In the matter of the Arizona House of Representatives investigation of certain allegiations against State Corporation Commissioner James M. Irvin / A report by the Speaker of the House to the Arizona House of Representatives Forty Sixth Legislature

              IN THE MATTER OF THE ARIZONA HOUSE OF REPRESENTATIVES INVESTIGATION OF CERTAIN ALLEGATIONS AGAINST STATE CORPORATION COMMISSIONER JAMES M. IRVIN

A Report by the Speaker of the House to the ARIZONA HOUSE OF REPRESENTATIVES Forty Sixth Legislature Presented by A. Melvin McDonald Jr., Esquire Special House Counsel October 6, 2003

Volume I Southern Union v. Irvin

INTRODUCTORY REMARKS On June 27, 2003, House Speaker Franklin "Jake" Flake appointed A. Melvin McDonald and the law firm of Jones, Skelton & Hochuli to act as Special Counsel to the Speaker. McDonald was directed to conduct a thorough and comprehensive investigation into a variety of misconduct allegations involving Arizona Corporation Commissioner James M. Irvin. Before McDonald's appointment, House Judiciary Chairman Steve Tully had published a two-volume investigative study which resulted in the identification of three separate areas of alleged official improprieties on the part of Mr. Irvin. The Speaker instructed McDonald to determine whether any of the three areas of alleged official misconduct outlined in the Tully report were serious enough to rise to the level of "impeachable offenses" under the Arizona Constitution, Statutory and Case Law. During the course of his inquiry, McDonald and his team of

investigators have expanded their investigation into five separate areas of possible misconduct. On the eve of his announced appointment, McDonald began to assemble a team of former federal investigators whose investigative skills, accomplishments and record of performance are above reproach. In order to ensure a bipartisan approach to the investigation, McDonald, a former Superior Court judge who was later appointed United States Attorney by former President Ronald Reagan, selected former United
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States Attorney Jose de Jesus Rivera, an appointee of former President Bill Clinton, to assist in the investigation. Rivera served as U.S. Attorney from May 1998 through April of 2001. Early in his career, Rivera worked with the Civil Rights Division of the Department of Justice and later served in the U.S. Attorney's office as a federal prosecutor from 1977-1981. McDonald assembled a six-member investigative team with 170 years of combined federal law enforcement investigative experience. The Investigative Team included the following former federal agents: A. Doug Hopkins. Mr. Hopkins served as a Special Agent with the FBI for

28 years (1971-1998). Hopkins has extensive investigative experience relative to violations of federal law involving bank fraud and embezzlement, kidnapping, bank robbery, bombings and fraud against the government. Hopkins was one of the lead investigators in the car-bomb slaying of reporter Don Bolles. For his work in the Bolles bombing, he received a letter of commendation from then U.S. Attorney Michael Hawkins. During his 28 years of service, Hopkins received ten written commendations from the Director of the FBI. He was selected by his peers to serve as a member of the Special Agents Advisory Committee to the Director of the FBI in 1992. B. John Thrasher. Mr. Thrasher served as an IRS investigator with 25

years of service in the Criminal Investigation Division (1974-1999). Mr. Thrasher
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specialized in complex criminal financial investigations. His work focused on money laundering, tax evasion, narcotics trafficking, offshore tax shelters, gambling, embezzlement, telemarketing fraud and other complex financial crimes. He was selected as a member of the Organized Crime Drug Enforcement Task Force and the Financial Task Force for the U.S. Attorney's office in Phoenix. Mr. Thrasher coordinated a nationwide tax shelter/money laundering investigation out of Washington D.C. which resulted in the prosecution of 20 individuals. C. Don Tucker. Mr. Tucker had a distinguished 33 year investigative career

(1961-1994) which began with the Federal Bureau of Narcotics (1961-1964) and ended with his appointment as Chief of Court Security for all federal courts in the United States (1994-1996). Mr. Tucker served as the Special Agent with the United States Secret Service (1964-1990) and was eventually selected as Special Agent in Charge of the U.S. Secret Service in Phoenix, a position he occupied for 12 years (1978-1990). He was appointed by President George Herbert Walker Bush to serve as the United States Marshall for the District of Arizona (1990-1994). While serving as Chief of Court Security for all federal courts, Mr. Tucker coordinated the investigation into the terrorist bombing of the Alfred F. Murrah Federal Building in Oklahoma City, Oklahoma that had resulted in the death of 168 people.

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D.

Jerry Wagner. Mr. Wagner served as an FBI investigator for over 27

years (1970-1998). His career involved narcotics investigations, serious crimes on Indian Reservations (including homicide and child sexual molestation cases), bank robbery, kidnapping and fugitive investigations, organized crime, foreign counterintelligence and espionage investigations and international terrorism investigations. His service in Arizona included investigative work on two of the biggest investigations in Arizona history: the Don Bolles car-bombing in 1976 and the Poland brother murder and hijacking of two Purolator guards in 1977. E. Mike Bartley. Mr. Bartley served as an FBI investigator for 29 years

(1969-1998). During his service, Mr. Bartley had extensive investigative experience relative to investigations of bank fraud and embezzlement, kidnapping, bank robbery, bombings and fraud against the government. He was a member of the FBI Swat Team for 19 years, and served on the Caribbean Drug Task Force and the Violent Offender Fugitive Task Force. During his service with the FBI, he was awarded the FBI "Shield of Bravery" by FBI Director William Sessions, and later received the FBI "Medal of Meritorious Achievement" from FBI Director Louie Freeh. F. Kelly D. Sanderson. Mr. Sanderson served as an FBI investigator for 28

years (1971-1999). Mr. Sanderson's investigative duties extended to interstate crimes involving gambling, theft, auto theft rings, bank robberies, drugs and money laundering.
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Mr. Sanderson was a recognized expert in the collection of intelligence, and was involved in complex investigations which included wiretap investigations. Before serving with the FBI, Sanderson was a member of a B-52 bombing crew that flew missions in Southeast Asia from 1967-1971. In addition to the contributions of this outstanding investigative team, various attorneys from Jones, Skelton & Hochuli have provided invaluable assistance in this investigative project. Those who have contributed from the law firm include Chris Doerfler and Randy Warner. Diana Weeks, secretary to Mel McDonald, has spent many long hours preparing transcripts from taped interviews and coordinating appointments and interviews with dozens of witnesses.

COMMISSIONER JAMES D. IRVIN On August 20, 2003, special counsel met with the subject of this investigation inquiry, James D. Irvin, and his legal counsel, Jeffrey Walsh. The purpose of the meeting was to not only meet Mr. Irvin, but to learn more of Mr. Irvin's background and experience. In addition to information provided by Commissioner Irvin, special counsel McDonald reviewed public information on various websites about Mr. Irvin and his very successful career. It was agreed that the interview would not extend to substantive issues, but would be limited to background.
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James D. Irvin has had a very successful professional career both in California and Arizona. He has had a highly successful political career in Arizona. Mr. Irvin is one of seven children. Born in Los Angeles, his grandfather started an armored car and security company, AT Systems. His father, who was a lawyer, expanded the business into one of the nation' largest money couriers, a $230 million annual s enterprise. AT Systems is the third largest armored transportation company in the nation. Commissioner Irvin was raised in Santa Monica, California, attending parochial schools until the 8th grade. He was a successful high school athlete, participating in football, baseball and track. He attended the University of Southern California, obtaining a Bachelor of Science degree in Education. He did student teaching in the Los Angeles school district, but became disillusioned with the teaching field when he saw what he felt was inept administration of school budgets and school planning, and witnessed the L.A. system advancing 5th graders to the 6th grade over his objection when the students lacked elementary reading, writing and arithmetic skills. After student teaching for one year, he left the field of education forever. He took a year off and traveled around the country with a college roommate. After this one year sabbatical, Commissioner Irvin returned to school in 1978 and earned a Master' degree in Business Administration from Loyola Marymount s
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University in California. Before his election to the Arizona Corporation Commission, Mr. Irvin spent over 20 years in the private sector, serving as a CEO to one of his father' security companies. He had worked at the company as a college student s rolling coins, wrapping money and working weekends as a guard. He gradually moved up the chain of responsibility, receiving various promotions based upon a record of clear accomplishments. He worked as an assistant manager for the company in Pomona, California and when the company was having problems in San Francisco, Mr. Irvin moved to Northern California and turned the San Francisco office around from losing money to a profitable, successful enterprise with 30% gross profits. He even expanded the San Francisco operations to other branch offices. He was involved in the company' expansion into the field of courier services. The company developed close s working relationships with Federal Express and UPS. Mr. Irvin moved to Arizona from California to, again, rescue a division of the company that was doing poorly and losing money. He had remarkable success. As Mr. Irvin, in his own words, told special counsel:
We turned the company around here. We grew. I think when I left in ` 7, we had 9 something like 1100, 1200 employees, 1,000, somewhere in there; and we were operating in Utah, Nevada, Arizona and California.

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Commissioner Irvin' responsibilities extended to over 1,000 employees, with s offices in California, Arizona, Nevada and New Mexico. The company had grown from armored car to security guards, alarms and the courier business. Commissioner Irvin developed his first taste of politics in 1989. A close friend asked him to become a precinct committeeman. He was later asked to become a financial chairman for the Arizona Republican Party. He helped the party raise substantial funds which, in part, were used to retire outstanding debt. In 1992, Republican party leaders asked Mr. Irvin to take charge of the "Trunk and Tusk Club," a major fund-raising organization within the Republican party, a position which not only exposed him to party leadership, but also enabled him to demonstrate his ability to raise funds. In 1994, Commissioner Irvin, then a political unknown, ran for the high profile position of Arizona Secretary of State. After conducting a successful political campaign, Irvin narrowly lost the primary election to Jane D. Hull, the former Speaker of the Arizona House of Representatives. During that election, Commissioner Irvin won 10 of the 15 counties in the state-wide election, losing the 11th county by only three votes. He lost that state-wide race by only 8,818 votes, securing just under 49% of the Republican primary vote. Jane Hull, who defeated Irvin in the 1994 primary election, was elected Secretary of State and would later become Arizona Governor
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after the resignation of Fife Symington. As a result of his razor-thin loss to Jane Hull, Mr. Irvin narrowly missed becoming Arizona' 20th Governor. s In 1996, Commissioner Irvin' political fortunes turned around when he was s elected to a seat on the Arizona Corporation Commission. He was encouraged by Republican party leadership to run for a post that had been controlled by Democrats for years. Commissioner Marcia Weeks was stepping down, leaving a vacancy on the Commission. In Commissioner Irvin's own words:
[T]he [Party] was looking at trying to find an individual that we Republicans could use to gain control because the Democrats had for so long been in charge. And the other thing exciting about the Commission was the opportunity to look at the infrastructure ... and I thought it was a wonderful opportunity to get in and serve the community. Bring my business experience and my background into a little business type of setting in government.

The Republican party saw it as an inviting opportunity to take control of the powerful and prestigious Arizona Corporation Commission. Carl Kunasek, the lone Republican, worked in support of Mr. Irvin's candidacy. His assistant, Jerry Porter, also contributed to the effort to elect Mr. Irvin to the ACC. Mr. Irvin was elected with 609,862 votes, defeating his Democratic opponent by 21,000 votes and capturing just under 51% of the popular vote. Soon after his election and entry into political office, Jim Irvin became Chairman of the Arizona Corporation Commission. There were

many laudable accomplishments by Mr. Irvin during his service at the ACC. While serving as Chairman in his first term, Irvin began such initiatives as the formation of the
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ACC Water Task Force, pushed to include the utilization of renewable energy in restructuring Arizona's electricity market, and received the Governor's Recognition Award for Customer Service Improvement. Irvin also chaired the Arizona Rural Telephone Task Force, and served as a Director for the Water Infrastructure Financing Authority (WIFA). In November 2000, the voters of Arizona approved a measure, placed on the ballot by the State Legislature, which expanded the size of the Commission from three to five Commissioners. The measure also changed the term of office from one six-year term to a four-year term with the possibility of reelection to one additional (consecutive) four-year term. Commissioner Irvin, as a result of that election, became eligible to run for reelection in 2002. Commissioner Irvin ran and was reelected to the Arizona Corporation Commission on November 5, 2002 for a seat which expires on January 1, 2007. Commissioner Irvin's second term began in January 2003. In the 2002 Primary Election, Commissioner Irvin defeated a former state representative, Roberta Voss, in a landslide victory (155,465 votes to 102,100 votes), capturing over 60% of the primary vote. In the subsequent general election, Commissioner Irvin garnered 572,556 votes to his opponent' 545,508 votes, winning reelection this time with slightly over 51% of s the popular vote.
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Commissioner Irvin married his wife Carol in 1982. He is the proud father of three children. His oldest child, a daughter, is a 20-year-old junior attending Arizona State University. His second oldest, also a daughter, is currently a freshman at Arizona State University. His youngest child, a boy, attends the 7th grade. Commissioner Irvin enjoys a close, loving and supportive relationship with his wife and children. Commissioner Irvin has been an active member of the community. He has served as a Reserve Deputy Sheriff for the Maricopa County Sheriff's Office, has served as a Board member of the Scottsdale Education Foundation, has been a past member of the Board of Directors of the Silent Witness Program, and has been a member of Rotary International. He has also volunteered with the Boys and Girls Club, the YMCA, and coaches Little League. Mr. Irvin' two general election victories and one primary election victory for his s current seat on the Arizona Corporation Commission deserve great weight and consideration in the impeachment process. The general public has elected him to statewide office not once, but twice, and the voters' selection to public office should not be negated through the processes of impeachment except by clear and convincing evidence of impeachable wrongdoing.

