Scottsdale independent ethics panel clears Councilman Guy Phillips of wrongdoing

Panel suggests city code too ‘ambiguous’ to infer ethics violations

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Scottsdale City Councilman Guy Phillips has been cleared by an independent ethics panel of any wrongdoing stemming from allegations a quid pro quo was established for a vote against the now-defunct Southbridge Two project in exchange for money donated to a GoFundMe account.

The municipal panel issued a May 5 findings of fact report finding Mr. Phillips was not guilty of any wrongdoing; however, the panel does find flaws in the local rules that govern certain political donations rampant in the digital age.

In January of this year, Scottsdale resident Mike Norton filed a complaint with the Scottsdale City Attorney’s office alleging Mr. Phillips accepted cash or cash benefits from “Save Old Town” advocates who opposed the Southbridge Two project.

Further, in his complaint, Mr. Norton claimed a GoFundMe page seeking to raise $20,000 to help aid Mr. Phillips who had experienced an ankle injury and was unable to work for an extended period of time received donations from 18 anonymous donors.

In all, there were three allegations made by Mr. Norton against Mr. Phillips. They were:

  • Count 1: Violation of Code Sections 2-50 and 14-135 in December 2019 and January 2020 by virtue of Mr. Phillips wife’s employment as a paid petition signature gatherer for the Preservation of Old Town Scottsdale Political Action Committee;
  • Count 2: Violation of Code Sections 2-50 and 14-135 in October 2019 by accepting a prohibited gift in the form of payments to personal creditors from the proceeds of a GoFundMe account created by Susan Wood; and
  • Count 3: Violation of SRC § 2-49 and A.R.S. § 38-503 on the ground that the facts alleged in Counts 1 and 2 created a conflict of interest that Mr. Phillips failed to timely declare, and which prohibited him from voting on Agenda Item 20 at the Scottsdale City Council Regular Meeting on Dec. 4, 2019.

The independent ethics council, in its conclusion stated:

“The ambiguities in the governing code sections could allow unscrupulous elected officials and their benefactors to disguise quid pro quo vote buying as personal gifts not made in the course of performing official duties,” the report stated. “We are not suggesting this happened here, but there is a problem with the city’s ordinances, which we suggest should be addressed. On this record and under these ordinances in their current form, however, we do not find an ethical violation.”

The independent ethics panel is comprised of Hon. Kenneth Mangum, Hon. Cecil Patterson, and Hon. Larry Fleischman.

In an email to Independent Newsmedia, Mr. Phillips expressed his gratitude for the findings.

“I would like to thank the panel for their professionalism and my friends for their support during this rough patch in my life. I am truly blessed to be surrounded by such good people,” Mr. Phillips stated.

The May 5 panel report outlines the investigation into the alleged three counts of wrongdoing.

Following Mr. Norton’s complaint filing, Scottsdale City Attorney Sherry Scott immediately referred the complaint to Independent Ethics Officer Kenneth Fields.

Judge Fields reviewed the complaint and on Jan. 27 issued findings, conclusions and recommendations referring all three counts to an independent ethics panel.

The investigation included weeks of legal proceedings and an extension due to COVID-19. The panel also received a statement from James Derouin, a letter from Paula Sturgeon and a statement from R.L. Whitmer.

GoFundMe facts

The findings of facts include a narrative about Southbridge Two, and Mr. Phillips breaking his leg on Sept. 17, 2019, which prevented him from operating his air conditioning business.

In the report it outline how Scottsdale resident, Susan Wood, who is an acquaintance of Mr. Phillips and under apparent guidance of former City Councilmember Bob Littlefield created the GoFundMe account in question.

Ms. Wood did not have a personal financial interest in the Southbridge Two vote, the report states.

Ms. Wood knew Mr. Phillips was self-employed and believed his inability to work would cause him financial hardship; concerned about his status on City Council placing limitations on raising money for his personal benefit, Ms. Wood discussed the concern with Mr. Littlefield, who, in turn, consulted Scottsdale City Clerk Carolyn Jagger.

