Evidence Shows SCA Funds Were Illegally Earmarked Campaign Contributions, Investigation Revealed; Feds Still Working Case

The evidence shows that Sheriff Joe Arpaio's top men ran an illegal campaign-finance scheme to benefit their boss' 2008 race, say newly released investigation documents.

The internal affairs probe of the so-called SCA scandal concluded earlier this year and resulted in the termination of two of Arpaio's closest aides, Chief Deputy Dave Hendershott and Deputy Chief Larry Black. The scheme's frontman, former Captain Joel Fox, was fired in October.

As we've mentioned previously, that probe -- ordered by Arpaio and turned over to his political ally, Pinal County Sheriff Paul Babeu -- whitewashed the sheriff's involvement. But Arpaio's role in the SCA could still be explored by the feds, who took over the case after state Attorney General Tom Horne gave it up.

One tantalizing piece of evidence that Arpaio knew something about the SCA (a.k.a. Sheriff's Command Association) is that he didn't order an investigation into the scheme, which helped him keep his seat in 2008, until mid-2010, when a whistleblowing deputy chief made public his suspicions about that and other serious ethical problems in the office. At that point, Arpaio could no longer safely ignore the scandal.

New Times has been harping about this case since it broke in late 2008 due to the apparent law-breaking by high-ranking lawmen. State law prohibits raising corporate funds for a political action committee, which the lawmen did, and it prohibits making donations to a political party that are earmarked to help a specific candidate.

Critics may want to dismiss the stories by New Times or the state investigation conducted under former Democratic Attorney General Terry Goddard.

But this time, it was the sheriff's own investigators who found that his top men probably broke the law.


The so-called "toughest sheriff" didn't call for internal investigation of a potentially illegal campaign-finance scheme run by his top men -- and which benefited him in the 2008 election -- until a whistleblower forced his hand.

​From 2006 to 2008, Hendershott, Black and Fox set up a secret fund and quietly raised $111,500 from a few wealthy buddies, plus another $12,150 from themselves and other deputies. Just before the 2008 election, $105,000 of the pool of dough was handed to the Republic Party in two big checks from the SCA's bank account.

The party, in apparent coordination with the sheriff's men, used the bulk of it to create a sleazy TV ad targeting Arpaio's opponent, Dan Saban.

For months, Fox was the only known member of the SCA. He refused to divulge the names of the people who'd contributed until threatened with a $315,000 fine.

Many of the findings of the Babeu-run investigation were made public in May -- but the SCA stuff, which made up about a third of the massive report, remained under wraps until a judge's order two weeks ago. The sheriff's office made the entire 29,000-page document available this week, and we had a chance to thumb through it.

Prior to its release, New Times fought with the Sheriff's Office and County Attorney's Office to have the document released in its native format -- that is, electronically. We lost the argument.

The sheriff's office insisted on printing the whole thing out, which means you can't see it all unless you buy copies at 50 cents a page or view it at the sheriff's downtown Phoenix office. While thousands of pages are dry as desert dust -- overtime sheets, policy manuals, the entire 800-page report by the AG's office, personnel files, etc. -- there are also dozens of transcripts from interviews of sheriff's personnel that contain rich detail and provide a fascinating glimpse into Arpaio's dysfunctional regime.

The most damning portion of the newly released part of the Babeu report explains how the key players were involved in potential crimes.

On one hand, Babeu and the private investigator he hired, Keith Sobraske, say in the report that they aren't "positing a finding" that Fox, in particular, broke the law. They note that the question is now before criminal investigators.

However, the report also states that "the preponderance of evidence" shows that the SCA funds were transferred to the state Republican Party for the purpose of creating and airing the Dan Saban ad.

In other words, the law was broken.

Karen Osborne, director of county elections, even told investigators that she warned Hendershott -- who's called her to a clandestine restaurant meeting in 2009 to discuss the action she'd taken against the SCA to get Fox to divulge the names -- that if the SCA funds contained corporate money, then Fox "was taking a trip" to prison.

It's "inconceivable" that the donation wasn't earmarked, she related.

Both Hendershott and Fox were singled out by investigators as liars.

The description of Hendershott's general caginess makes him sound no better than a street criminal under questioning. Investigators noted that, "Hendershott's evasiveness during the interviews on the SCA matter was prominent and obvious, and added nothing to his credibility or the believability of the information he did provide."

When asked whether he discussed the SCA donations during a trip to Alaska he took with Black, developer Steve Ellman and businessman James Wikert, Hendershott denied it flatly, then started talking about how he "almost got eaten by a bear" and had to ask to borrow Ellman's .50-caliber handgun.

He claimed to incredulous investigators that he didn't really meet Black, Fox and Republican Party consultant Chris Baker at a restaurant in 2008 to discuss the planned donation of the SCA funds to the party.

True, he related, he was at the restaurant while they were there -- but he sat far away from them, by himself, and drank an iced tea.

(Fox, meanwhile, claimed he never saw Hendershott at the restaurant.)

Investigators concluded that Hendershott was the primary solicitor of SCA funds and was heavily involved in the formation and operation of the scheme. (We pegged him as the "brainchild" of the SCA scandal in our April feature article.)

Hendershott knew in advance that the Saban ad would come out, the report reveals.

Lisa Allen, Arpaio's spokeswoman, told investigators that Hendershott was "like a kid in a candy shop" in the days before the ad aired. He told her and several top deputies that something "big" was about to happen in the race. After the ad ran, Allen and the others were certain he'd been talking about the ad.

When state investigators launched a criminal probe and began talking to deputies about the SCA, Hendershott "coached" his men to lie, the Babeu report concludes. Babeu and Sobraske decided that Hendershott's denial of the coaching wasn't credible when stacked up against the statements by witnesses.

Black's denials weren't seen as much better by Babeu. However, the investigating team left unresolved the issue of whether Black -- who had helped run the SCA, solicit donors and take checks to the Republican Party -- had broken the law. At the same time, the report mentions that Black was "intimately involved" in the SCA scheme and that "the contributions were earmarked."

The federal criminal investigators can't help but take note of statements like that.

Black admitted to investigators that he'd discussed Saban's videotaped deposition during a 2006 defamation lawsuit with Baker, the Republican Party consultant. Allen was convinced that when she'd witnessed Black in his office working with the Saban video material, he'd been helping to create the Saban ad.

Some of Fox's "faulty logic" and apparent bald-faced lies were "remarkable," the report states. For instance, Fox denied publicly that the SCA fund contained corporate money. Yet he collected and deposited three checks, totalling $36,500, that were clearly marked as being from corporations.

Investigators pointed out that Fox had a motive to lie in order to avoid potential criminal prosecution. He'd lied to the public and to the state AG's office investigators. His convoluted, illogical account of why he gave the money to the Republican Party is "not credible."

Egregiously, the investigators didn't probe Hendershott about Arpaio's knowledge of the SCA.

A five-hour, unrecorded interview of Arpaio was conducted by Sobraske, but the private investigator and Sheriff Babeu refused to turn over any notes or transcripts of that interview.

Inquiring minds want to know: Who, if anyone, is going to end up taking the "trip" that Osborn mentioned -- and when?