LAWS AND RULES RELATING TO IMPEACHMENT
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Article 8, Part 2, Sections 1 and 2 of the Arizona Constitution set forth the Constitutional requirements for impeachment of a state official. These sections provide:
Section 1. The House of Representatives shall have the sole power of impeachment. The concurrence of a majority of all the members shall be necessary to an impeachment. All impeachments shall be tried by the Senate, and, when sitting for that purpose, the Senators shall be upon oath or affirmation to do justice according to law and evidence, and shall be presided over by the Chief Justice of the Supreme Court. Should the chief justice be on trial, or otherwise disqualified, the Senate shall elect a judge of the supreme court to preside. Section 2. No person shall be convicted without a concurrence of two-thirds of the Senators elected. The Governor and other state and judicial officers ... shall be liable to impeachment for high crimes, misdemeanors, or malfeasance in office, but judgment in such cases shall extend only to removal from office and disqualification to hold any office of honor, trust, or profit in the state. The party, whether convicted or acquitted, shall, nevertheless, be liable to trial and punishment according to law.

[Emphasis added] Impeachment is a legislative function with very little judicial oversight. The Arizona Supreme Court has no jurisdiction to review impeachment proceedings if the Legislative bodies follow the constitutional and statutory procedures: articles of impeachment are decided by majority vote; trial by the Senate with a 2/3 vote is required for removal from office; and the Chief Justice of the Arizona Supreme Court presides over the trial in the Senate. (See Mecham v. Arizona House of

Representatives, 162 Ariz. 267, 782 P.2d 1160 (1989)) The Arizona Rules of Criminal Procedure and the Arizona Rules of Civil Procedure, which govern criminal and civil cases, do not apply in impeachment proceedings. Impeachment trial procedures and rules are reserved exclusively to the Arizona State Senate. (Mecham, 156 Ariz. 297,
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751 P.2d at 962) There are only two issues which the State Senate may litigate in an impeachment proceeding: removal from office and disqualification from future office. (Mecham, Id.; Ingram v. Shumway, 164 Ariz. 514, 794 P.2d 147 (1990)) As a duly elected Arizona Corporation Commissioner, James D. Irvin is subject to impeachment. (See A.R.S.   38-311) A.R.S.   38-312 provides that impeachment shall be instituted in the House of Representatives by resolution, and shall be conducted by managers elected by the House of Representatives, who shall prepare articles of impeachment, present them at the bar of the Senate and prosecute them. The hearing shall be heard before the Senate sitting as a court of impeachment. There are three grounds for impeachment: high crimes, misdemeanors, or malfeasance in office. Holmes v. Osborn, 57 Ariz. 522, 115 P.2d 775 (1941). The scope of wrongdoing contemplated by the Constitution's stipulation of "high crimes and misdemeanors" is vast. Abuse of power and serious misconduct in office fit this category. There is significant historical and legal precedent for impeachment proceedings in both the national government and, to a lesser extent, in Arizona. Since 1797, the United States House of Representatives has attempted impeachment of public officials on 35 occasions, succeeding against sixteen federal officials. The successful

impeachments included two presidents, a cabinet member, a senator, a justice of the
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Supreme Court, and eleven federal judges. Of those impeached, nine cases were tried before the U.S. Senate. Of the nine who went to trial, seven were convicted by the U.S. Senate, all of them federal judges. Many facing the prospect of impeachment have resigned at various stages of the impeachment process rather than face impeachment. The most notable resignee was Richard Nixon, the 37th President of the United States. Arizona has had two instances in its history where public officials have been impeached and tried by the State Senate: the 1952 impeachment of a State Corporation Commissioner and the 1988 impeachment of an Arizona Governor. The Commissioner was acquitted in his trial before the Senate while the Governor was convicted of the impeachment charges. This same Governor successfully defeated the "dracula clause," which enabled him to run again for elected office in the future. The Governor was later acquitted of criminal charges that were almost identical to the impeachment offenses. The standard of evidence in the criminal case was higher than the standard in the impeachment trial. Arizona's Constitutional language regarding impeachment is structurally similar to the U.S. Constitution's rules on impeachment. As the Mecham decision noted, "The framers of our national Constitution considered and rejected a judicial role in the impeachment process, fearing that any judicial involvement would encroach upon the

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legislative prerogative. THE FEDERALIST, No. 65 (Alexander Hamilton)." Mecham, 156 Ariz. at 301, 751 P.2d at 961. The term "high crimes and misdemeanors," was not defined by the framers of our state constitution, just as it was not precisely defined by the framers of our national Constitution. The term itself has been applied through impeachment processes at both the national and state level. In an article entitled What Does "High Crimes and Misdemeanors" Mean?, authored by Gary J. Schmitt and Joseph Bessette, the authors describe the broad meaning of these terms.
The imprecision surrounding the phrase "high crimes and misdemeanors" in the Convention and the follow-on debates in the state ratifying conventions is not especially surprising; for this phrase had its source in over four centuries of British parliamentary practice, during which its meaning was no more specific. Ever since the fourteenth century, "high crimes and misdemeanors" had included not only criminal conduct but also a broad array of charges involving corruption, misuse of funds, and abuse of authority.

There are a number of guiding principles Schmitt and Bessett refer to that fall within the area of high crimes and misdemeanors in the area of federal impeachment:
[One] is left with a few broad, albeit important, principles: first, consonant with the separation-of-powers principle, the standard for impeachment was not so low as to encourage Congress to make impeachment a routine means for checking the president; second, "high crimes and misdemeanors" included offenses that were not, strictly speaking, illegal; and third, "high crimes and misdemeanors" were generally associated with violations of a public trust and, in the major impeachment case of the time, involved actions which in some fashion undermined or ran contrary to the fundamental norms of sound rule.

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It is clear from a review of historical precedents that impeachable offenses can be initiated not only for specific breaches of official duty, but also for actions outside of one' official duties. It is further clear that the "high crimes and misdemeanor" s standard applies to those who abuse their public trust and duties, and that it is not necessary that they be charged with actual crimes by prosecution authorities to fall within this broad definition of high crimes and misdemeanors. High crimes and misdemeanors not only include a variety of criminal misdeeds such as obstruction of justice, perjury or making false statements, whether charged or uncharged, but other serious breaches of public duty or public trust. Noted author and Time Magazine editor Borgna Brunner, writing an analysis on "A Short History of Impeachment," notes that:
Bribery, perjury, and treason are among the least ambiguous reasons meriting impeachment, but the ocean of wrongdoing encompassed by the Constitution's stipulation of "high crimes and misdemeanors" is vast. Abuse of power and serious misconduct in office fit this category, but one act that is definitely not grounds for impeachment is partisan discord.

The third standard for impeachment in Arizona, "malfeasance," is well defined in the cases. Malfeasance as a ground for removal is doing that which an elected official has no authority to do, and is positively wrong or unlawful. Holmes v. Osborn, 57 Ariz. 522, 115 P.2d 775, 783 (1941). The objective of the impeachment process is to rid government of those who have violated their sacred public trust, and to determine whether such persons can ever serve again in any position of governmental trust. The
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Arizona Supreme Court first enunciated this principle in State ex rel DeConcini vs. Sullivan, 66 Ariz. 348, 188 P.2d 592 (1948):
The object of the removal by impeachment of a public officer for official misconduct is not to punish the officer but to improve the public service ... The ultimate aim of impeachment proceedings is the removal from office of the person accused ... .

The Constitution and statutes are silent on many of the impeachment procedures and scheduling. The impeached public official is entitled to not less than ten days' notice of the date set by the Senate for the impeachment trial. The Senate is free to make its own procedural rules and schedule witnesses and procedures at its own discretion. The Constitution and statutes are also silent on the standard of evidence required to charge and to convict. In the 1988 Evan Mecham impeachment proceeding, the standard adopted by the Arizona House of Representatives to impeach was "probable cause" (i.e. preponderance of the evidence), the standard of proof generally applied in civil courts. However, when the case was actually tried before the Arizona Senate, the standard of proof was elevated to "clear and convincing evidence," a standard of proof higher than preponderance of the evidence but far less than the criminal standard of proof "beyond a reasonable doubt." The findings and recommendations in this report are based upon the higher standard of "clear and convincing evidence." Where there are doubts, those doubts
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have been resolved in favor of Commissioner Irvin. The objective of this report is to provide the Speaker and Members of the House with all substantial and credible information that may constitute grounds for impeachment. Before submitting this report to Speaker Jake Flake and the Arizona House of Representatives, appointed counsel has a clear obligation to satisfy himself that the information contained in this investigation is both "clear" and "convincing" and that it addresses occurrences that "may constitute grounds for impeachment." The first step has been to make an initial assessment whether the evidence against Commissioner Irvin is substantial, clear and credible. To make that

determination, special counsel has carefully weighed whether a multitude of witnesses who testified in the Southern Union litigation or were independently interviewed in this impeachment investigation are believable and whether their version of events is corroborated by other evidence. The same standard has been applied to the American National Mortgage inquiry, Clean Elections, Fraud on the Court, and allegations surrounding a lawsuit involving Corporation Commission employee James Fisher. The second step has been to assess the severity and gravity of the facts previously uncovered as part of the Southern Union litigation, the American National Mortgage litigation, the Jim Fisher litigation, Clean Elections and Fraud on the Court. It has been special counsel' duty to discern whether Commissioner Irvin committed s
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wrongful acts of sufficient magnitude to warrant a recommendation of impeachment. Special counsel has carefully sought counsel and advice from the investigative team he assembled to ensure that his judgment and recommendation is shared by this team. Actions worthy of impeachment can take two distinct forms: (1) acts perpetrated by a public official in the discharge of his official duties, or (2) acts independent of his official duties which reflect upon his character and fitness to serve. To illustrate, an official who takes a bribe for a favorable vote acts as part of his official duties, while the same official who physically assaults his spouse is not acting within his official duties, but clearly has committed actions which may reflect upon his character to serve. The essence of this inquiry in the Southern Union litigation, American National Mortgage, and his actions against Commission employee Jim Fisher focus exclusively upon actions taken by Commissioner Irvin in his capacity as a Corporation Commissioner. These actions go to the very essence of impeachment. Our

investigation into allegations regarding whether Commissioner Irvin committed a "fraud on the court" in the Southern Union trial or violated the Clean Elections laws do not relate to his official duties. To illustrate this important distinction, the chief defense raised by former President Clinton's lawyers in his impeachment defense involving his misdeeds with Monica Lewinsky or his false statements in the Paula Jones civil lawsuit centered on the fact that those actions did not arise out of his duties as President but
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rather focused on misdeeds in his private life. It was this distinction which likely saved President Clinton's presidency. No such distinction exists in this investigation on three of the five issues subject to our inquiry. Special counsel and his colleagues have unanimously concluded that there is substantial and overwhelming evidence of gross misconduct falling squarely under the Constitutional standard of high crimes, misdemeanors or misconduct in office, and that Commissioner Jim Irvin should be impeached and, after his Senate trial, be removed and forever barred from serving in elected or appointed public office in the State of Arizona.