Based on Mr. Littlefield’s discussion with Mr. Jagger, Ms. Wood set up the GoFundMe account so that it did not refer to Mr. Phillips’ membership on City Council; and proceeds from the account would pay bills for Mr. Phillips, rather than go directly to him.

After setting up the account, Ms. Wood changed the account settings so the contributors would be anonymous.

Ms. Wood did not discuss the GoFundMe account with Mr. Phillips prior to its creation, and he was unaware of the plan to create the account until after it became active in October 2019.

The report states Ms. Wood did not discuss Southbridge Two with Mr. Littlefield or Mr. Phillips in connection with the GoFundMe account.

“There is no evidence that anyone stated or implied to Mr. Phillips that the GoFundMe account was created as an incentive or reward for his vote on any matter before the Scottsdale City Council,” the report states.

The GoFundMe account raised just under $2,400, which paid five bills on behalf of Mr. Phillips.

“Ms. Wood stated in an affidavit that she did not know what Southbridge Two was in early October 2019 when she created the GoFundMe account. An affidavit from Ms. Sturgeon contradicts that statement, avowing in September 2019 both Ms. Wood and Mr. Phillips were ‘part of the active and frequent discussion about Southbridge Two on the Save Scottsdale Facebook page.’ We make no finding as to whose statement on this point is correct,” the panel report states.

Mr. Phillips reported the nature and amount of the GoFundMe proceeds on his annual financial disclosure statement, which he timely filed in January. He did not declare the GoFundMe proceeds as a permissible gift in excess of $25, or as a conflict of interest.

Mrs. Phillips becomes ensnared

Mr. Phillips voted against Southbridge Two on Dec. 4, 2019, which passed City Council with a 4-3 split vote.

The Committee for the Preservation of Old Town Scottsdale political action committee was subsequently created, which Mr. Phillips supported.

Ms. Wood was not an officer of, or monetary contributor to, the committee, but she did support the committee’s referendum petition drive.

The PAC retained R.L. Whitmer to manage its referendum effort, and he recruited people to work as petition signature gatherers. The PAC paid recruiters on a per-signature basis at rates ranging from $8 to $18 per signature, the report stated.

On Dec. 8 or 9, 2019, Mr. Whitmer recruited Cora Phillips --- Mr. Phillips’ wife --- as a paid signature gatherer. She was paid $8 per signature.

Between when she was hired and Jan. 2, she gathered hundreds of signatures for the petition, and was reportedly paid a total of $4,512.

Mr. Whitmer did not discuss hiring Mrs. Phillips as a petition signature gathered until after the Southbridge Two vote. The report also states neither Cora nor Mr. Phillips discussed the possibility of Cora working for the committee as a paid petition signature gatherer until after the Dec. 4 vote.

Mr. Phillips did not declare the PAC’s payments to Mrs. Phillips as a permissible gift in excess of $25.

Conclusions of law: Count 1

The independent ethics officer does not believe the record substantiates the violations alleged in any of the three counts. For count 1, the inference of the complaint is that Ms. Phillips’ payments were a disguised cash payment to Mr. Phillips.

“The Southbridge Two vote occurred on Dec. 4, [2019]. After the vote, no matter related to Southbridge Two remained to be decided by the Council. Consequently, at the time when Mr. Whitmer decided to hire Cora Phillips, the Committee was not involved in a situation that involved the city’s decision-making or permitting processes. Cora Phillips’s work for the Committee therefore fell outside the scope of Code Section 2-50(a),” the report stated.

“The uncontroverted evidence that Mr. Whitmer decided to hire Cora Phillips after Dec. 4, [2019] negates the possibility that the Committee’s payments to her were an attempt to exert improper influence on a municipal decision. The timing of his decision likewise negates the possibility that hiring Cora Phillips was part of a plan to reward Mr. Phillips for voting against Southbridge Two.”

