Phoenix Mayor Phil Gordon gave advice to Veolia Transportation on how to play hardball with the city. And it paid off.
Cash-strapped Phoenix agreed to pay $27.5 million over the next five years to Veolia, the company that operates city buses and has Elissa Mullany — Gordon's girlfriend — on its payroll.
The mayor stepped into the fray from late March to early April, when the company wasn't getting its way during contract negotiations with the city. Gordon advised Veolia executives to tell city transit officials that it would walk away from its city bus contract, a Veolia insider tells New Times.
That's exactly what the company did, prompting Phoenix's city manager to fly to Chicago and make nearly $30 million worth of concessions to the company, a city source also says.
Gordon's actions raise questions about whose interests he was putting first: The city's? The company's? His girlfriend's?
Gordon wasn't supposed to be involved in discussions about Veolia; he already had declared publicly a conflict of interest regarding the company — which makes sense, given that his girlfriend helped the transportation firm win its contract.
City ethics policy dictates that an elected official cannot participate in city business in "any manner" once he's declared a conflict.
When the public was watching, Gordon abstained from voting and discussing Veolia. But behind the scenes, he was engaged.
Several council members confirmed that Gordon participated during City Council closed-door executive sessions when Veolia was discussed.
The city and Veolia were at odds because company executives wanted Phoenix transit officials to pay Veolia employees' pensions, which had become under-funded because of economic downturns, and to pay for unused sick leave.
At the time, Veolia was operating city buses for Phoenix under a contract set to expire on June 30. The unresolved sick leave and pension issues were tied up with the contract. Phoenix already had awarded Veolia a new contract to continue operating city buses starting July 1.
It was supposed to be a seamless transition from one contract to the other.
Since they had dual contracts on the table, Veolia executives and city officials agreed that the pension and sick-leave issues from the old contract wouldn't interfere with the new bus contract.
But Veolia negotiators weren't getting the city to budge on those issues, so they turned to Billy Shields, the company's lobbyist and a longtime friend of Gordon's.
Erica Swerdlow, spokeswoman for Veolia Transportation, denies that Gordon spoke directly to Veolia executives but concedes that the mayor suggested to the company how contract negotiations should be handled.
"He did indicate to our lobbyist, Billy Shields, that he had removed himself from any involvement in negotiations over the old contract but suggested that in order to get the matter resolved with the city, which was in everyone's interest, we needed to get it elevated to the city manager level," Swerdlow says.
Apparently, Veolia's threatening to walk away from a city bus contract — leaving Phoenix with only two months of guaranteed bus service and the immediate need to find another transportation company — was an effective way of getting the city manager's attention.
After Gordon made his suggestion, the company told the city it was pulling out.
David Leibowitz, Gordon's hired spokesman, also confirmed the mayor's involvement but said Gordon did nothing wrong, much less illegal. He described Gordon's role as "minimal."
The mayor refused to speak directly to New Times on any matter related to this story, at one point insisting that all questions be submitted in writing to Leibowitz.
In a statement to New Times, Leibowitz says: "What the mayor did do in reference to Veolia is affirm their belief that, in order to resolve the matter, they should elevate the negotiation conversation up the city's chain of command, to the city manager. The mayor's thinking was, getting this resolved was in everyone's best interests and that the time had come to 'go upstairs,' so to speak."
After Veolia fired off its written notice rejecting the five-year, $386 million contract Phoenix had awarded the company, Phoenix transit officials started negotiating with First Transit, the company that placed second in the city bus-contract bid.
That didn't go anywhere.
City Manager David Cavazos flew to Chicago with several employees to strike a deal with Veolia. To settle the old contract, Cavazos made $27.5 million worth of concessions to Veolia for the pension and sick-leave payments and agreed not to recoup $681,000 that the Phoenix Public Transit Department already had mistakenly paid for Veolia employees' sick days between 2000 and 2009. Despite the fact that sick-leave payments were Veolia's responsibility — not the city's — nobody in the city's transit department had noticed that the firm was billing Phoenix for the cost for almost nine years.