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I. SOUTHERN UNION V. JAMES M. IRVIN COMMISSIONER JAMES M. IRVIN IS RESPONSIBLE FOR REPEATED ACTS OF WRONGDOING IN THE ONEOK-SOUTHWEST GAS MERGER. THESE ACTIONS CONSTITUTE EGREGIOUS CRIMINAL AND ETHICAL MISCONDUCT AS WELL AS MALFEASANCE IN OFFICE. COMMISSIONER IRVIN VIOLATED HIS DUTIES AS AN ARIZONA CORPORATION COMMISSIONER AND HIS ACTIONS MANDATE HIS REMOVAL FROM PUBLIC OFFICE. A. Background 1. The Scope of the Southern Union v. Irvin Litigation

The Southern Union v. Irvin civil litigation was likely one of the most, if not the most, expensive and thoroughly investigated lawsuits in Arizona history. development of facts in that litigation was unprecedented. The

Approximately 124

witnesses were deposed for well over 200 days, including witnesses deposed during the federal court trial in Phoenix. The depositions involved witnesses who resided in approximately one dozen states. Many witnesses were produced at locations other than where they lived. Depositions were taken in eight states and the District of Columbia (Arizona, Oklahoma, New York, California, Missouri, Nevada, Texas, Colorado). At Commissioner Irvin's federal jury trial, 71 witnesses were presented live or by video deposition. The litigation, when the final amended pleadings were filed, involved not only individual defendants, but three of the leading natural gas companies in the United States.
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The corporate and individual defendants had some of the finest attorneys in the United States. The list of attorneys assembled to represent the various parties reads like "Who's Who in American Law." It is clear that the record compiled in this case does not involve a situation where highly talented lawyers on one side bullied and beat up on weaker, inexperienced lawyers leading to an unfair result. The facts flowing out of the Southern Union v. Irvin litigation were developed with painstaking precision, and skillfully presented and articulated to both judge and jury. Attorneys representing various parties to this litigation, as well as governmental attorneys familiar with the case, have confirmed that the legal price tag for all parties in the various multistate lawsuits reached an estimated $80 million dollars. The one and only elected public official who stood at the heart of this litigation nightmare was James M. Irvin of the Arizona Corporation Commission. 2. The Parties in the Federal Court Litigation and their Legal Counsel

The plaintiff, Southern Union Company is headquartered in Wilkes-Barre, Pennsylvania. A member of the New York Stock Exchange, Southern Union is engaged primarily in the transmission and distribution of natural gas. Southern Union owns and operates more than 10,000 miles of interstate pipelines that transport natural gas from the Gulf of Mexico, South Texas and the Panhandle regions of Texas and

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Oklahoma to major U.S. markets in the Midwest and Great Lakes region. Southern Union also owns and operates the nation's largest liquefied natural gas import terminal - located on Louisiana's Gulf Coast. Southern Union served nearly one million natural gas end user customers in Missouri, Pennsylvania, Rhode Island, southeastern Massachusetts and Texas. Lead trial counsel against Commissioner Irvin and the other defendants was New York attorney Eric D. Herschmann, a former Senior Investigative Counsel for the New York County District Attorney's Office and former Special Assistant United States Attorney. A partner in the New York law firm of Kasowitz, Benson, Torres and Friedman, his litigation team consisted of Michael Fay (a partner in the same law firm); Tom Q. Ferguson, Shelly L. Dalrymple and William H. Spitler of the Tulsa Oklahoma law firm of Doerner, Saunders, Daniel and Anderson; N. Warner Lee and William McManus of the Ryley, Carlock and Applewhite law firm of Phoenix, Arizona; Christina Dodds of the Austin, Texas law firm of Watson, Bishop, London and Brophy; Robert E.B. Allen, Charles Steven Price and Barry R. Sanders of the Phoenix law firm of Allen, Price and Padden, P.C.; and Professor Thomas A. Mauet, Director of Trial Advocacy and Professor of Law at the University of Arizona College of Law and a noted author on trial practice. Herschmann and Ferguson litigated most of the trial for Southern Union.
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The defendant Oneok was headquartered in Tulsa, Oklahoma. Oneok was an energy company involved mostly in oil and gas production and natural gas processing in the Midwest. A member of the New York Stock Exchange, Oneok was the largest natural gas distributor in Kansas and Oklahoma, operating as Kansas Gas Service and Oklahoma Natural Gas Co., and serving about 1.4 million customers. Southern Union sued both Oneok and key company officials. Oneok in turn sued Southern Union in Oklahoma, and became embroiled in a separate lawsuit against Southwest Gas. The Oneok team of lawyers consisted of John Rule, Oliver Howard, Thomas J. Kirby, David Keglovits and Amelia A. Fogleman of the Tulsa, Oklahoma law firm of Gable and Gotwals; Michael Kennedy, Tom Henze and Mark M. Deatherage of the Arizona law firm of Gallagher and Kennedy; and John Swenson, Richard J. Doren and Thomas E. Holliday of the Los Angeles law firm of Gibson, Dunn and Crutcher. Tom Henze, a highly respected local attorney, was lead counsel for Oneok in the Arizona litigation. Various Oneok company officials and attorneys were also named in the lawsuit. Larry Hammond and John A. Stookey of Osborn Maledon, P.A, a Phoenix law firm, represented Eugene Dubay, President of Kansas Gas Service, a division of Oneok. It was Dubay who was to head the Southwest division of Oneok after the completion of the proposed Southwest-Oneok merger. Attorneys Mike Kimerer and Tom Rawles of the Kimerer and Derrick Arizona law firm represented John Gaberino, General
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Counsel of Oneok. Attorney Michael Piccarreta of the Tucson law firm of Piccarreta and Davis represented James Kneale, Vice President-Chief Financial Officer and Treasurer of Oneok. Attorneys Don Bivens and Paul Stoller of the Phoenix law firm of Meyer, Hendricks and Bivens represented attorney Mark Dioguardi, a local Phoenix attorney who represented Oneok in the Southwest - Oneok merger. The defendant, Southwest Gas, has engaged in the business of purchasing, transporting and distributing natural gas to residential, commercial and industrial customers in the southwestern United States since 1931. A member of the New York Stock Exchange, Southwest Gas served approximately 1.5 million customers in Arizona, Nevada and portions of California. Headquartered in Nevada, Southwest Gas was an investor-owned utility. Southwest Gas shares are traded on the New York Stock Exchange and the Pacific Stock Exchange. Southwest Gas assembled an exceptional team of attorneys to represent both the company and officers and directors named in the Southern Union lawsuit. The Southwest litigation team consisted of Michael Farrell, Michael J. O'Connor, Douglas F. Behm, John Moody, Richard Thomas and Michael S. McCoy of the Phoenix law firm of Jennings Strouss and Salmon; Seth Aronson, Floyd Andrews, Marc Einstein and Patrick Lynch of the Los Angeles law firm of O'Melveny and Myers; Michael R. Klein, Steven F. Cherry, Howard M. Shapiro, David P. Donovan of the Washington
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D.C. law firm of Wilmer, Cutler and Pickering; Scott Rowland and Paul J. Cleary of the Tulsa, Oklahoma law firm of Boone, Smith, Davis, Hurst and Dickman; Todd L. Bice of the Las Vegas law firm of Schreck, Brignone and Godfrey; and Steve Morris and Kristina Pickering of the Las Vegas law firm of Morris, Pickering and Sanner. Thomas A. Hartley, Chairman of the Board of Directors of Southwest Gas, was represented by Michael A. Beale and K. Thomas Slack of the Phoenix law firm of Beale and Michaels. Hartley was further represented by Samuel B. Benham and C. Stanley Hunterton of the Las Vegas law firm of Hunterton and Associates. Michael O. Maffie, President and Chief Executive Officer of Southwest Gas, was represented by David J. Damron, Shannon M. Ivanyi, and Victoria Skinner of the Phoenix law firm of Sanders and Park. Thomas Sheets, Southwest Gas's General Counsel, was

represented by Attorneys Ed Novak, Douglas Passon and April O. Wynne of the Phoenix law firm of Quarles and Brady Streich Lang. Defendant Edward Zub, Southwest Gas's Senior Vice President over Regulation and Product Pricing, was represented by Attorney Christopher M. Skelly of the Phoenix law firm of Scott and Kelly and by Jordan Green of the Phoenix law firm of Fennemore Craig, P.C. Southwest Gas's public relations firm, Sitrick and Company, was represented by Brian A. Sun of the Santa Monica law firm of O'Neill, Lysaght and Sun.

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The defendant Commissioner James Irvin was represented in all phases of the various pieces of litigation by a cadre of seasoned and extremely capable trial attorneys. His lead counsel in the Phoenix federal trial was Michael W. Sillyman, of the Phoenix law firm of Kutak and Rock. Mr. Sillyman was assisted by attorneys Brian J. Schulman, David M. Park and Kimberly B. Schultz of the Kutak Rock law firm. Commissioner Irvin was further represented by attorney Michael Anthony of the Phoenix law firm of Carson, Messinger, Elliot, Laughlin and Ragan. He was

represented in the simultaneous criminal investigation by Phoenix attorney Bruce Feder of the Feder law offices. Commissioner Irvin's wife, Carol Irvin, was represented by Phoenix attorneys Marc Budoff and Jeff Ross of the law firm of Budoff and Ross. Carol Irvin was not a party in the Southern Union lawsuit. Commissioner Irvin is currently being represented in his federal appeal by attorney Barry Richard of the law firm of Greenberg Traurig, P.A. of Tallahassee, Florida, and attorneys E. Jeffrey Walsh and James A. Ullman of the Phoenix law firm of Greenberg Traurig. Mr. Richard was selected by the National Law Journal as one of its "Lawyers of the Year" in 2001 for his work in the 2000 Bush-Gore litigation. He served as legal counsel to George W. Bush in Florida. The defendant Jack Rose was represented by attorneys Daniel J. O'Connor, J. Daniel Campbell, Jason Hunter, Zahnie L. Soe Myint and Ellen Davis of the Phoenix
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law firm of Bell, O'Connor and Campbell. He was also represented by Shane R. Swindle of the Phoenix law firm of Brown and Bain. In the criminal investigation arising out of the Southwest-Oneok merger, he was represented by attorney John Hannah of the Phoenix law firm of Hoidal and Hannah, P.L.C. It was John Hannah who very capably negotiated "use immunity" agreements with the United States Attorney's office and with special counsel for the Arizona State Legislature. 3. The Outcome of the Southern Union Related Cases The magnitude of the havoc caused in part by Commissioner Irvin and some of the other named defendants linked to Irvin's activities are a matter of public record. These actions generated a number of civil lawsuits filed and litigated in Oklahoma, Arizona and California. Massive, complex litigation developed among the three utility giants as well as the shareholders of Southwest Gas, who sued the company in a class action lawsuit. The civil settlements and/or jury dispositions of those lawsuits began in September of 2001 and continued through the Irvin trial. The settlements and jury awards were as follows: a. Southwest Class Action Lawsuit:

On September 24, 2001, Southwest Gas Corporation announced court approval of a settlement with the lead shareholder representatives in a California shareholder class action lawsuit. The settlement covered those shareholders who purchased or held
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Southwest stock at any time during the period from December 14, 1998, through January 21, 2001. Under the terms of the settlement, Southwest shareholders were to receive $22 million if Southwest entered into a business combination with a third party within 36 months; 50% of the first $54 million of any recovery from either Southern Union Co. or Oneok Inc. in litigation currently pending in Phoenix Federal District Court, or $9.5 million if neither of first two happened within 36 months. On January 4, 2002 United States District Court Judge Rosalyn O. Silver of the District of Arizona dismissed all of Southwest's claims against Southern Union, leaving only the Southern Union allegations alive, thereby eliminating that component in the shareholder settlement. b. Southwest Gas Settlement with Southern Union:

On August 7, 2002, both Southern Union Company and Southwest Gas announced a settlement of the Southern Union claims against Southwest Gas. Southwest Gas Corporation agreed to pay Southern Union $17.5 million to settle Southern Union's claims of fraud and bad faith breach of contract related to Southern Union's attempts to purchase Southwest. All claims brought by Southwest Gas against Southern Union had been previously dismissed by the federal court.

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c.

Oneok Settlement with Southwest Gas:

On August 9, 2002, Southwest Gas and Oneok announced that they had settled their lawsuits against each other. As part of that settlement, Oneok agreed to pay Southwest Gas $3 million to settle all outstanding claims between them. Southwest Gas, as part of the settlement, dropped four claims against Oneok, including fraud and breach of contract in the merger termination. Oneok dismissed all of its claims against Southwest Gas as part of the settlement. d. Jack Rose Settlement with Southern Union:

On December 13, 2002, Commissioner Irvin's "loaned executive"/consultant Jack Rose, near the eve of the Southern Union v. Irvin and Rose jury deliberations, settled his lawsuit with Southern Union by agreeing to pay $75,000, a sum which Southern Union later donated to St. Joseph's Hospital. As a part of that settlement, Mr. Rose signed an agreement expressing his regrets over the role he played in the proposed Southwest Gas Corporation merger with Oneok in 1999. e. Southern Union's Verdict against James Irvin:

On December 18, 2002, an Arizona U.S. District Court jury awarded Southern Union Company $975,181 in compensatory damages against various defendants and awarded an additional $60 million in punitive damages against Arizona Corporation Commissioner James C. Irvin. As a result of various pretrial rulings by the Court,
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$975,181 was the maximum amount of actual damages that Southern Union was allowed to submit to the jury. On the "Interference with Contract" claim, Commissioner Irvin's fault was apportioned at 40%, leaving Southern Union with a compensatory damage award of $390,072.58 against Irvin. In that verdict, the jury apportioned findings of fault related to the actual damages portion of the award among Commissioner Irvin (40%); Jack Rose (15%); Oneok (5%); Eugene Dubay, former Oneok, Inc. executive (10%); John Gaberino, Oneok, Inc. General Counsel (6%); Mark Dioguardi, former counsel for Oneok, Inc. (5%); Southwest Gas Corporation (5%); Michael Maffie , President of Southwest Gas (12%) and Thomas Hartley, Chairman of Southwest Gas Corporation (2%). Irvin was also found liable for "Intentional

Interference with Business Expectancy," where his fault was assessed at 20%. Of course, there was no apportionment of the $60 million punitives damages award, the entire amount was assessed against Irvin. This verdict is now on appeal before the Ninth Circuit Court of Appeals. f. Oneok Settlement with Southern Union:

