Republican Senate leaders are trying to recruit outgoing Arizona Gov. Doug Ducey to run for Senate despite an ongoing FBI corruption investigation into his administration's efforts to issue tax refunds worth up to $100 million to aid one of Ducey's campaign donors.
Ducey, who is term-limited, has repeatedly said he has no plans to run for Senate but according to Politico is the "preferred candidate" of Senate Minority Leader Mitch McConnell in the 2022 race against first-term Democratic Sen. Mark Kelly. The National Republican Senatorial Committee has tried to recruit Ducey into the race and NRSC chair Sen. Rick Scott, R-Fla., has "patiently tried to warm" former President Donald Trump to the idea after Ducey refused to help Trump try to overturn his election loss.
Trump fired a warning shot in response to the recent reports.
"Rumors are that Doug Ducey, the weak RINO Governor from Arizona, is being pushed by Old Crow Mitch McConnell to run for the U.S. Senate," Trump said in a statement on Friday. "He will never have my endorsement or the support of MAGA Nation!"
The recruitment comes as the FBI's public corruption unit investigates the Ducey administration's efforts to secure a tax break for a prominent Texas Republican donor. The probe was launched last summer after the Arizona Republic reported that current and former Ducey staffers had pushed for a closed-door deal to undermine state tax law to aid a key supporter, while the governor had his "eyes on higher office."
The Republic reported that Ryan LLC, a Texas tax firm founded by Ducey donor G. Brint Ryan, pressured the Arizona Department of Revenue (DOR) to give a tax break to an oil client and filed a lawsuit against the agency. The firm pushed the DOR to agree to refund sales taxes on fuel for mining companies even though the tax had been in place for decades. The firm sought a $12,000 tax refund for an oil client but officials said the change would have triggered refunds in all other similar cases, which would cost taxpayers more than $100 million and $30 million per year in subsequent years. Ryan LLC stood to make millions in commissions.
The tax firm hired three top Ducey deputies to push for the refund within months of their departures from the administration, in defiance of a state law that requires a one-year "cooling-off" period for public employees before they can lobby their former employers. Ducey's administration argued that the law did not apply to the former aides because they oversaw public agencies but were not "employees" and therefore were not lobbying former employers.
Two of the former aides, former Ducey general counsel Mike Liburdi and former deputy chief of staff Danny Seiden, even signed on to represent Ducey in an unrelated lawsuit while simultaneously pushing for the tax break. The third aide, former chief of staff Kirk Adams, was still serving as a consultant to Ducey on state gaming policy.
The three former deputies and others working for Ducey met with DOR officials at least 16 times to push for the tax break, according to the report. Ducey's deputy chief of staff Gretchen Conger and budget manager Glenn Farley also joined the effort to push the DOR for the refunds. Conger was involved in the effort for nearly a year before reporting that she had a potential conflict of interest because the refund would have resulted in a $10 million windfall for her father's mining company.
Then-DOR director Carlton Woodruff and deputy Grant Nulle opposed the change. Attorney General Mark Brnovich, also a Republican candidate in this year's Senate race, launched an investigation into the matter in 2020. Brnovich backed the DOR and took the fight to court, which ruled against the tax firm. Ducey later fired both Woodruff and Nulle, though the administration claimed the firings were unrelated. Nulle and Woodruff both told the Republic they believe they were fired for pushing back against the proposed refund.
Ducey spokesman C.J. Karamargin denied any wrongdoing and claimed the former aides had not violated the state's cooling-off period.
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The 18-month campaign by current and former Ducey aides underscores the administration's close ties to the governor's political supporters, as well as the active revolving door between the governor's office and corporate interests who have business before the state.
Adams, who continues to work as a consultant for companies with business with state agencies, also led negotiations to expand sports betting in the state, benefiting Arizona's professional sports owners — who have collectively donated $400,000 to Ducey's campaigns.
"Ducey's tenure as governor has been marred by corruption scandals, and it's been scarred by numerous pandemic failures as he's repeatedly put his political aspirations ahead of keeping Arizonans safe," Brad Bainum, a spokesman for the Democratic super PAC American Bridge 21st Century, said in a statement to Salon.
Last year, Cara Christ resigned as director of the Arizona Department of Health Services (ADHS) to take a top job at health insurer Blue Cross Blue Shield of Arizona one month later. The move came just weeks after her department gave Blue Cross Blue Shield a no-bid contract to run COVID vaccination sites in the state. Christ said company officials had approached her about the job opportunity while she was working with them on vaccination sites. Arizona law bars state employees involved in contract procurement from having "employment discussions" with contract recipients for one year.
