played a minor role in his campaign, that claim is not true.”

In the spring of 1997 after taking office, Mr. Irvin implemented a “loaned executive” program at the commission and appointed Rose.

“It is obvious that Commission Irvin became so comfortable with his relationship with Jack Rose that he wanted that relationship to continue beyond the campaign trail,” says the report.

By June 1997, Mr. Rose became commission executive secretary, and there was open hostility between Mr. Irvin and his fellow Republican commissioner at the time, Carl Kunasek.

“There was no other government entity so totally dysfunctional than the ACC,” says the report.

Mr. Rose announced in September 1998 that he was resigning effective Dec. 31, 1998. But before he left, the report says he had a series of meetings with Prudential Securities, an investment-banking firm.

On Dec. 14, 1998, Oneok and Southwest Gas announced that the board of directors of both companies had agreed to a merger. According to the report, Mr. Rose saw the opportunity to financial gain in the merger, and Mr. Irvin became convinced Oneok could help him politically.

“Irvin and Rose had openly discussed how Oneok could be influential in Irvin’s political future, as well as Southwest Gas,” says the report.

Following the merger announcement, the report says Mr. Rose faxed his resume to Prudential Securities in New York City using a commission cover sheet and a commission fax machine.

On Dec. 21, Mr. Rose again used a commission fax machine to send Prudential Securities a business proposal.

“You need someone who has relationships with state commissions, and the networking ability to land the initial contracts,” Mr. Rose told Prudential Securities, according to the report.

After his employment as commission executive secretary ended, the report says Mr. Rose agreed to work for Mr. Irvin as an unpaid consultant.

“There was a clear motivation in Rose’s mind for this service,” says the report. “It would give him extraordinary opportunity to network with utility leaders at U.S. West, Southwest Gas, Oneok and other utility giants in and outside the state of Arizona. He hoped to convert these contacts into a lucrative consulting contract.”

Rose Acted As ‘Unofficial Consultant’

Mr. Irvin then notified Oneok and Southwest Gas officials that Mr. Rose “would act as his unofficial consultant and their contact man on the merger.

On Feb. 1, 1999, Southern Union made a bid to buy Southwest Gas. The bid became public. Feb. 22.

“From almost the first moment that Irvin was notified of Southern Union’s bid, he became a partisan rather than a judge,” says the report.

“Since receiving legislative immunity and testifying under oath, with the penalty of perjury hanging over his head, Jack Rose has lambasted Mr. Irvin’s claims of ignorance and non-participation, confirming that from almost the first day they learned of Southern Union’s intent to acquire Southwest Gas, Jim Irvin, with Rose’s assistance, set out to ‘kneecap’ Southern Union’s chances of acquiring Southwest Gas.”

Mr. Rose signed an agreement w
ith Prudential Securities on March 19, 1999, according to the report. However, the report says that while he knew of the agreement and assisted Mr. Rose in getting it, Mr. Irvin made no claim on any fees Mr. Rose might receive.

“There is no evidence that Irvin ever stood to make one cent in unlawful remuneration for his assistance to Jack Rose or Oneok,” says the report.

Southern Union ‘Victimized’ By Irvin’s Actions

Mr. McDonald concludes that Mr. Irvin could be convicted of violating A.R.S. 13-2311, fraudulent schemes and practices; willful concealment; classification.

The statute was “intended to be a broad remedial statute applicable to any plan, trick or device to perpetrate a fraud,” says the report. “There is clear and convincing evidence that Jim Irvin violated this statute.”

“There were many victims of Jim Irvin’s actions,” it continues. “Tens of thousands of shareholders lost $108 million because of Irvin’s improper actions in persuading the Southwest Board to approve the lowest bidder [Oneok]. His actions eventually spurred the Southern Union lawsuit, leading to the collapse of the merger.

“Southern Union was victimized by Irvin’s actions. Southern Union was disparaged by ex parte statements that Irvin made to commissioners and staff at the Nevada and California commissions. Southern Union lost millions of dollars and the opportunity to do business in Arizona, because a public official abandoned the sworn duties of his office and became a political charlatan.”

During the trial on the Southern Union lawsuit, Carol Irvin, Mr. Irvin’s wife, presented handwritten notes on a telephone conversation she had with Mr. Rose.

“The ‘Rose document’ went to the heart and soul of Jim Irvin’s planned defense at the trial,” says the report.

However, when the Southern Union legal team requested that the “Rose document” be subjected to forensic testing, Mr. Irvin’s legal team withdrew it.

An evidentiary hearing ensued, and Federal Judge Silver found that the evidence was sufficient for the jury to find “intentional fabrication of evidence, as well as showing Commissioner Irvin’s consciousness of wrong doing.”

In his sworn testimony during Mr. McDonald’s investigation, the report says Mr. Rose “confirmed that what Judge Silver and the jury had previously concluded — that the ‘Rose document’ was a document permeated by fraudulent claims and that the core of Rose’s so-called admission, which were intended to exonerate Irvin, were blatantly false and a fraud on the court.”

Conclusion

The report concludes:

“Mr. Irvin, with the assistance of his wife, perpetrated a fraud on the court. There is clear and convincing evidence that he participated in a scheme to proffer fabricated evidence in a vain attempt to influence the judicial process in the hopes of exculpating himself.”

The two other situations in which Mr. McDonald concluded Mr. Irvin committed an impeachable offense were a Corporation Commission inquiry into American National Mortgage Partners; and Mr. Irvin’s continuing attempts to fire Jim Fisher, a member of the commission staff.

On the American National Mortgage Partners inquiry, the report says, “Commissioner Irvin engaged in forbidden ex parte communications and actions involving a serious conflict of interest when he inappropriately intervened on behalf of the brother of a key campaign strategist, Bill Caspare, in an ongoing securities investigation and prosecution. The brother, Frank Caspare, was a principal in a security case being investigated and pursued by the Securities Division of the Arizona Corporation Commission.

“Jim Irvin crossed the line, and abused the responsibilities of his office,” the report says. “His actions did not constitute high crimes and misdemeanors, but did constitute malfeasance in office.”

On Mr. Fisher, the report says that almost immediately after he took office in 1997, Mr. Irvin “commenced an open campaign to have James Fisher, Executive Consultant with the Utilities Division fired. Fisher had no previous contact with Irvin prior to Irvin’s election and was perplexed by Irvin’s efforts to terminate him. Irvin targeted Fisher for more than four years.

“Fisher was unaware of the motive behind Commissioner Irvin’s actions until well into Irvin’s first term. He eventually learned that Irvin was a friend with a water company executive that Fisher had reviewed five years earlier.”

According to the report, the executive was upset with Mr. Fisher and urged Mr. Irvin to terminate Mr. Fisher in retaliation for his actions.

Mr. Fisher filed a personal lawsuit against Mr. and Mrs. Irvin in 2001, and a settlement for $380,000 was reached in February 2003 without Mr. Irvin admitting any wrongdoing.

However, Mr. McDonald concluded that Mr. Irvin’s actions violated Arizona’s whistle blower statute.

“Above and beyond that violation, his abuse of a public employee for four years, as evidenced by the sizeable settlement, constituted malfeasance,” says the report.

In another part of his investigation, Mr. McDonald reported that he found no evidence that Mr. Irvin violated the state Clean Election Act in collecting signatures during his 2002 re-election campaign. —