On January 3, 2003, Oneok and its affiliated attorneys and officers settled all claims brought against them by Southern Union relating to their Southwest Gas acquisition activities in 1999. Mark Dioguardi had been dismissed from the lawsuit prior to the settlement. Oneok paid Southern Union $5 million to settle its lawsuit.
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Oneok's claims against Southern Union had been dismissed long before the settlement. As a critical component of that settlement, Oneok agreed to purchase Southern Union's Austin-based natural gas operating division and other related assets for $430 million in cash. On July 31, 2003, Judge Silver issued a 25-page written decision upholding both the $390,072.58 compensatory damage award and the $60 million punitive damages award against Commissioner Irvin. On August 27, 2003, Judge Silver further explained several important rulings during the Irvin litigation. In her July 31, 2003 opinion, Judge Silver, in denying Commissioner Irvin's Amended Motion for JNOV or in the Alternative for New Trial or Remittitur and seeking a new trial or remittitur on the punitive damage award of $60,000,000, reaffirmed with a multitude of findings supporting the jury' punitive damages award. s g. Judicial and Jury Findings against Commissioner James Irvin

It has been well documented that the trial jury that presided over Commissioner Irvin's trial inquired of Judge Silver whether they had the authority to attach conditions to their verdict. After trial, the jurors revealed that they had hoped to have the authority to remove Commissioner Irvin from his elected duties as an Arizona Corporation Commissioner. When the Judge informed them that their only duty was to determine

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fault and award damages, if any, they imposed their compensatory and punitive damage awards. The verdict and damages were upheld in Judge Silver's July 31, 2003 ruling. That ruling was later expanded in a supplemental August 27, 2003 minute entry order. Special counsel has interviewed the jury foreman and one additional juror to find out the rationale and basis for the jury's staggering verdict. Jury Foreman Adkins explained that Commissioner Irvin had "no credibility as far as I was concerned. It'd be the type of situation where it reached a point that I wouldn't believe anything he said." Juror member Lynn LeSeuer, in describing Irvin's testimony, said: "He had a credibility problem with all of the jurors. He had a hard time determining what was black and white. All he saw was 256 shades of gray. And when he was on the stand, he had a really hard time giving a yes or no answer. They would ask him a yes or no question and he would kind of worm his way back and forth through it." Aside from jurors' comments, Commissioner Irvin's actions have resulted in a tidal wave of condemnation and demands for resignation from a U.S. Senator, both a current and former Governor, the Maricopa County Attorney, a unanimous Corporation Commission, the Republican party chairman, political leaders from various branches of federal and state government, both Democrat and Republican, various respected media organizations and news commentators, and from ordinary citizens of Arizona who feel betrayed by his highly publicized actions.
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Judge Silver's observations in her July 31, 2003 ruling identified the precise, specific character flaws and fundamental breaches of public duty which jurors justified as the basis for their award. Judge Silver's judicial opinion paints a clear and vivid mosaic of the enormity of Commissioner Irvin's actions, a picture which explains and clarifies why a unanimous jury assessed $60 million in punitive actions and why she upheld, to the penny, perhaps the largest punitive damage decision against an elected public official in American history. Her summation of the evidence leaves no room for misinterpretation or mistake. It is clear from the trial record that both the trial jury and Judge Silver were aghast at a series of actions taken by Mr. Irvin to the detriment of Southern Union Company. Judge Silver describes Commissioner Irvin's actions in the Southern Union litigation using terms such as reprehensible, intentional trickery, deceit, evil mind, abuse of power, concealment, perseverance in hiding his wrongful acts through the trial, intentional conduct, egregious acts of reprehensibility, attempts to offer fabricated evidence, participating in a scheme to impede the jury's search for truth, engaging in fraudulent and tortious conduct calculated to inflict willful and malicious injury, and disregarding the interests of the rate-payers of Arizona, which is a centerpiece of his public duties as an Arizona Corporation Commissioner. Each of the jurors, and co-defendant Jack Rose, stated that the most damaging witness against Mr. Irvin was Commissioner Irvin himself, and that his actions on and
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off the witness stand made him a witness impossible to believe and one which the jurors felt was unfit for continued public office. These findings, supported by an exhaustive and comprehensive trial record, documents repeated acts of serious misconduct by evidence that is both clear and convincing, and mandates impeachment and removal from office, now and forever. 4. Southern Union Corporation - A History

The plaintiff Southern Union is a 74-year-old company founded in 1929. Its operations have been historically conducted in Pennsylvania, Rhode Island, Massachusetts, Florida, Missouri, and Texas. In 1998-99, Southern Union was a strong, financially sound company with a solid track record of success with its customers, shareholders and regulators. At the time Southern Union made its offer to buy Southwest Gas, Southern Union was the 10th largest natural gas company in the country. Today, Southern Union is the 4th largest natural gas company in the country. It had always enjoyed, with rare exception, a fine reputation among regulatory bodies who oversee its activities. Between 1993 and 1998, trial evidence demonstrated that it outperformed every natural gas company in the United States. Southern Union was led by a strong chairman of the board, George Lindemann. Mr. Lindemann was a self-made billionaire   a man who created several successful companies in different industries, including the natural gas industry. His business
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acumen is legendary. His successes have been the subject of numerous articles by highly respected business magazines, business journals and news publications such as Forbes, Business Week, Money Magazine and the Wall Street Journal. He has built an enviable record of business achievement over the course of his illustrious career. Mr. Lindemann bought Southern Union in 1989 when it was on the verge of bankruptcy and turned the company around in dramatic fashion. In his 14 years of management, a $170 million company grew to over a billion dollar industry giant. Under Lindemann' leadership as controlling shareholder and CEO, Southern Union s became a national leader in providing the lowest gas prices for its customers. In addition, the company's safety performance ranked among the best in the natural gas industry. Southern Union's stock outperformed every other natural gas company in the country soon after Mr. Lindemann took over control of Southern Union up and through the trial. This background of achievement and natural gas performance is important because part of the strategy of detractors of Southern Union, including Commissioner Irvin, was to paint a false picture, suggesting that it was a debt-riddled, poorly managed company so weakened by economic, safety and performance issues that regulatory approval would be either unlikely or subject to conditions so onerous and burdensome as to make Southern Union' acquisition of Southwest Gas economically unfeasible. s This strategy will be detailed later in this report.
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5.

General Merger Process

Southern Union tried to buy Southwest Gas for $1.8 billion dollars. Oneok also tried to buy Southwest Gas, for $108 million dollars less than Southern Union, and Southwest Gas initially accepted Oneok' lower offer. On December 14, 1998, Oneok s offered to purchase Southwest Gas for $28.50 per share. On February 1, 1999, Southern Union made a higher offer for $32 per share, with the exact same terms offered by Oneok. Typically, when a company like Oneok or Southern Union is interested in buying another company like Southwest Gas, the buyer will first approach the target company or an investment banking entity to promote a sale. If management of the two companies reach agreement on the terms of the deal, then the deal is submitted to the board of directors of each company for preliminary approval or disapproval. The board of directors is the governing body of a company. The members of the board are elected by the shareholders of that company. The shareholders are the owners of the company; they have put up the money to run it. When a company is up for sale, like Southwest Gas was here, both the board of directors and the management of a company owe a strict legal duty to the shareholders to get the most value and best return on the shareholders' investment. In other words -- to get the shareholders the most money for the deal. The company does not belong to either the management or
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the board of directors, so it is not their company to decide whom to sell to based on personal benefit, bias or whim. The management and the directors are dealing with the shareholders' money. And at the point in time when the company is being sold, the shareholders (the owners) are cashing out and want to get the most money possible. Several steps must be taken to bring about a merger. When the board of directors approves a preliminary merger agreement negotiated by management, the final approval of the sale has to come from the shareholders. To educate the shareholders on the merger proposal, management and the directors prepare a proxy statement and mail it out to all of the shareholders for their approval. The proxy statement is supposed to set out the information about the sale and is normally accompanied with a written recommendation from the board of directors setting forth their reasons to support the recommendation. The shareholders then vote on the proposal and return their proxy to the company. For natural gas companies, like Southern Union, Southwest Gas and Oneok, there is another critical layer of involvement. These natural gas companies are "regulated entities" and, therefore, must get approval from state utility commissions for the prices they charge for their services, the services they provide and the products they sell. The rate-paying public has a right to expect competent delivery of natural gas at acceptable prices. If a company like Southwest Gas sold its operations to an inept or
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poorly managed company, it would jeopardize the quality of product and service that ratepayers had grown to expect. For that reason, utilities commissions in each of the affected states have to approve the sale before it can become final. Any merger with Southwest Gas would have had to go through an approval process in at least three states -- Arizona, California and Nevada -- where Southwest Gas operates and serves its customers. In Arizona, the regulatory body is the Arizona Corporation Commission, or ACC. Commissioner Irvin was the Chairman of the ACC in 1998-1999. In California, the merger had to be approved by the California Public Utilities Commission or CPUC, and in Nevada, Southwest Gas'home base, the merger had to be approved by the Public Utilities Commission of Nevada, or PUCN. These three administrative entities do essentially the same thing. The

commissioners at these three agencies play similar roles to judges in a lawsuit. They have a clear duty to be fair and impartial, to consider the evidence and arguments of counsel and litigants without bias, and to wait until they hear all the evidence before they vote. It is vital that commissioners maintain neutrality and impartiality until they have heard all evidence and arguments of adversaries in any proceeding. The essence of the jury verdict and judge's findings against Commissioner Irvin was that he utterly failed to remain fair and impartial, instead crossing the line and becoming an advocate for Oneok and against Southern Union. It was their belief that Commissioner Irvin
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violated the duties and oath of his office when he abandoned his duty of impartiality and engaged in unprecedented covert actions with a non-ACC employee, Jack Rose to ensure Oneok's bid for Southwest Gas. There is a well-defined process involving the ACC which precedes a vote on a merger. It begins when the two merging companies file a joint application for ACC approval. The ACC has a very capable staff of over one hundred people whose job is to review merger applications and make recommendations to the ACC commissioners about the agreement. These officials examine the safety record, the performance record, and economic strength and viability of a company. After the staff makes its recommendations, the ACC commissioners then make the final approval of the merger application based solely on evidence that is presented in the case in a public hearing. Those who oppose the merger, or otherwise believe it is harmful to rate payers or the state, have an opportunity to be heard. It is vital to the due process rights of all applicants and interested parties to know that commissioners cannot pre-judge a deal or lobby in favor of one merger partner over another. They cannot be involved in choosing one merger partner over another until the evidence has been fairly presented and issues of approval come to vote. It is unthinkable for a commissioner in one state to try and influence a commissioner in another state through ex-parte communications. It is unthinkable for a quasi-judicial
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officer to lobby a governor or a board to help a preferred applicant prevail over the opposition. Their decisions should only be based on the information that is presented to them after review by ACC staff. When someone makes an unsolicited comment such as a letter outside of the judicial process, the commissioners have a duty to file such letters in the docket so all sides are able to see and evaluate any contact made with a commissioner. Under these clear due process guidelines, the applicants, interested parties, shareholders, and rate payers can know why a merger is being approved or rejected. There are not supposed to be any back-room, secret meetings, nor can actions be potentially influenced by friends or advisors who might have a significant financial interest in the outcome of a case. Before the Oneok-Southwest Gas merger, California, Arizona and Nevada had approved virtually every merger that had come before them in the natural gas industry. The same is true with every other regulatory agency in this country. It is not uncommon for conditions to be agreed to by the parties and then imposed for approval. This is part of the regulatory give-and-take attendant to virtually every merger. Commissioners can impose conditions relating to an existing work force, or insist that a merged utility be an active part of the community that it will serve. The commissioners and the applicants have continuing duties of fair play. Conditions must be fair and designed to promote a greater public good. It should be emphasized that no natural
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gas merger has ever failed because it could not get regulatory approval and never in the history of this country has a regulatory body imposed conditions on a deal that prevented the deal from closing. The evidence produced at the Southern Union v. Irvin trial proves Commissioner Irvin was part of a clever strategy designed to defeat Southern Union's superior bid to acquire Southwest Gas. For the plan to work, those supporting the plan would have to persuade the Southwest Board of Directors to reject a superior offer to the clear detriment of the shareholders that they had a fiduciary duty to protect. The strategy, as described in the trial record, was to bombard key decision makers with false and misleading information at the last possible moment. The objective was twofold: convince the Southwest Board that regulatory boards in Arizona, California and Nevada had serious reservations about approving Southern Union's bid while, at the same time, undermining confidence in the economic strength of this natural gas giant. If detractors could taint the higher bidder, a $28.50/share offer could appear to be superior to a company offering $32.00/share. The decision makers only had to be persuaded that the high bidder was besieged with debt and would probably be saddled with regulatory conditions by various state utilities commissions. The best person available to promote these points was Chairman Irvin. He was the one person who could walk through an open door and lobby commissioners from neighboring states,
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enter the enclave of a Governor's office in Nevada and lobby for Oneok, or approach CEO's or other company officials of regulated companies like Southwest Gas to shatter confidence and undermine support for Southern Union. It was no mistake that the trial jury assessed 40% and 20% findings of liability and entered a staggering punitive damage award. All other participants were in the private sector. No voice among all the named defendants carried greater weight and authority than the voice of the ACC chairman, James Irvin. 6. Jack Rose - Commissioner Irvin' Close Friend and Advisor s