Other no-bid pandemic contracts have also raised eyebrows in the state.
The Ducey administration last year awarded former campaign consultant Mario Diaz a no-bid contract worth more than $1 million for COVID vaccination outreach. Diaz's contract was initially limited to a single zip code in Phoenix. Local news outlet KNXV-TV reported one month later that the zip code lagged behind the rest of the county, with just 16% of residents being vaccinated, compared to more than 54% in the area nearby, but the administration continued to extend and expand the contract.
In July of 2020, Ducey's administration also awarded a $4 million no-bid contract for prison COVID testing to Centurion of Arizona, whose parent company Centene had donated money to Ducey's campaign. The state now faces a fine of up to $23 million after failing to comply with a court order to improve prison health care, which officials may try to pass along to Centurion, according to the Associated Press.
In 2018, state inspections found that under Ducey, ADHS failed to verify background checks for some employees at the notorious Southwest Key shelters where migrant children separated from their families at the border were housed, which came as distressing news amid multiple news reports of sexual abuse at the shelters. A ProPublica investigation found that one employee at a Tucson shelter had been convicted of groping a 15-year-old boy.
In 2015, then-Theranos CEO Elizabeth Holmes stood behind Ducey as he signed a new law in a Theranos laboratory that allowed state residents to order lab tests of any kind without approval from a doctor. Ducey signed the law after lobbying from Holmes, who was convicted of fraud this month after lying to investors about the capabilities of her blood test startup. Ducey's backing of Holmes' unproven technology turned Arizonans into "guinea pigs," wrote Arizona Republic columnist Laurie Roberts, after Theranos rolled out its tech into Walgreens and wellness stores around the Phoenix area, pumping out blood test results that were inaccurate. In 2017, Brnovich, the state attorney general, negotiated a $4.65 million consumer fraud settlement with the company on behalf of 175,000 Arizona residents who paid for the blood tests. Ducey stayed silent on the scandal and his office said after the settlement that Ducey had "no second thoughts" about promoting the company.
The Arizona Republic rang in 2022 with a damning New Year's Eve exposé detailing the administration's "efforts that focused on directly enriching Ducey's supporters." There "seems to be a general theme where Ducey has been able to use his position as governor to implement a number of changes in state policy that raise questions about whether the public interest is being served or whether narrower private or political interest are being served," John Pelissero, a senior scholar at the Markkula Center for Applied Ethics at Santa Clara University, told the outlet.
"We completely reject the premise of these stories and we know Arizonans will too," Ducey spokesman C.J. Karamargin said in response.
Evidently these tales of alleged corruption have not prevented Republicans from trying to recruit Ducey into the Republican field vying to face Kelly, which already includes Brnovich, Peter Thiel protégé Blake Masters, energy executive Jim Lamon and former state National Guard chief Mick McGuire. Ducey stoked speculation about his plans after name-checking Kelly during his State of the State address this week in a speech largely focused on criticizing the federal government. The governor has also recently hired four former aides to ex-Sens. John McCain, R-Ariz., and Jeff Flake, R-Ariz., Politico reported on Friday, and an announcement could be made by the end of February.
Karamargin shrugged off the reports in an interview with Salon, without specifically denying them. "It seems like just a lot of crystal-ball gazing, from our perspective," he said.
Arizona Republican strategist Paul Bentz said he doesn't expect Ducey will actually enter the Senate race, but not because of the corruption allegations.
"The criticisms against the governor and his supporters have not gained a foothold in the electoral consciousness," Bentz said in an email to Salon. "His biggest challenge would be the criticisms he would receive from Trump if he were to enter the race." Bentz suggested that Trump might "pick a candidate" while in Arizona over the weekend for a campaign-style rally, but Trump did not do so.
None of this means that Ducey doesn't have his sights set on running for higher office. Bentz said that Ducey's team "is working diligently to continue to strengthen his national reputation," noting that he had campaigned for Glenn Youngkin, the newly-elected Republican governor in Virginia. Ducey's final State of the State speech was focused on national GOP issues, Bentz said, including "supporting parental choice in public schools and investing in border security. His vision for 2022 sounds to me more like someone who has his eyes set on president or vice president," not the Senate.