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Former Arizona Commerce Authority chief Cardon's bonus stirs questions by Craig Harris - Jul. 31, 2012 11:25 PM The Republic | azcentral.com Former Arizona Commerce Authority CEO Don Cardon, who recently quit with more than two years remaining on his contract, is eligible for a "discretionary bonus" of up to $75,000, records obtained by The Arizona Republic show. Those involved in negotiating the termination of Cardon's contract are tight-lipped about whether he will receive the money. Critics, meanwhile, say the situation is yet another example of the agency's lack of transparency. Under Commerce Authority policy, part of the CEO's compensation is to be paid by private-sector interests served by the authority's economic-development work. It is unclear whether enough private funds have been raised to cover the bonus or if taxpayers will be on the hook. "The closure of Mr. Cardon's contract is the focus of discussions involving ACA attorneys and the ACA board of directors. It would be premature to comment until such time that those negotiations have concluded," said Matthew Benson, spokesman for Gov. Jan Brewer, who chairs the Commerce Authority. Cardon officially left his state post July 6. However, he remains tied to the agency as the paid executive director of Team ACA, the non-profit arm that raises private money to pay for some of the agency's expenses. Some of those expenses include part of the commerce director's compensation. Team ACA does not plan to disclose Cardon's salary or how much donors are giving, raising other transparency issues, critics say. Cardon's initial three-year contract, obtained through a public-records request, paid him a $300,000 annual salary, a $50,000 signing bonus, a $30,000 wellness/health allowance and a $12,000 annual car allowance. The contract also made him eligible for an annual discretionary bonus of up to $75,000, along with a $1,440 annual cellphone allowance. Nicole McTheny, an agency spokeswoman, referred questions regarding Cardon's contract to David Thompson, a private attorney for the authority. Thompson said he was not authorized to comment and referred questions back to the agency. Cardon, meanwhile, said it has yet to be determined if he will receive the bonus. Brewer pushed for creation of the Commerce Authority, a public-private partnership that began last year. Although it is a state agency, it has a board made up of local business leaders. It uses taxpayer money, including a $25 million deal-closing fund, to lure businesses to Arizona. During Cardon's short tenure, the Commerce Authority says, more than 5,000 jobs were created, totaling more than $321 million in capital investment, prompting Brewer to praise his work. However, Cardon's employment contract -- approved by Brewer -- has been controversial since going into effect Sept. 27, 2011. "They should be transparent on whether he is getting a bonus or not and where the money is coming from," said Serena Unrein of the Arizona Public Interest Research Group Education Fund, a public watchdog group that has been critical of the Commerce Authority. "We have concern that the Commerce Authority is not showing taxpayers how their money is being spent." Cardon came to the authority from the Arizona Department of Commerce, where he was the top executive for about two years. That department was phased out and replaced by the authority. When Cardon's contract took effect last fall, it stipulated that private funds would pay for his discretionary bonus and his wellness/health allowance, which was designated for additional insurance benefits. Cardon announced Jan. 11 that he would resign as chief executive and return to running his private businesses, which include a development company. Following a public uproar over the fact that he quit after taking the taxpayer-funded signing bonus, Cardon said he would return the money. The agency's board also planned to discuss with attorneys whether the money should be refunded. Cardon said recently that he wrote a check to repay the signing bonus, but he said because the Internal Revenue Service withheld substantial taxes from his bonus, the full amount of repayment is being calculated. Records obtained by the newspaper show that on Oct. 7, 2011, Cardon received the signing bonus and the net payment was about $32,535, after nearly $15,965, or about 32 percent, was paid in taxes. Another $1,500 was deducted for his 401(k) retirement plan. Non-profit's financial contributions The day Cardon announced his resignation, it was also announced that Team ACA would pay half of Cardon's base salary from the time he arrived until he left. Today, however, it is unclear if Team ACA has the funds to honor its commitment to pay half of Cardon's salary or the discretionary bonus. Team ACA declined to allow The Republic to see its financial records, saying those records were closed to the public on April 1, when it took control of the accounting from the state Commerce Authority. A non-profit organization only is required by law to release its annual tax return, which currently is not available. Cardon said in an interview before he left the state job that the non-profit had raised at least $500,000 to help the Commerce Authority and other business-development groups. Cardon declined to say how much he will make as Team ACA executive director. The Commerce Authority, in a June 18 statement issued in response to questions from the newspaper, said Team ACA was approximately halfway to reaching its $1 million fundraising goal. However, after The Republic attempted to confirm through donors that a half-million dollars was in hand, Cardon through a publicist on July 20 sent an e-mail to the newspaper clarifying earlier statements. "Team ACA has received at least $600,000 in commitments