One of the most important and pivotal figures in the Southern Union litigation was a boy-genius who emerged as a powerful figure at the Arizona Corporation Commission. When Commissioner Jim Irvin was elected to the Arizona Corporation Commission in 1997, one of his key campaign advisors and strategists was Jack Rose. His life story is important to the mosaic of this litigation. Jack Rose was born in humble beginnings in Mohave County, the youngest of 8 children. Despite his family's financial hardships, Rose used a brilliant mind and ambitious personality to successfully escape from his small town environment and gain admission to prestigious eastern universities. His is a fascinating rags-to-riches story. Raised in a poor environment by a loving mother and abusive stepfather, Rose would escape to public libraries and immerse himself in books.
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In 1985, while in the midst of pursuing his college education out of state, Rose, a political neophyte at the youthful age of 21, successfully ran for and was elected to a seat on the Mohave County Board of Supervisors. This made Rose the youngest county supervisor ever elected in Arizona and, at the time, made him the youngest elected official in the United States. He had successfully crafted a strategy which involved changing political parties from Republican to Democrat, and engineering a strategy resulting in a landslide victory in a Republican dominated county. After a four year term, Rose left full-time politics and returned to school. In 1990, Rose's political interests bought him to Phoenix where he volunteered to work with then-Phoenix mayor Paul Johnson as a "loaned executive." Rose and Johnson became close friends, a friendship which thrives even to this day. Rose played an active role in assisting Mayor Johnson as an unpaid volunteer, contributing political ideas and giving political support to the Mayor. He would later serve as an elected member of the Maricopa County Charter Committee. Many of his contemporaries viewed Jack Rose as a rising star in the Democratic Party. During many of Rose's political activities in the early 1990's, he was commuting between Massachusetts and Arizona with a backbreaking schedule, leaving on Wednesdays and returning on Sundays. In 1991, Rose graduated from Yale and was admitted to Harvard Law School.
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In 1996, shortly after his graduation from Harvard Law School, Rose became a key political strategist in Commissioner Irvin's quest for election to the Arizona Corporation Commission. Rose became an important Irvin fundraiser, speech writer, and strategist. He traveled with Irvin throughout the state. Although Commissioner Irvin claimed in an interview on August 20, 2003 that Rose played a minor role in his campaign, that claim is untrue. Irvin, in a classic understatement, said:
Irvin: [J]ack provided a little assistance. I think it was blown out of proportion when it got into how much assistance he would have provided on the campaign but he -What role did he have? What role did he play? Yeah, I' not sure he had a role or he played anything cause he wasn' there m t all the time. He wasn' an active participant. He   the only thing that I t recall him ever claiming to commit to do was he said he' help raise a little d bit of money. Of which he did help raise, I don' remember the exact amount. t I want to say, best guess it' probably maybe twenty, $25,000. But I' not   d m don' quote me on that even though you got it on tape. t Yeah, too late, you' e recorded. r But anyway   Did he do speech writing for you or   Not that I recall, no ...

McDonald: Irvin:

McDonald: Irvin: McDonald: Irvin:

[Irvin Interview at 19, emphasis added.] Jack Rose was heavily involved in Irvin's 1996 campaign. Mohave County resident Gary Goodman had encouraged Rose to assist Irvin. Before joining the Irvin campaign, Rose had received a generous buyout of his employment contract from his
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employer, Bank of America, enabling him to devote almost full time to the Irvin campaign as an unpaid political advisor and strategist. A troubling aspect of the Rose-Irvin relationship has been Commissioner Irvin's propensity to misstate the truth, even on trivial, non-essential matters. The jurors we interviewed told us that Commissioner Irvin was simply not a truthful person, and that this lack of credibility was manifest during the trial time and time again. An example of this troubling behavior is illustrated by his attempt to distance himself from his relationships with Jack Rose and Mark Dioguardi. This was a problem which plagued him during his trial, as well as our August 20 interview. Juror Lynn LeSeuer described the impact of Irvin's dishonesty upon the jury.
McDonald: Tell me in your own words, just give me a summary, of how the trial as it progressed, the strengths and weaknesses that you saw in the Southern Union case? The strengths and weaknesses in the Southern Union case. Well, we had a total of 72 witnesses, either in person or video deposition. Some of that includes multiple testimonies. As it progressed, we learned more and more about what happens with/when corporations are getting ready to merge. I knew a little bit about small mergers that I' e been involved in. I learned a lot about larger mergers and we v learned quite a bit about the do' and don' s. You know as far as s t what is required when you hold public office. OK What was your read on Commissioner Irvin? How would you describe your feelings as they begin to evolve in the case? Well, to give you my read on Commissioner Irvin, I also have to give you my read on Jack Rose. I know he' not part of this whole s proceedings but when they came into the court room, it was? they were very buddy, we' e in this for the same purpose and we' e going r r
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LeSeuer:

McDonald: LeSeuer:

to stick together to the end. And about half way through the case, or I guess it was probably either the 1st or 2nd time that Jack Irvin was on the stand. McDonald: Leseuer: You mean Jim Rose [sic] or? Jim Irvin. Jim Irvin was the stand, he made the statement that they were not friends that they were just acquaintances and he kind of really distanced himself from Jack Rose. Whereas, everything we had heard prior to that, you know they would go to the gym together. They would go hiking together. They would, you know, they were almost inseparable with a lot of their business dealings and a lot of their? you know, they had a good relationship going from what everyone outside was saying. So when, Commissioner Irvin got up and said they were not friends, and they were just kind of so-so as far as business associates, that kind of turned Jack and it kind of made all of the jury perk up and say well, wait a minute, that' contrary to s everything we' e heard. v

(LeSeuer Interview at 2-3.) In the trial, Irvin claimed he had worked out with Rose possibly one time. Those who know Rose and Irvin have characterized that claim as utterly absurd. We asked Irvin to detail the personal side of his relationship with Jack Rose. He said:
McDonald: Now, were   was Rose a friend of yours outside of the professional realm? In other words, would you go to dinner with him? Activities like that? I think Jack and I socialized and went out to dinner probably once the entire time and that was a fundraising event. Okay. Other than that, maybe once or twice we went to the gymnasium and we worked out. Did you belong to the same spa? No.
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Irvin: McDonald: Irvin: McDonald: Irvin:

McDonald: Irvin:

When you same "gymnasium" what   is it one that you and he both belong to? No, it was one he invited me   he invited me to   it was one that he was a member of, I was a member of a different one. In fact, I used to be a member of the Renaissance Club down here. He was up   some place up north. But no, we really   really didn' socialize. He t invited me to go on several trips with him to Las Vegas and he invited me to go   Did you go? No. No. Never went. On a rafting trip. Never went, never did any of those things with him. Okay so there really wasn't a social life then, it was just one political dinner and there were no social dinners together, and once or twice at a health club and that was it? Basically, as best I can recall, yeah. I mean, we'd talk on the telephone. Sometimes we'd meet for lunch. But, you know, really there was no outside social hiking, movies -- you know, other things. And I -- I don't want to go there in case -Dioguardi. Is it the same with Mark Dioguardi or were you closer to Dioguardi? No, it's pretty much the same with Dioguardi. Again, it was -- the only social thing I ever did with Mark outside of fundraising was I was invited to go to his wedding. Other than that, and Carol and I went to his wedding. Other than that, I think the only time on a social aspect with Mark was probably at a -- not a -- well, either at political fundraisers or charitable events.

McDonald: Irvin: McDonald:

Irvin:

McDonald: Irvin:

(Irvin Interview at 24-25, emphasis added.)

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Jack Rose, who testified under oath pursuant to subpoena before a later grant of immunity by the House of Representatives, was shocked by these claims. He explained that both he and Irvin belonged to the Renaissance Club, and would frequently work out together at that facility. We did subpoena the records at the Renaissance and found that, indeed, Irvin and Rose were members during the same period. The Renaissance would actually maintain records when members attended that facility. There were a number of times that Irvin and Rose signed in within minutes of each other. Rose' s testimony, and the Renaissance records, confirmed Commissioner Irvin' claims were s false. Jack Rose joined the Renaissance Athletic Club on July 7, 1997 and ended his membership on December 31, 1998. Jim Irvin joined the same facility on April 24, 1997 and canceled his membership in late February of 2000. We learned that there were numerous times that Rose and Irvin would work out together at the Renaissance. After leaving the ACC, Rose joined the Tocasierra Spa and Salon at the Pointe Hilton at Squaw Peak. While Irvin did not acquire a membership at that facility, he was a frequent guest of Jack Rose. It is this type of misleading testimony that we find from Jim Irvin time after time. In addition, we learned that there were well over 100 breakfasts and lunches where Irvin and Rose would meet and dine together. Additionally, there were numerous hiking events where Rose and Irvin climbed Squaw Peak as well as other hiking terrains.
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And it is not just Irvin's word against Rose's word. Irvin's ACC secretary, Laura Winewar Black, testified at trial that she was aware of the many activities that Rose and Irvin would participate in together on an almost daily basis. Mrs. Black testified at the trial:
Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. Now you knew Jack Rose and Jim Irvin back in 1999, right? Yes, I did. And they were good friends back then; right? I know Jim as my boss; Jack is my friend. But did you know that Jack and Jim were good friends back then? Yes, I did. And they socialized together a lot; right? I have no idea how often they socialized. Do you recall they went to lunch together almost every day? No, I don't know anything about them going to lunch every day. Do you recall that they used to work out together? Yes, that I do know, that they worked out together. And Mr. Irvin's a pretty big enthusiast about working out, right? Yes. And so is Mr. Rose, right? Yes. And do you recall that they used to go to breakfast meetings together and do various things together?
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A.

I know they did do some things together; I don't know exactly what.

(Trial Transcript, p. 5156:10 to p. 5157: 9.) Dioguardi confirmed that his personal and social relationship with Irvin was much closer than described by the Commissioner in the August 20th interview. Jack Rose had a closer professional and working relationship with Jim Irvin than any other person, including Irvin's wife. Irvin trusted Rose, confided in Rose, received counsel and advice from Rose, and relied heavily on Rose for both political and regulatory advice. 7. Jim Irvin's Creation of an Arizona Corporation Commission "Loaned Executive" Position - Jack Rose Serves as Irvin's Loaned Executive in 1997

In the early spring of 1997, shortly after Irvin's assumption of office at the ACC, Commissioner Irvin implemented a "loaned executive" program designed to position Rose as a confidant and chief advisor even though he was an unpaid non-state employee. It is obvious that Commissioner Irvin became so comfortable with his

relationship with Jack Rose that he wanted that relationship to continue beyond the campaign trail. Jack Rose, once appointed, was actually provided a private office at the Arizona Corporation Commission over the vehement objections of then Chairman Carl Kunasek. Commissioner Renz Jennings supported Irvin in the assignment of a

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private office for Rose. It was an unprecedented action for an unpaid, non-state employee to have a business office within the confines of a public agency. One of Rose's first assignments as loaned executive was to draft "Commissioner Jim Irvin's Ethics Policy" that would govern Irvin's current and future employees, including Rose. The rules were intended to cover those employees who worked under Irvin at the ACC, then and in the future. The first two policies are probative to this inquiry. The first ethics rule read:
It is the policy of Arizona Corporation Commissioner Jim Irvin to uphold, promote and demand the highest standards of ethical behavior from all employees. Accordingly, all members of the Irvin staff, including Loaned Executives, shall maintain the utmost standard of personal integrity, truthfulness, honesty and fairness in carrying out their public duties; shall avoid any improprieties in their roles as public servants, and shall never use their position or powers for personal gain.

The second ethics rule, drafted by Jack Rose and adopted by Jim Irvin, read:
In order to avoid conflicts of interest and the appearance of impropriety, staff members shall not accept gifts, commissions, retainers, salary, or any other type of income from a regulated utility company. Furthermore, an employee with a substantial interest in any contract, sale, purchase or service to the ACC is prohibited from participating in the transaction.