Still, the company wanted more — so city officials also rewrote part of the new contract.
Not only did Phoenix eliminate a $50,000-a-day fine if workers went on strike and postpone all fines (for such problems as late buses, employees out of uniform, or customer complaints) for four months, it also slipped a clause in the updated contract that essentially allows Veolia to wiggle out of future fines if it concludes they are unfair.
When Veolia first bid on the city bus contract, it objected to all fines the city planned to assess. City transit officials told Veolia that unless it withdrew the objections, they could not bid on the contract. Company officials withdrew them and were awarded the new contract in January.
But Veolia ended up getting its way after Gordon advised the company to strong-arm his city.
About the overall settlement, Assistant City Manager Ed Zuercher says, "It was a way to get this [new] contract signed."
Veolia spokeswoman Swerdlow contends Gordon made the suggestion to Veolia that it negotiate with top city officials. His spokesman, Leibowitz, claims that Gordon only affirmed what Veolia already was planning to do.
Either way, Gordon wasn't supposed to be involved in "any manner" in negotiations with Veolia.
If Gordon truly had removed himself from involvement, as Swerdlow maintains, how could he have known the status of negotiations? How did he develop the opinion that the city manager needed to get involved? And why was he discussing Veolia and ongoing negotiations with the company's lobbyist?
When New Times asked City Attorney Gary Verburg for his interpretation of the city's ethics policy and whether Gordon should have been involved in Veolia discussions, Verburg responded that he only provides legal advice to his clients. Apparently taxpayers aren't among them, if they're asking about a delicate matter involving the mayor.
He refused to answer any questions on Gordon and Veolia.
Verburg also refused to release a list of elected officials who attended executive sessions on April 27 and May 11 when Veolia issues were discussed.
But Councilwoman Thelda Williams tells New Times that though she missed the April 27 meeting, she recalls that Gordon participated in the May 11 meeting. Councilman Sal DiCiccio recalls that the mayor participated in both meetings.
Given that Gordon's suggestion to Veolia greased the wheels for the company's nearly $30 million payout, the mayor's participation in these sessions could expose the city to potential legal action, DiCiccio says.
The mayor's girlfriend has been on Veolia's payroll since 2007, the entire time the two have been dating.
Mullany, who handles public relations for Veolia, helped the firm land its latest Phoenix contract, which company officials call "one of the biggest of its kind in the United States."
Swerdlow confirms that Mullany was directly involved in the Phoenix contract, but she characterizes that role as "brief."
The Veolia spokeswoman says, "Part of Ms. Mullany's ongoing duties, among many, included helping with the oral-presentation preparation. She did assist our staff in oral-presentation training for the [proposal's] evaluation/interview panels. She had a brief role in a three-day preparatory meeting."
Mullany was on a team coaching Veolia executives in November 2009 on how to answer questions posed by a city panel evaluating the two bus-contract finalists — First Transit and Veolia.
The Veolia insider tells New Times that Mullany was advising company executives at that time on how to craft answers based on what the city wanted to hear.
Despite Mullany's role with the Phoenix contract and her romantic involvement with Gordon, the mayor still pulled strings behind the scenes.
But he didn't always try to shroud his involvement with Veolia from the public.
In June 2009, when City Council members talked about seeking bids from various transit companies to operate city buses, Gordon said his "intent was to vote for one contract awarded to Veolia," according to city records.
At that time, Gordon had been dating Mullany for more than a year, and Mullany already was working for Veolia. But his relationship with Mullany and her ties to Veolia were sailing under the public radar. They kept their romantic relationship mostly secret until December 2009.
By July 2009, a public request seeking Gordon's security-detail logs was filed in an effort to figure out Gordon's relationship with Mullany — whom he had appointed to city commissions and boards, taken overseas on economic-development trips, and paid exorbitant amounts of money.
Gordon realized that questions were mounting about their relationship, about her role in City Hall, and about the more than $300,000 he had paid her company over four years for managing and raising money for his political funds.
