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Gary and Sherry Pierce

Gary Pierce, who sat on the Arizona Corporation Commission, and his wife, Sherry, are accused of accepting a bribe.

PHOENIX -- Seeking to undermine her credibility, defense attorneys in the Corporation Commission bribery case got the government's key witness to admit on the stand she may have committed tax fraud.

Kelly Norton acknowledged that she never reported to the Internal Revenue Service the $6,000 a month she was paid over nine months in 2011 and 2012 by utility company owner George Johnson for political consulting work. That included Johnson's desire to set up an organization for Johnson that could spend money to elect candidates to the Arizona Corporation Commission in 2012 without having to publicly disclose the donors.

That work, she said, also involved finding candidates for the Pinal County Board of Supervisors that year whose views in opposition to incorporating San Tan Valley and against the proposed Curis copper mine lined up with those Johnson.

But while Norton never declared the $6,000 a month she got from Johnson, she did report to the IRS the $3,500 a month that she, in turn, paid to Sherry Pierce. And Norton, by reporting that expense from her personal consulting firm, in turn reduced her own taxable income.

Norton, however, said since she was made aware of the issue she has been in contact with an accountant.

"Once this is all over she (the accountant) is going to put it all together and fill an amended return,'' she said.

During nearly a full day of cross examination, defense attorneys also got her to concede that she did not produce certain emails to the FBI demanded in a grand jury subpoena. Norton said she said she did the best she could.

And Norton admitted she posted a series of comments on Facebook about "karma,'' some around the time that bribery and fraud indictments were handed up against her former husband, Jim, as well as Johnson, former utility regulator Gary Pierce and his wife, Sherry.

One, for example, said, "Karma. No need for revenge. Just sit back and wait. Those who hurt you will eventually screw up themselves and if you're lucky, God will let you watch.''

Woody Thompson, Johnson's attorney, asked Norton if that was about her former husband.

Kelly already testified that one reason she divorced Jim was because he had "a girlfriend'' -- and it wasn't his first. And she has repeatedly told of being angry with Jim about being forced to hire and pay that $3,500 a month Sherry Pierce for not much work, and about being asked to participate in a real estate deal.

But Kelly, who is an unindicted co-conspirator in the case -- she got immunity in exchange for testifying about her role in the alleged bribery scheme -- said those comments about karma were about herself.

Her testimony is crucial to the government's claim that she was a conduit for the $31,500 paid by Johnson that eventually went to Sherry Pierce, money that wound up in the joint checking account she had with her husband Gary. Kelly Norton also said she was asked to participate in a plan to help Gary Pierce purchase a piece of property in Mesa, with the funds paid for by Johnson.

Prosecutors contend the payments to Sherry Pierce and the land deal, which never went through, were in exchange for Gary Pierce's votes on two matters in front of the commission, votes that financially aided Johnson and the water and sewer company that bears his name.

During Tuesday's cross examination of Kelly Norton, defense attorneys also sought to paint a picture for the jury of her attitudes.

They got her to disclose comments she had made in previous interviews with the FBI about politicians and others. That includes calling current commissioner Tom Forese "arrogant,'' former commissioner Bob Stump "lazy,'' and Gary Pierce to be "very pushy,'' at least as far as the proposed real estate deal that ultimately never went through.

She also said it was her understanding that Gov. Doug Ducey, who was a fraternity brother and close friend of her former husband, was pushing to abolish the Arizona Corporation Commission as part of an ongoing effort to consolidate and streamline state government.

But gubernatorial press aide Daniel Scarpinato said later that has never been on the governor's agenda. Ashley Adams, Sherry Pierce's attorney, asked Kelly Norton if all she had was negative views about all of her associates and friends.

"I've said lots of nice things about them,'' she responded. "But in these particular instances I didn't.''

Adams' questions about what Kelly Norton thought of others yielded something else: She said she told the FBI that she considered Jessica Pacheco, an executive at Arizona Public Service "not qualified'' for her job "according to what most people think.''

What makes that significant is it once again suggests that the FBI has long been interested in more than just this bribery case.

Both the Corporation Commission and Pinnacle West, APS' parent company, have previously disclosed contact with the FBI.

Prosecutors have effectively acknowledged they are looking into more than just the question was whether Johnson was bribing Gary Pierce for his votes as a regulator, having offered immunity to both Pierce and Jim Norton for their testimony in another, unnamed matter.

And Kelly Norton's 2017 grand jury subpoena, which listed the issues prosecutors wanted to question her on, had four paragraphs blacked out before being shown to jurors and the public. Prosecutors have acknowledged what's contained in those provisions relate to another case.

This federal indictment appears to be an outgrowth of allegations that Pierce, while still on the commission, had met secretly with Don Brandt, the CEO of APS and Pinnacle West, and Don Robinson, his predecessor, while the utility was in the middle of a rate case before the commission. These were laid out in a letter from a whistleblower, later identified as a former commission staffer, to Attorney General Mark Brnovich.

The state investigation also was looking into $500,000 spent by the Free Enterprise Club in 2014 on behalf of Gary Pierce's son, Justin, who was running for secretary of state.

Wil Cardon, another candidate in that race, charged that the elder Pierce used his position on the commission to get financial support from the companies regulated by the panel for his son's campaign. The Free Enterprise Club is exempt from state laws requiring public disclosure of the source of the organization's funds.

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