Had Jim Irvin embraced and acted in accordance with his own ethical policies, he would not have been assessed staggering punitive damages, nor would he have been recommended for impeachment and a lifetime ban for elective office in Arizona by Special Counsel.
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Jack Rose, as a loaned executive, became involved in sensitive Commission business, working with utility executives and becoming a visible presence at the Commission, even though he was unpaid. Because of the highly sensitive

responsibilities of Corporation Commissioners, resentment and skepticism developed over this program among one commissioner and among staff, especially Carl Kunasek and his aide, Jerry Porter. The term "loaned executive" was misleading because Rose was not an "executive" with any recognized company in Arizona and, consequently, no company had loaned Rose to the Corporation Commission. Commissioner Irvin, in our August 20th interview, admitted:
McDonald: So when you' e elected to the Commission, I know that he came on   r you brought him on as a loaned executive. What did that mean? I' m trying to   is it something   a description you got from Paul Johnson or is it something that you created or   You know, it' a good question and I don' think there' any really s t s good answers. Because at the time there wasn'   Jack had drafted a t   it was on the record, an ethics policy which was the same ethics policy that he used with Paul Johnson which quite frankly to me looked very, very good for outside people. And it was a way for him to kinda be able to, from time to time, be able to provide me with some advice or whatever. There was no   there was no description, there was nothing ever put out per se and, you know, in hindsight, probably loaned executive was a very bad term to use but, you know, what else you gonna do? Just a (?) contact or somebody to, you know, somebody from the outside to give advice to an elected official from a third party, non binding advice. In other words, was he loaned by a company like Bank of America or was it just a title. You say maybe it was a bad name. So  

Irvin:

McDonald:

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Irvin:

And that' why I' saying that cause you'l look back and now and s m l see all the controversies created. I think   it was a bad name because he was not, to my knowledge, no one paid him to do that and he wasn'   he would offer   and it wasn' all the time he did, but he t t would offer a thought or I' call him and say, you know, gosh, let' d s just run this by from your perspective, what do you see. And just bounce something off the wall and, you know, he' give me his d opinion on it, for whatever that was worth. But the answer to that question is "was he paid by another company or did anybody bring him," the answer is not to my knowledge. And that was never the intent, for anybody to be paid in that capacity. In other words, to bring him on you never discussed like with Bank of America or something where they say "here, we' e gonna let you use r his time or his talents or anything like that?" No, you' e absolutely right. We never discussed with anybody. r

McDonald:

Irvin:

[Irvin Interview at 20-21, emphasis added.] In truth, Mr. Rose's participation was much greater than an occasional phone call from Commissioner Irvin. He had an actual office and would come to work on a regular basis, even though he was unpaid. There were a host of potential liability issues potentially arising out of Rose's participation in the Commission's business. For example, if Jack Rose took an action as a "loaned executive" that created liability to an aggrieved party, would the State of Arizona be liable for the actions of this unpaid employee? These legal questions and troublesome concerns never became a focus in Mr. Irvin's mind. Indeed, in the Southern Union litigation, Jack Rose was named as a defendant and even though he was not a state employee, the State

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eventually provided Rose a defense and ended up paying his $75,000 monetary settlement. The relationship between Rose and Irvin was particularly troublesome and confusing to ACC staff. Each Commissioner was already provided with a state-

approved advisor under state law. The actions of Rose entered into those areas normally reserved for the state   approved advisor. Rose acted as "loaned executive" only to Commissioner Irvin and none of the other commissioners. The unpaid position did provide Jack Rose an excellent opportunity to meet the movers and shakers in the utilities hierarchy in Arizona. Rose had a brilliant mind and a fascination for the concept behind deregulation, and this unpaid position gave him the unique opportunity of "networking" with utility executives not only in Arizona, but throughout the various states.

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8.

Political Firestorm at the Commission - Irvin vs. Kunasek

A firestorm of conflict began at the onset of Irvin's ascension to office between Commissioner Carl Kunasek and Commissioner Irvin. This personality conflict slowly evolved into open hostility between the two commissioners. It started on the day of Irvin's initial oath of office and continued until Kunasek left office at the expiration of his six year term. Although Kunasek and his advisor Jerry Porter had enthusiastically supported and worked for Irvin's election, the honeymoon was short-lived and soon evolved into a bitter, degrading battle that severely damaged staff morale and subjected the commission to public ridicule. Kunasek believed that Irvin should accede to Kunasek's decisions and vote in step with Kunasek. He had far more government experience, and had an impressive legislative background. Kunasek had become accustomed to this type of loyalty from his days as Senate president. Irvin, on the other hand, decided early on that he was not going to be a "yes" man to Kunasek. As hostilities grew between them, Renz Jennings, the lone Democrat on the Commission, saw an opportunity to further his agenda by siding with Irvin in forming a new majority. While the Jennings-Irvin alliance was not always guaranteed, Jennings frequently aligned himself with Irvin on many key issues isolating Kunasek and raising the hostility thermometer to the boiling point.
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Irvin and Kunasek's rivalry and hostility grew almost daily. The hate mail and accusations that spread between them, and among their assistants, was disconcerting. Jennings and Irvin frequently traded insults with Kunasek and Porter. Soon, after Rose became Executive Secretary, insults were frequently leveled back and forth between Rose and Kunasek. Soon, Patrick Black joined the fray against Kunasek. There was no other governmental entity so totally dysfunctional than the ACC. The result was predictable: good people began to resign and look elsewhere for work. Recruiting top people became nearly impossible because of the hostile

environment that poisoned the ACC. The natural byproduct of this hostility was that regulated entities were frequently caught in the cross fire, doing their best to convince each Commissioner that they were in that Commissioner's camp. Public utilities would frequently hire one lobbyist favorable to Kunasek, and another lobbyist friendly to Irvin. There was plenty of blame to throw around among the feuding parties. The poisonous venom expanded to the administrative assistants, resulting in accusations and counter-accusations among Commissioners and their staff. The political feud at the ACC made the Commissioner the laughing stock of state government.

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9.

The Termination of Geoffrey Gonsher and Promotion of Jack Rose to the Position of Executive Secretary

There was open hostility at the ACC between Kunasek and Irvin when Irvin and Jennings were successful in firing then Executive Secretary, Geoffrey Gonsher, and replacing him with Jack Rose. Lindy Funkhauser, the chief legal counsel and an outstanding attorney, was also terminated, wreaking unprecedented hostility between the warring factions. With Rose' appointment, the unpaid s "loaned executive" had now assumed a pivotal role at the Commission as its Executive Secretary. Kunasek resigned as Chairman when Funkhauser was fired in the fall of 1997. This resulted in Irvin becoming the new Chairman of the ACC. During the tumultuous one and a half years of his tenure as Executive Secretary, Rose was repeatedly accused of various acts of impropriety by Kunasek and his aide, Jerry Porter, resulting in public name-calling and growing dissension. According to Jack Rose, Kunasek refused to ever meet with Rose in any one-on-one meeting other than a single meeting where Rose was contemplating resigning his post as Executive Secretary. People who lived and worked through this period at the ACC assessed fault to all of the antagonists. The outright hostility peaked in June of 1998, after Kunasek and Porter accused Jack Rose of violating the open meeting law. Rose denounced Kunasek and Porter and asked the ACC's in-house counsel if he could investigate "a member of a commissioner's staff." Kunasek and Rose exchanged heated barbs in an open commission meeting with each denouncing the character and ethics of the other. As the rift between Kunasek, Porter and Rose grew, the relationship between Rose and Irvin grew much closer. In July of 1998, it was Irvin who proudly announced that Jack Rose had been appointed to the Federal Communications Commission National Rural Task Force on

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telecommunications deregulation. Irvin lauded Rose, noting that the FCC had " recognized the talent and leadership abilities of Mr. Rose on cutting-edge issues." Jack Rose was a highly visible, proactive Executive Secretary during the one and a half years of his service. During part of that period, because of the ACC's inability to hire competent replacement personnel, Rose' functions included acting Utilities Director as well as Executive s Secretary. 10. Jack Rose's Contacts with Prudential Securities Prior to His Resignation as Executive Secretary of the ACC

Jack Rose served as Executive Secretary from June 1997 until December 31, 1998. On August 27, 1998, Rose announced his resignation from the ACC effective at year' end. Rose told s the media, "I came on board hoping for an intellectual feast, and I got more of a knuckle sandwich." He intended to go to work in private enterprise with a "think tank" or possibly explore other business opportunities. His great hope was to win appointment to a White House Fellowship within the Clinton Administration. His backup plan was to obtain employment with an investment banking enterprise. Mr. Rose felt that his legal and business background and his networking connections arising out of his service with the Corporation Commission would enable him to make a lucrative living. a. September 1998 Meeting between Rose and Prudential

Before his resignation in December of 1998, Jack Rose became involved in a series of meetings and contacts with Prudential Securities, an investment banking powerhouse. In September of 1998, four weeks after his announced resignation, Rose traveled to Washington D.C. and later to New York to meet with representatives of Prudential Securities. Rose met in New York on

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September 24, 1998 with three important Prudential figures -- David Dubin, Peggy Jones and Joe Fichora. The purpose of the trip was to explore a possible role for Prudential in the deregulation of electric services in Arizona. A secondary purpose was to enable Rose to meet important people at Prudential in the event his career options turned in that direction. The trip to Washington D.C. and New York generated a firestorm of criticism from Commissioner Kunasek. Kunasek demanded a copy of Rose's appointments from Irvin, requesting dates, times and names of officials meeting with Rose in both his Washington D.C. and New York travels. Kunasek complained that the trip to New York and Washington was a "junket" for a lame duck Executive Secretary about to retire. His letter was copied to the Governor, the Senate President, the Speaker of the Arizona House, the Auditor General, Commissioner Jennings and the ACC Business office. Irvin lashed back, coming to Rose's defense, claiming that Rose was meeting with regulatory officials of the FCC, RUS, and Department of Energy as well as investment bankers and legal firms specializing in electrical restructuring issues on a national scale. In response to Kunasek's claim that his career history had never required him to engage in such an extended stay, Irvin sarcastically fired back at Kunasek suggestions "perhaps because the issues you dealt with were not as complex or comprehensive as those Mr. Rose is addressing." During the course of pretrial discovery in the Southern Union v Irvin civil lawsuit, it was learned that Rose had ordered 500 new business cards, desiring 250 for the Washington -- New York trip. These new business cards would later raise criticism against him at the trial. To his statutory title of "Executive Secretary," Rose had added on the business card a new title of "Chief Executive Officer." Southern Union attorneys suggested that Rose added the term to the business card to embellish his role at the Commission in his search for a new job after December 31 and that the
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September trip to New York served a secondary purpose of allowing Rose to "network" with Prudential officials on the eve of his resignation and plant important seeds with Prudential for his future business hopes in the field of investment banking. Rose defended his new business card title at our deposition, claiming that the CEO addition to the business card was justified because his duties under the statute were identical to those of a CEO. Rose was adamant that the meetings in Washington, D.C. and New York were critical to the ACC's deregulation interests. There was a plan in place at the ACC to deregulate various electrical utilities in the state of Arizona. For deregulation to be possible, it would be critical to involve investment banking entities to finance deregulation. Prudential stood to play a key funding roles in the deregulation process. b. The November Meeting Among Prudential, Rose and Irvin

The next major event involving Rose with Prudential occurred in November of 1998, almost two months before his resignation from the Arizona Corporation Commission. Rose and

Commissioner Irvin both attended the NARUC (National Association of Regulatory Utility Commissions) conference in Florida. NARUC's member agencies regulate the activities of telecommunications, energy and water utilities throughout the 50 states, the District of Columbia, Puerto Rico and the Virgin Islands. While attending the meeting, Rose again met with PSI executives David Dubin, Peggy Jones and Joe Fichora. Commissioner Irvin joined Rose at this meeting. At this November meeting, Rose told Dubin and his colleagues that he was leaving the ACC and was considering going with the FCC. He asked pointed questions regarding investment banking showing a keen interest in that industry. c. Oneok's December 14, 1998 Bid to Purchase Southwest Gas Rose Attempts to Secure Employment with Prudential on the Same Day
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On December 14, 1998, both Oneok and Southwest Gas publicly announced that the board of directors of the two natural gas giants had agreed to a merger subject to regulatory and shareholder approval. Prior to the public announcement, Ed Zub, Senior Vice President at Southwest Gas, had called Irvin, Kunasek, Jennings and Rose to confidentially inform them of the merger plans. The press release announced that Oneok would pay Southwest shareholders $28.50/share to buy out all Southwest shareholders and assume control of Southwest Gas subject to regulatory approval. That same day, using an Arizona Corporation Commission fax machine and an Arizona Corporation Commission cover sheet, Rose faxed his resume to David Dubin of Prudential Securities in New York. Rose would later be criticized in the Irvin trial for using an ACC cover sheet and ACC phone lines to transmit personal information to seek private employment. One week later, on December 21, 1998, Jack Rose faxed Joseph Fichera, Managing Director of Prudential Securities a "Business Proposal" again using an Arizona Corporation Commission cover sheet and the ACC fax line.1 Rose, in pitching his qualifications, reminded Fichera: [Y]ou need someone who has relationships with state commissions and the networking ability to land the initial contracts. As a former commission staff director who has networked aggressively over the past few years, I am in an ideal position to get the initial advisory contracts, add value to the state proceedings, and obtain the resulting underwriting business.

In our deposition of Jack Rose dated August 27, 2003 and August 28, 2003, he conceded that he used poor judgment in using ACC cover sheets to send his resume and business proposal. He did indicate that he asked Commissioner Irvin's secretary to make sure that the state was reimbursed for the facsimile line charges, which would have been less than $1.00. He was unsure whether that reimbursement had ever been made.
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1

Rose boldly claimed: "Like any other business, insiders always have an advantage." The proposal became yet more bold. He wrote:
Last week Southwest Gas Corporation announced that it is being bought out in an all-cash transaction. Given my relationship with this company, and my ability to advise them on important regulatory issues related to the merger, I believe that I am well positioned to get some of the underwriting business.