Gordon stopped publicly participating in Veolia matters that summer. He took care to publicly avoid any conflict, or any appearance of conflict, regarding Mullany. He even had her name placed on his conflict-of-interest list, a document containing the names of companies, organizations, and individuals that city elected officials file to show they are not voting on matters affecting their or their loved ones' financial interests.
But he continued to participate behind the scenes.
Rich Jarc, executive director of the nonprofit Josephson Institute of Ethics, tells New Times, "If . . . he in fact said one thing and did another, then it is very questionable behavior. He's calling into question his trustworthiness.
"As a civic leader, you want to be someone who — when you say something — people are going to trust that you're telling them the truth."
Under normal circumstances, a politician's love interest might not merit a headline.
But in Mullany's case, she works as a consultant for companies doing business with the city. She has earned a living from political donations made to Gordon and his political funds. Gordon has hired two of her business partner's family members to work in the Mayor's Office without posting the jobs or interviewing other candidates. She has traveled with her powerful boyfriend overseas as a city representative to stimulate the local economy.
Gordon paid Mullany lump sums as large as $20,000 for "administration" or "fundraising" from political-donation accounts — even when no discernible work was performed.
One example of his generosity to her includes an $8,000-a-month salary from a federal political-action committee formed to earn Phoenix influence by donating money to congressional candidates. Gordon paid Mullany's company $104,497 and contributed just $54,700 to candidates for Congress.
Gordon has given no answers to questions concerning Mullany, such as: Who paid for his and Mullany's tickets to Super Bowls in Glendale and Miami? And in whose private jet did the two fly from Miami to Phoenix?
The answer to the latter question is that the pair flew home on a plane owned by Mullany's former employer, Phoenix mega-developer Steve Ellman.
Gordon's refusal to answer questions and provide public records has sparked a lawsuit by Judicial Watch, a conservative Washington, D.C. think-tank, demanding that logs on the activities of his security detail be made public. In refusing to release the logs, the city claims Gordon's safety might somehow be imperiled if the more-than-a-year-old records are released.
Judicial Watch argues that the records should be released so the public can determine whether Gordon appropriately used his taxpayer-funded security personnel — including whether he used them to shuttle Mullany around the city.
A judge tossed out a motion by the city to dismiss the lawsuit and scheduled both parties to appear in court for a September 27 hearing.
Gordon also has refused to release his conflict-of-interest checklist — the one that he asked Mullany's name be placed on. New Times requested all city elected officials' lists, and every one except Gordon released the information. (That he wanted Mullany's name on the list was discovered in Gordon's internal e-mails concerning Veolia.)
A letter from New Times attorney Steve Suskin demanding Gordon's list was ignored by City Attorney Verburg.
Initially, Gordon's camp said the list wouldn't be released because it hadn't been updated. Then, his people claimed the list was protected by attorney-client privilege.
Critics suggest that he's trying to conceal Mullany's clients.
It wouldn't be the first time that he and/or his spokesman have tried to do that.
In March, Jason Rose, Gordon's paid representative before Leibowitz took over, tried to conceal that Mullany had worked for Steve Ellman.
Rose e-mailed one of Gordon's senior staffers, telling him that if anyone asks about Mullany and Ellman, he should: "Suggest the following . . . the mayor can't, couldn't, and wouldn't vote on something that she was involved in. Don't know who she represents or represented for event planning and community relations . . . if asked, unaware of any work Elissa has done for Ellman or anyone else in the city of Phoenix."
Rose knew Mullany was working for Ellman, who then enjoyed unfettered access to Gordon — the developer attended Mayor's Office staff meetings, had dinner with the mayor and foreign dignitaries, and accompanied Gordon on trips to foreign countries.
Despite Rose's posturing, internal e-mails between Gordon and Rose revealed that Mullany worked for Ellman for at least six months promoting investment opportunities for his development firm.
Then came her job with Veolia to, among other things, help the company win its Phoenix bus contract.
If what New Times has learned about Gordon's involvement with Veolia is accurate, Councilman DiCiccio says, "It makes the city look bad, and it opens up the city for a lawsuit from the other bidder."
DiCiccio added, "I think there are some legal issues here that the city attorney needs to look into."