to be given over a span of three years," he wrote. "These commitments have come from a number of companies, including the Apollo Group and Alliance Bank. These contributing organizations share the belief that Arizona must have more resources to create jobs and lure thriving businesses to our state." Before Team ACA took control of the finances, public records show the group raised $200,000, with $100,000 each coming from Western Alliance Bank and Apollo Group Inc., parent company of the University of Phoenix. The Commerce Authority, meanwhile, continues to release documents that show reimbursements from Team ACA. Those records show that for the fiscal year that ended June 30, nearly $141,000 in private-donor funds had been spent. One of the largest reimbursements from Team ACA was $30,000 for Cardon's wellness/health allowance. There were no records to show that any other part of Cardon's compensation package had been reimbursed. Cardon said it is his understanding that once the Commerce Authority sends an invoice to the fundraising arm for half of his salary as the authority's CEO, it will be paid promptly. The Commerce Authority also used private Team ACA money for: • A $38,500 Waste Management Open golf tournament skybox to entertain clients. • A suite at the Fiesta Bowl to entertain Silicon Valley Bank, which expanded its operations in Arizona and received a $3 million Commerce Authority grant. The two sides shared the cost of the suite, with the bank paying $7,500 and Team ACA paying $16,813. • A $7,638 holiday reception. • A $2,200 stadium suite to entertain clients during the Arizona Diamondbacks' opening day. • A $480 limousine tab to pick up Cardon at a Monterey, Calif., airport and take him to meet with former Phoenix sports executive Jerry Colangelo, who was in the area. Colangelo co-chairs the Commerce Authority and chairs Team ACA. Such expenses are common for some private businesses. Ed Zito, president of Alliance Bank of Arizona, which maintains the accounts of Team ACA, said he was not concerned with how the Commerce Authority used private funds. For example, he said hosting Silicon Valley Bank at the Fiesta Bowl resulted in a coup for the state because of the bank's expansion and the potential to bring venture capital to Arizona. Zito added that the bank will continue to support Team ACA and the Commerce Authority. "Between the organizations that have stepped up and those that have pledged but not cut checks yet, we are in a mode of really supporting ACA in its ability to accomplish its mission to promote economic development around the state," Zito said. Ryan Rauzon, a spokesman for Apollo, said the private higher-education company believes other businesses should support Team ACA and the authority. "We recognize the need for private resources to boost Arizona's business-friendly profile without using tax dollars," Rauzon said. "Team ACA focuses on the area of policy advancements and local events that can't be paid for with public resources, and we support that." Rauzon said Apollo has not decided whether it will go beyond its one-year $100,000 commitment. Silence on other donation amounts While the amount of Western Alliance Bank and Apollo's donations were disclosed, it is unlikely that transparency will continue. Cardon said he anticipates the names of donors will be disclosed on the Team ACA website, but "we will not disclose how much they are donating." Critics from across the political spectrum say the secrecy harms the public's trust in government. Arizona PIRG's Unrein says the public will not be able to ascertain whether companies making large donations to Team ACA are receiving preferential treatment in return from the Commerce Authority, Brewer or any other state agency. "These companies are contributing to Team ACA because it's in their best interest and will somehow have a positive benefit for their company at the end of the day," Unrein said. "Clearly, the Commerce Authority has been a pet project of the governor, and I would think that any organization or company that is working to help the Commerce Authority couldn't hurt the governor's perception of you." Steve Voeller, president of the Arizona Free Enterprise Club, which advocates limited government and lower taxes, said concealing the amounts of the donations to Team ACA "gives pause and raises red flags for taxpayers." That's because, he said, the governor runs the Commerce Authority board, and the Arizona House speaker and Senate president are ex officio members who attend board meetings. "One way for a private company to have a greater influence or be a team player is to be a large contributor to the fundraising arm," Voeller said. Tom Jenney, Arizona director for Americans for Prosperity, another limited-government organization, said the lack of transparency prevents taxpayers from knowing if a certain company that donates to Team ACA will receive favorable treatment. "I'm not accusing anyone on the board of having bad character. But we are talking about millions of dollars of subsidies or special-interest tax breaks that can be awarded by the Commerce Authority," Jenney said. "Whenever government is handing out that much money, taxpayers have to be very wary of potential kickbacks. Transparency will help a great deal in avoiding future scandals." Cardon said neither the governor nor any elected officials will be on the Team ACA board, and he does not see a conflict. Brewer also does not believe the amount a business donates to Team ACA should be disclosed. "The governor is committed to ensuring the Arizona Commerce Authority adheres to all legal requirements related to financial disclosure and transparency. Team ACA, of course, is a separate entity with its own set of regulations governing financial donations," said Benson, the governor's spokesman. |