There was only one Commissioner on the Arizona Corporation Commission who could or would fulfill Rose's "advantage" as an insider, Chairman Jim Irvin. Commissioner Jennings was leaving the ACC at the end of December with Rose so he was certainly in no position to assist Rose. The newly elected Commissioner, Tony West, had no ties to Rose. In fact, it was widely rumored that Rose had resigned because of the certainty that West and Kunasek would align and fire him. It was certainly clear that Rose could not look to Kunasek for assistance -- Kunasek detested Rose and held him responsible for a myriad of what he believed were bad decisions and questionable conduct. Rose added in his proposal to Prudential the following language: "I should have a job title that is sufficiently prestigious to enable me to work directly with CEOs and impress state commissions." Rose' proposal and payoff was contingent upon his productivity. He wrote: s
I'm looking for an investment bank that is willing to be creative and implement a highly entrepreneurial, pay-for-performance relationship. I know that I have the ability to bring in substantial business and help position an investment bank to take advantage of opportunities in telecommunications, energy and water.

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At the time of Rose's proposal to Prudential, Oneok had already formulated a financial agreement with Paine Webber for its investment banking needs regarding their acquisition of Southwest Gas. d. The January 12, 1999 "Meet and Greet" Luncheon Oneok, Southwest Gas, Rose and Irvin Meet to Discuss the Merger

On January 12, 1999, only four weeks after the merger announcement by Oneok and Southwest Gas, only three weeks after Jack Rose's business proposal to

Prudential, and a mere 11 days after his resignation as Executive Secretary to the Arizona Corporation Commission, Irvin returned Rose to the fringes of power. This decision was made without the knowledge of Mr. Kunasek and the Commission's newest member, Tony West. On that date, Southwest and Oneok representatives had scheduled meetings with Commission members to advise them of the planned merger. Officials within the industry refer to these contacts as a "meet and greet" meeting. Such meetings are entirely appropriate, and give companies an opportunity to meet with the Commissioners and briefly outline their plans for the merger. Southwest and Oneok representatives first met with Commissioner West and his assistant James Fisher at the ACC offices. That same day, Southwest and Oneok representatives met with Carl Kunasek and his assistant Jerry Porter, again at the ACC offices. For some inexplicable reason, Commissioner Irvin arranged to meet the
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Oneok and Southwest representatives at the downtown Arizona Club over lunch. The meeting occurred without the knowledge or participation of Irvin's appointed assistant, Patrick Black. 1. The Briefing of Commissioner Irvin by Jack Rose Prior to the January 12, 1999 Luncheon with Oneok and Southwest Gas

Jack Rose, in his deposition to special counsel, provided valuable insight into his conversations with Jim Irvin leading up to their January 12, 1999 meeting with Oneok and Southwest Gas officials. Rose had conducted some preliminary research on Oneok over the internet and through industry publications, and had learned that they were not only a major utility company but had strong political connections and were active on the political landscape in Oklahoma and Kansas. Jim Irvin had openly shared his political aspirations for a gubernatorial run or possibly a prestigious federal appointment with Jack Rose. Rose explained to Irvin, prior to their meeting, how Oneok could prove invaluable to his political future, lending enormous support for elective office, or lobbying political figures responsible for making prestigious national appointments. Politics was always the main subject of conversation between Irvin and Rose at their many breakfasts, and the "meet and greet" meeting was no exception. As Rose explained it:

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(Rose)

Jim had an interest in being appointed to the Federal Energy Regulatory Commission, FERC is the acronym for it, and he also had an interest in the Federal Communications Commission, which is typically a harder appointment to get so FERC was more of a realistic opportunity. Oklahoma is a major natural gas and oil producer and the Senators from Oklahoma, I think it was Inhofe, I-n-h-o-f-e, and Don ... Nickles, yes. He is the deputy, number two leader in the U.S. Senate. I told him that they were both very influential on energy issues and that undoubtedly Oneok knew them well and that if he were interested in a FERC appointment, I am not sure that I spelled it out in this detail, but this may have been in more than one conversation, but basically that these were important people to know if you are looking for an appointment at FERC ... But I knew a little bit about them, enough to know that they were well-connected in Oklahoma. Actually a company like that, if you are running for high public office can do pretty well at fundraising. Did you discuss that? You had mentioned he had wanted to someday be Governor.

McDonald:

Rose: I mentioned that to him.

(Rose Deposition, Vol. 2 at 191-193.) Rose urged Irvin to be punctual to the meeting and not keep these powerful executives waiting for a late arrival. In Rose's own words, he describes his strategy with Irvin preceding the meeting:
A. Well, here is what I told him. Jim was very interested, and I don't want to minimize his interest in public policy, Jim had a genuine concern about public policy so it wasn't all politics, but this conversation was more political than anything. What I told him -- I had done some preliminary research on Oneok. I told him they were a large company, that they were very well connected in Oklahoma. I told him that there were a couple of very influential Republican Senators out of Oklahoma and that I had heard that they were well-connected in the community and that they could be helpful on a number of fronts, and that this was just mainly a social "meet and greet" and just be friendly with them and listen to what they have to say, and, you know, take a positive

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attitude, and that it would be helpful if he would give me a buildup, and he said fine.

(Rose Deposition, Vol. 2 at 191-192.) Jack Rose and Irvin had a very positive meeting with Southwest Gas and Oneok executives. Rose, as of the January 12th meeting, had not as yet had any positive response from Prudential, was currently unemployed, and appreciated the access that Irvin was providing to him to meet company heads from Oneok and Southwest Gas. At the meeting, Irvin spoke fondly of Rose's great accomplishments as the former Executive Secretary, while Rose touted Irvin's leadership and vision for the future. Even though Irvin was late for the meeting, Rose believed that positive contacts had been accomplished at the meeting. 2. Jim Irvin Informs Oneok and Southwest Gas, at the January 12, 1999 Meeting, That Rose Would Be His Contact Person in the Merger

At the meeting, according to multiple trial witnesses from both Oneok and Southwest Gas who testified at Irvin's trial, Jim Irvin told representatives from both Oneok and Southwest Gas that their contact person on the merger would be Jack Rose. Utility officials were both surprised and a little leery of this directive. Unlike Rose's role between 1997 and 1998, where he was a duly recognized "loaned executive" and/or "executive secretary," he was not a "loaned executive" to Jim Irvin or to the

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ACC and had no ties or business affiliations to the state or the ACC. Larry Brummett, CEO of Oneok, testified, "Jim Irvin told me that the ACC would need to do due diligence and that Jack Rose would conduct the due diligence for the ACC." From that date, Mr. Rose became the contact man between Irvin, Oneok and Southwest Gas. Rose was appreciative of Jim Irvin's confidence. He believed that his due diligence investigation, normally conducted by the ACC staff, would provide him networking opportunities with two natural gas giants, Oneok and Southwest Gas, and would give him an opportunity to further demonstrate his networking capabilities with Prudential in hopes of gaining a lucrative consulting agreement with them.

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3.

Jack Rose Refuses to Testify at the Irvin Civil Trial, and Subsequently Receives Federal and State Use Immunity from Government Authorities

It is important to discuss, prior to reviewing Jim Irvin's actions on the Southwest Gas merger, the differing positions that Rose and Irvin took at their joint federal civil trials. The Southern Union lawsuit against James Irvin and Jack Rose lasted from July 1998 until December 2002. During the course of pretrial discovery, there was an ongoing investigation by law enforcement authorities into the actions of Irvin and Rose, among others. Commissioner Irvin actively participated in pretrial discovery and trial, giving extensive sworn testimony. Jack Rose, acting on the advice of his criminal defense attorney, invoked his privilege against self-incrimination and refused to answer questions, with limited exceptions, during pretrial depositions, as well as during trial. In February 2003, after the jury verdict against Commissioner Irvin, the United States Attorney's office granted Jack Rose "use immunity," compelling his testimony before a federal grand jury, which met in Phoenix. Federal grand jury proceedings are secret proceedings, with rights of disclosure to third persons subject to very narrow exceptions enumerated in the federal rules. Rose testified before the federal grand jury in February 2003 for approximately six hours, over two days. That grand jury testimony is sealed, and can not be made available to the public.

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An impeachment inquiry is a legislative rather than a judicial proceeding. Federal rules prohibited disclosure of Rose' grand jury testimony to Special Counsel s McDonald or to representatives of the House of Representatives. It was clear to special counsel that even if the U.S. District Court granted a request by special counsel to review Jack Rose's immunized federal grand jury transcripts, he could not disclose the contents of that confidential information to the Arizona House of Representatives or the Arizona State Senate in any impeachment report. Special counsel concluded that it was vital to question Jack Rose, even if it required the grant of legislative use immunity. Special counsel McDonald had several meetings with Rose attorney John Hannah, who informed counsel that Mr. Rose would fully cooperate and provide truthful testimony if the Arizona legislature ordered his testimony and extended use immunity. Special counsel felt it was critically important to the impeachment investigation to seek use immunity for Jack Rose. On August 26, 2003, special counsel met with House Speaker Jake Flake, House Judiciary chairman Steve Tully, and other key House staff as well as rules committee counsel, seeking approval for an order compelling immunity. Speaker Flake and Chairman Tully were extraordinarily cooperative in pledging their support for a grant of immunity. That same day, special counsel met with House Minority leader John Loredo, Judiciary Committee minority leader Ben Miranda, and other key staff
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members of the Democratic minority as well as their legal counsel. They too were extraordinarily cooperative, providing their full support for this effort. It was agreed that a special meeting of the House Judiciary Committee would be convened on Wednesday, August 28th, to seek an order compelling Mr. Rose's testimony and to extend to Mr. Rose a grant of use immunity. On August 27, 2003, special counsel met with Maricopa County Rick Romley, Chief Assistant Paul Ahler and special advisor Barnett Lotstein seeking their support for a grant of immunity. They assured special counsel that the full investigative authority of the James Irvin investigation had been transferred to the United States Attorney for the District of Arizona and that they had no ongoing investigation of either Mr. Rose or Mr. Irvin. They gave their blessing to special counsel's efforts to compel truthful testimony in exchange for use immunity from witness Jack Rose. On the same day, immediately after the meeting with the County Attorney, special counsel and key legislative leadership from both the Republican and Democratic sides of the aisle jointly attended a meeting with Attorney General Terry Goddard, his Chief Assistant Robert Myers, and Criminal Section Chief Don Conrad. The Attorney General's office informed special counsel that they had no ongoing investigation involving Rose and/or Irvin, and lent their support to a grant of immunity.

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Later that same day, special counsel contacted United States Attorney Paul Charlton and disclosed his plans of obtaining legislative use immunity. Three and a half months earlier, Paul Charlton had publicly announced that his office was closing its investigation of Mr. Irvin and Mr. Rose, stating that their office had found no prosecutable federal crimes. That press release, issued May 9, 2003, stated the following:
The United States Attorney Paul K. Charlton announced his decision to not file federal criminal charges against Arizona Corporation Commissioner Jim Irvin. This decision was based on a thorough review of the facts relating to the aborted merger efforts of Southern Union Gas Company to acquire Southwest Gas Corporation. The United States Attorney's decision took into account evidence obtained prior to the civil trial related to the failed merger, evidence obtained during the civil trial, and evidence obtained after the civil verdict. Mr. Charlton said that the civil action and verdict did not result in a finding of fraud and that we find no prosecutable federal criminal offense.

Mr. Charlton advised special counsel McDonald that his office had no objection to issuing legislative use immunity for Jack Rose, again confirming that the United States Attorney's office had closed down its investigation of Mr. Rose and Commissioner Irvin. With the support and blessings of the three lead prosecutors and prosecution agencies in Arizona, the House Judiciary Committee scheduled a special meeting for 8:00 a.m. on August 28, 2003. Jack Rose and his legal counsel had agreed to be available at 9:30 a.m. that same morning to truthfully answer all questions relating to the Oneok-Southwest Gas merger.

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The House Judiciary Committee, acting pursuant to A.R.S.   41-1152 (a rarely used statute authorizing the legislature to compel testimony and extend use immunity), voted unanimously to order Jack Rose to answer all questions from special counsel. As a result of that order, Mr. Rose gave sworn testimony from 9:30 a.m. to 6:30 p.m. on August 28, 2003, and again from 1:30 p.m. to 6:30 p.m. on August 29, 2003. He had also testified on August 21, 2003 but had refused to answer questions relating to Southern Union' claims or the fraud on the court issues without a grant of use s immunity. Mr. Rose provided invaluable documents never before seen by attorneys representing parties involved in the Oneok - Southwest Gas merger. Jack Rose's sworn testimony provides valuable insight into the activities, knowledge and motives of Commissioner James Irvin and has proven to be extremely important and insightful in this House of Representatives impeachment investigation. His sworn testimony confirmed the factual findings of the federal trial jury against James Irvin and supported the scathing findings against Mr. Irvin by Judge Roslyn Silver. Rose' testimony confirmed multiple acts of gross misconduct by s

Commissioner Irvin performing in his official capacity, reinforcing the need for Articles of Impeachment and the ultimate removal of James Irvin from public office. Before

questioning Jack Rose under the grant of legislative use immunity, it was thoroughly

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explained to Mr. Rose that immunity would not protect perjury or false swearing. The immunity statute provides:
Testimony or evidence produced pursuant to this article may not be admitted in evidence or used in any manner in any criminal prosecution against a natural person sworn and examined before either house of the legislature or any committee of either house, except for perjury, false swearing, tampering with physical evidence or any other offense committed in connection with an appearance required by section 411151

4.