The report also states there is no foundation for inferring what Mrs. Phillips received from the PAC was, or as intended as, a gift or personal benefit to Mr. Phillips.

“Because the Committee’s payments to Cora Phillips were not a gift, Mr. Phillips had no duty to declare them under SCR § 2-50(b) or 14-135(e),” the report stated.

Conclusions of law: Count 2

Ms. Wood claims to have had no financial interest in the outcome of the Southbridge Two vote, and there is no evidence or allegation to the contrary, the report states.

Consequently, the code does not prohibit Mr. Phillips from accepting the benefit of the GoFundMe account proceeds.

Ultimately, due to the fact that the account was created without Mr. Phillips knowledge and Ms. Wood was not connected to Southbridge Two, there is not evidence to support a finding that the fund was created to wield undue influence, or that Mr. Phillips assented to its use in exchange for voting against the development project.

The report states that regardless of whether Ms. Wood knew what Southbridge Two was or not, would not have changed the findings for count 2.

“If Ms. Wood did not know what Southbridge Two was, it would be irrational to conclude that she created the GoFundMe account to influence Mr. Phillips’s vote rather than to assist him financially because his injury prevented him from working,” the report states.

“However, even if Ms. Wood was well aware of Southbridge Two, and even if she had publicly advocated against it before creating the GoFundMe account, that would not bring her within our reading of Code Section 2-50(a) as someone ‘engaged in a general practice or specific situation that involves the city’s decision-making or permitting processes.’”

The report states the code section would describe the PAC, but the PAC did not then exist and there is no evidence Ms. Wood was acting as anyone’s agent.

The GoFundMe account can’t have advanced Ms. Wood’s “practice” or “specific situation” unless she stood to gain some material benefit from a council decision, the report states.

“Similarly, the GoFundMe account, which we find was created for a benign purpose, does not become a prohibited gift if its donors are Southbridge Two opponents any more than it becomes a permitted gift if the donors were Southbridge Two supporters or apolitical,” the report states.

The panel finds that the language of Section 2-50(a) qualifying “engaged in” is vague and undefined.

The report states the language seems to be directed at vendors, bidders and lobbyists or attorneys representing clients with a financial stake in city decision-making.

“But we doubt it was intended to include every citizen whose interests are affected by Council votes or departmental decisions, even when those votes or decisions draw such citizens into the political process,” the report states, noting the panel cannot construe it so broadly against Mr. Phillips to include anyone who holds an opinion on an issue before the council.

“And, we are unwilling to conclude that Ms. Wood was merely a friend if she created the GoFundMe account while disagreeing with Mr. Phillips’s view on Southbridge Two, but a corrupter if she did so while agreeing with his view. The line separating ethical and unethical conduct cannot be that thin.”

Ultimately, the panel finds that Mr. Phillips bills being paid by the GoFundMe account was not a payment for services rendered for performing official city duties.

The report states if the GoFundMe account had not been so clearly connected to Mr. Phillips’ injury, rather than his status as a council member, the conclusion may have been different.

The disbursements were, however, a gift, which must be declared within five days. The report finds the code language surrounding gifts as ambiguous.

“We cannot confidently resolve the ambiguity that arises from the phrase ‘required by the Code provision,’” the report states. “The ambiguity precludes us from finding a reporting violation that the drafters of the ethics provisions may well have wanted us to find.”

The report states it is the City Council’s prerogative, not the panels, to eliminate ambiguity and vagueness in its code.

Conclusions of law: Count 3

The panel finds no conflict of interest.

Mr. Phillips would have had a substantial interest in the Southbridge Two vote if he had accepted proceeds from the GoFundMe account in exchange for his vote, or if Mrs. Phillips’ employment by the PAC had been a reward of compensation for his vote.

“As we have explained above, we find otherwise,” the report states. “No conflict of interest arose, and Mr. Phillips therefore had no duty to declare a conflict or refrain from participating in the Southbridge Two vote.”

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