Jack Rose's Immunized Testimony Confirms Jim Irvin's Active involvement in "Back-Door Dealings"

There was no dispute between the parties in the Southern Union v. Irvin civil trial that the Oneok-Southwest merger was filled with back-door dealings that would eventually rock Oneok, Southwest Gas, and the ACC. Eric Herschmann, Southern

Union's lead trial counsel, and Mike Sillyman, Irvin's lead trial counsel, both agreed that the merger transaction was tainted by back-room dealings. The core of Jim Irvin's defense was that these back-room dealings were carried out without Jim Irvin's knowledge, and that Mr. Irvin was more outraged than Southern Union by the backdoor dealings of virtually all of the civil defendants. Mr. Irvin's trial attorney, Mike Sillyman, told the federal trial jury
Let me first begin by telling you that we do not and will not deny that there were back-room dealings by Rose, Oneok, its attorneys, Dioguardi and Gaberino, and other officers and directors of Oneok. Commissioner Irvin is more upset about that backroom dealing than is Southern Union. These acts were totally unknown to Commissioner Irvin, and the facts in this case will demonstrate as much.

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Eric Herschmann, in his closing argument to the jury, seized upon this concession, arguing:
Mr. Irvin has already admitted in his opening statement and on the witness stand that there were back-room dealings in relationship to the proposed Southwest Gas merger. He left his name off the list of people involved. Everyone else was to blame but Mr. Irvin.

Jim Irvin's assertion of ignorance was decisively obliterated by Mr. Herschmann and soundly repudiated by the judge and jury. The jury believed that he not only knew of the clandestine meetings, but actively participated in and coordinated these very meetings. The evidence in this impeachment investigation is much clearer than jurors received at Mr. Irvin's trial. During the Irvin trial, Jim Irvin's closest confidant, Jack Rose, remained silent, invoking the 5th Amendment. Jim Irvin could make any claim involving Jack Rose, knowing that his trusted colleague would remain, like a potted plant, at counsel table saying nothing. 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' assistance, set out to "kneecap" Southern Union's chances of s acquiring Southwest Gas. Rose has testified that he and Irvin took overt and covert actions to ensure that Oneok prevailed over Southern Union in the merger. Jim Irvin was indeed a key advocate and architect of the scheme to destroy Southern Union's
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chances of acquiring Southwest Gas, and his active participation in the misconduct, and his later acts to conceal and coverup his complicity, mandate that he be removed from office and barred for life from holding elective office in Arizona. 5. After His Resignation on December 31, 1998, Jack Rose Did Not Work Again as a Loaned Executive for the ACC

In Commissioner Irvin' sworn testimony in the Southern Union litigation, Irvin s claimed that Rose returned as a loaned executive immediately after resigning as Executive Secretary on December 31, 1998. He testified:
Q. A. When did he become loaned executive or a consultant to you after January 1st, 1999? I would probably say on January 2, ` 9, we went back into that. Somewhere 9 in that time frame. I don' know there was any specific day that it may or may t not have started. Okay. Was there any type of written document that explained what his role was as loaned executive or identifying him as a loaned executive to you? I don' think there was any document that explained the program. The only t document that we had on that was a document that Mr. Rose drafted back in ` 6 or ` 7 regarding ethical standards that we would have for   the office and 9 9 if somebody wanted to do that, they would sign that.

Q. A.

(Irvin deposition, Volume I, March 21, 2000, page 28, lines 5-19.) Jack Rose was adamant in special counsel' deposition that he never returned to s the position of loaned executive and that he had made that fact crystal clear to Commissioner Irvin. First and foremost, he was attempting to secure a consulting

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agreement with Prudential and hoped to use his contacts with Commissioner Irvin and his prior experience with the ACC to win such an agreement. Irvin's invitation to Rose to attend the January 12, 1998 "meet and greet" luncheon gave Rose a golden opportunity to network with prominent utility executives and hopefully parley these connections into greater interest in an investment banking contract. Rose explained in his deposition that his involvement in 1999 with Irvin was dramatically different than 1997. His role as "loaned executive" in 1997 was no secret. It was fully disclosed to Chairman Kunasek and to Commissioner Jennings. His role was supported by Renz Jennings in a very public setting. Jennings provide Rose and Irvin a letter confirming his support for Rose's role as "loaned executive." He was given an office at ACC offices. In 1999, Rose did not have an ACC office. Neither Carl Kunasek nor Jenning's replacement, Tony West, knew of Rose's continued involvement with Irvin. Both Irvin and Rose knew that newly elected Commissioner Tony West or Carl Kunasek would never support Rose in any capacity. Of equal importance, the enmity between Kunasek, Porter and Rose was so great that Rose had vowed to never return to the Arizona Corporation Commission offices. In fact, since the day of his departure, in December of 1998, he has never returned to those offices. Rose testified that circumstances in 1999 were significantly different from the circumstances that existed in 1997-1998. Rose realized that the ethics rules that he had
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drafted for Irvin would preclude him from being a loaned executive in 1999. Unlike his duties in 1997, he was attempting to use his networking activities to win a consulting agreement with Prudential. That alone would have violated Paragraph 1 of

Commissioner Irvin's ethic policies. Additionally, it would have violated Paragraph 2 because, prior to the Las Vegas trip, Rose had a contract with Prudential and Irvin's ethics policies prohibited an employee "with a substantial interest in any contract, sale, purchase or service to the ACC" to participate in any transaction. On January 12, 1998, Rose agreed to assist Irvin as an unpaid consultant, not a loaned executive. There was a clear motivation in Rose' mind for this service. It s would give him a 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. As these contacts continued to solidify, he could re-approach Prudential or some other investment banking firm and hopefully gain their agreement to employ him with their company.

It is clear from both the trial record and from Rose' sworn testimony that his s new arrangement with Commissioner Irvin was a win-win for both parties. Rose was a trusted aid of Jim Irvin. He had a brilliant mind and a keen understanding of utility
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issues as well as political issues. He had formed a very close friendship with Irvin. Rose was somebody that Irvin trusted. Rose had fought with Irvin in the campaign of 1996 and had guided him through two years of turmoil at the Commission. Rose also was a political and utility strategist and tactician that Irvin trusted and respected. Rose had a history of guiding the impetuous Irvin away from political blunders. The arrangement was equally desirable for Jack Rose. His efforts to obtain employment with Prudential in December of 1998 had failed. Prudential had not shown any real interest in following up with Rose' business proposal of December 21, 1998 and had s somewhat blown him off. Rose believed it was necessary to prove to Prudential that he had both the political connections and the intellectual savvy to bring top utility companies into the investment banking arena, and to bring them investment opportunities that no one else could generate. Commissioner Irvin was Chairman of the powerful Arizona Corporation Commission. Working with Irvin gave Rose open access to these powerful utility executives. Irvin's designation of Rose as his advisor and point man on the Oneok-Southwest Gas merger gave Rose a rare opportunity to network those connections into possible employment with Prudential Investment, while impressing Southwest Gas and Oneok with his intellect and performance. It was against this background that Irvin notified key Oneok and Southwest Gas executives that Jack Rose would act as his unofficial consultant and their contact man
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on the merger. Mike Maffie, CEO of Southwest Gas testified that Irvin designated Rose as the "due diligence" man. (Maffie deposition, Volume I, May 15, 2000, page 128-129). Maffie acknowledged that he was surprised that Irvin had selected a noncommission employee to do the due diligence but at least understood Irvin's decision because of their prior close working relationship with Rose. (Maffie deposition, Volume I, May 15, 2000, pp. 159-161). Ed Zub, the senior managing official at Southwest Gas admitted bewilderment that Jack Rose even showed up at the January 12th meeting, especially knowing that he had resigned from the Commission at the end of 1998. He had no clue that Rose would play any role in the merger discussions. Irvin made it clear to Zub that Rose would be the contact man on the Oneok-Southwest merger. (Zub deposition, Volume I, July 13, 2000 at pp . 202-204). Larry Brummett, CEO of Oneok, who also attended the luncheon, confirmed that Irvin had told him that Rose would conduct the due diligence surrounding the merger for the ACC. (Brummett deposition, Volume I, January 11, 2000, p. 57) Jack Rose has testified that as of January 12, 1999, he felt that there was very little to do as far as conducting a "due diligence inquiry." One utility giant was

purchasing the stock of another utility giant and approval was all but assured. Those who attended the January 12, 1999 "meet and greet" luncheon all felt that the merger would be uneventful. Since the ACC had their own staff who would scrupulously
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review the merger application and make recommendations, Rose perceived his role as minimal -- one of doing a quick review and giving independent advice to Irvin. Rose did undertake some minimal due diligence investigation into the merger prior to February 1999. Rose, at his own expense and on behalf of Irvin, did travel to Las Vegas on January 19, 1999. He met with Ed Zub at the Rio Hotel and questioned Zub about the Oneok merger and what that merger meant to not only the ratepayers of the affected states, but also to the future of Zub and to CEO Michael Maffie. That inquiry is very superficial. Southwest and Oneok executives testified in the Irvin federal proceedings that they had genuine concerns over Jack Rose' participation in the due diligence s investigation. Their negativity over Rose' involvement was not particularly directed s against Rose or Irvin personally. Their fear was predicated upon their knowledge of Commissioner Kunasek' hatred of Jack Rose and, given the new configuration on the s Commission with the addition of Tony West, they feared that Rose's involvement could act as a "lightening rod" and eventually cause damage to their efforts for the merger application. (Zub dep., Vol. III, 8/3/00, pp. 521-523; Zub dep. Vol II, 7/14/00, p. 354) B. The Importance of Jack Rose's Role as a Consultant to Irvin Skyrockets When Southern Union Makes a Competing Bid to Buy Southwest Gas. After Learning of the Bid, Jim Irvin Forsakes His Oath of Impartiality and Becomes an Advocate.

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On February 1, 1999, Southern Union made a bid to buy Southwest Gas. With this action, the future for Jack Rose and Jim Irvin would change forever. Between February 9-12, 1999, while the bid was still confidential and unknown to the public and the Southwest shareholders, but prior to the February 22, 1999 public announcement of the offer, Jim Irvin was contacted by Edward Zub, Senior Vice President over Regulation and Product pricing, and confidentially informed that Southern Union had made a competing bid for Southwest Gas. Zub made similar calls to Commissioners Kunasek and West. Jim Irvin called Rose that same day and disclosed to him the substance of his conversation with Zub. Irvin told Rose that Zub and Mike Maffie were vehemently opposed to any acquisition by Southern Union. According to Jack Rose, Irvin told him that Zub trashed Southern Union, saying
They're coming in, they have a very high debt-to-equity ratio, they have 90 percent debt, they are overleveraged, they have a bad record in safety, they have a bad community record, and they have done business in Arizona previously and they have gotten into a lot of trouble both locally and with their regulators in other states, and Southwest Gas is very concerned that this new company, Southern Union, is going to come in here and slash jobs and reduce service.

(Jack Rose Deposition at 212:1-9.) After this initial contact with Zub, Commissioner Irvin improperly became a champion for Oneok over Southern union in the merger process, without ever allowing Southern Union the opportunity to rebut Zub' claims. Jack Rose did the same. Rose s admitted in deposition that he and Irvin made a grievous error of judgment in failing to
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fairly and impartially investigate Zub's claims; rather, he and Irvin blindly accepted them. Additionally, because of Irvin's respect and friendship for both Maffie and Zub, he wanted to reward his old friends by backing their desires for a sale to Oneok rather than Southern Union. The importance of Rose's role as Irvin's "consultant" increased dramatically with this new bid from Southern Union. What was originally an uncontested merger and acquisition of one utility giant by another utility giant had now become a full-fledged war between two utility giants, and Southern Union was making a bid that was $108 million superior to Oneok' own bid. Jack Rose was secretly selected by the Chairman s Irvin to head what Irvin has claimed was a "due diligence" investigation. The doors of Oneok were about to open up Rose, and create a networking bonanza that would lead to a dazzling consulting agreement. From the very inception, Irvin and Rose set out to find a way to enable Oneok to successfully prevail and defeat Southern Union's bid to acquire Southwest Gas. C. Commissioner Irvin's February 12, 1999 Call to Oneok Executives Was Grossly Improper. Irvin, Without Southern Union's Knowledge, Contacted Larry Brummett and Told Him That Irvin, as Chairman, Would Not Approve a Bidding War.

When two NYSE public utilities are competing to acquire a company, it is not unusual for the conflict to result in a bidding war. Jack Rose recognized that the

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competing bids could easily touch off a "bidding war" for Southwest Gas between Oneok and Southern Union. While Rose knew that a bidding war would benefit the Southwest shareholders, providing them a higher price for their shares, he feared that a bidding war was potentially troubling to the ratepayers of Arizona, Nevada and California. Rose suspected that the bidding companies might pay far more for Southwest Gas than it was worth and, after winning the bid, have to make cutbacks in service or attempt to raise rat