Editor's note: On Oct. 5, 2010, Gov. Mitch Daniels fired IURC Chair David Lott Hardy over the ethical scandal that followed the controversy reported on below.
Indiana Gov. Mitch Daniels didn’t exactly get his presidential bid off to a stellar start when he alienated his party’s Radical Right last spring by telling a conservative publication it was time to “call a truce” on social issues. The Republican’s admonition that the economy trumps values, published in the Weekly Standard in June, drew harsh and immediate rebuke from the pro-life community.
It would seem that Daniels' approach to governance, as expressed through his actions as governor, would generate as much animosity from a Tea Party Right that preaches the evils of socialism as it does from a Progressive Left that rails against oligarchy. Ditto those who believe the money changers must be thrown out of the temple of democracy.
Is Eli Lilly pursuing the presidency?
The Indiana governor's socialist tendencies
In the interest of full disclosure, this story involves former Indiana Utility Regulatory Commission (IURC) General Counsel Scott Storms, with whom I worked in the late 1990s. He was a lawyer for the Indiana Department of Environmental Management (IDEM), where I worked as an environmental writer. His office was a few dozen feet from my desk, but I knew him only to the level of saying hello when passing in the halls. His sister Cheri was a coworker and friend.
"Scott Storms walked through a loophole, packed his briefcase at the IURC and unpacked it at Duke."
We both left IDEM in 2000, when Democratic Governor Frank O’Bannon appointed Storms an administrative law judge overseeing the state’s utility policy. Storms rose to the positions of chief judge and general counsel under Daniels.
The IURC is a five-member commission that regulates Indiana utilities -- electric, gas, water and telecommunications -- setting rates and the utilities' returns on investment. All commissioners are appointed by the governor's office. The general counsel and his staff provide legal advice to the IURC on all aspects of utility policy. Storms was the regulatory agency’s ethics officer.
Post IDEM, I worked as a consultant, writing a weekly newsletter that analyzed IURC actions for the utility industry and providing media services to citizen groups like the Citizens Action Coalition (CAC).
When Storms started his job with Duke Energy on Sept. 27, state politicos were abuzz with talk of ethics. Duke is one of the world’s great environmental polluters and is at the center of one of the most audacious economic/environmental crimes against the citizenry in Indiana history, which really is saying something.
"According to Dow Jones Factiva, Duke had $57 billion in total assets and $35 billion in total liabilities on Dec. 31, 2009."
Instead of following the state’s mandatory “one-year cooling-off rule” and not working for a company he had previously regulated, Scott Storms walked through a loophole, packed his briefcase at the IURC and unpacked it at Duke.
“The hubris by Duke Energy and those involved in this hiring decision is horrid,” CAC’s Kerwin Olsen said in a Sept. 25 news release. “… Those laws were put in place to remove the appearance of impropriety on the part of the State employee seeking employment and the corporation doing the hiring.”
According to documents obtained by CAC, Storms has “issued at least four orders relative to Duke Energy cases” pending before the IURC since July 8, 2010. All were related to the company’s economically risky, taxpayer-funded, coal-gasification power plant under construction at Edwardsport in Knox County.
Chairing the Charlotte-based Duke Energy Corp. board is Jim E. Rogers, former CEO of Public Service Indiana, a public utility sold to Duke under Rogers’ reign. According to Dow Jones Factiva, Duke had $57 billion in total assets and $35 billion in total liabilities on Dec. 31, 2009.
"Under a system of institutionalized corruption, championed by Daniels, Hoosier taxpayers are footing the estimated $2.88-billion-and-rising construction bill at Edwardsport."
But under a system of institutionalized corruption, championed by Daniels and enabled by the Indiana General Assembly, Hoosier taxpayers are footing the estimated $2.88-billion-and-rising construction bill at Edwardsport.
CAC said Storms wrote and signed the July 28 IURC order that allowed Duke to recover costs from ratepayers and earn incentives, even though the plant isn’t producing electricity and is experiencing delays and soaring costs.
"Not only is Duke Energy recovering costs from ratepayers for a power plant that hasn't produced, and may never produce, a single kilowatt hour of electricity,” CAC Executive Director Grant Smith said in the news release, “those monies being recovered from consumers include hefty profits for Duke Energy.”
If Edwardsport succeeds, Duke profits, and ratepayers pay. If it fails, Duke profits, and ratepayers pay. All mandated by the government.
Talk about socialism.
Indiana’s presidential wannabe governor reacted to this ethical scandal with feigned, self-serving indignation. According to the Evansville Courier & Press, Daniels’ general counsel fired off a letter to the IURC chairman that “left no doubt the governor is angry.”
"If Edwardsport succeeds, Duke profits, and ratepayers pay. If it fails, Duke profits, and ratepayers pay."
General Counsel David Pippen cited an ethics panel's opinion that said Storms could take the Duke job without following the one-year rule if he stayed away from regulatory matters he was involved in, the newspaper said.
"While the opinion may be technically correct, the governor intended the ethics laws to reassure the public that state employees would not trade influence for personal gain," Pippen wrote to IURC Chair David Lott Hardy.
Daniels had legislatively pushed the one-year limit, which was added to the state’s ethics law in March. The Courier reported that Pippen urged the Commission to have no contact with Storms for a year.
"We are certain the IURC intends to abide by the letter and spirit of the ethics laws and that it shares our view that the formal ethics opinion for Mr. Storms contains significant restrictions on his duties as counsel for Duke Energy of Indiana," Pippen wrote.
The storyline that should anger the Left and the Right alike isn’t that Mitch Daniels’ chief utility advisor passed through the revolving corporate door without missing a step. It’s that the governor and the Indiana General Assembly are more concerned about the “appearance” of impropriety than impropriety itself.
State political leaders believe the rampant corruption that subverts the American political system can be controlled by a one-year waiting period on situations like Scott Storms’, which, as the Indianapolis Star editorialized on Sept. 28, is no isolated case.
"Talk about socialism."
IURC Chair Hardy worked for Public Service Indiana, Duke’s predecessor, the editors noted. Duke President Michael Reed served as executive director at the IURC. Two Indiana Duke attorneys are former IURC staffers.
“The short street runs both ways; and not just to and from the IURC,” the Star said. IDEM Commissioner Thomas Easterly is a former utility executive. And Daniels recently appointed a lobbyist for the coal industry to head IDEM’s enforcement division, where Storms once worked.
Scott Storms has spent the past decade of his career inside state government, where he not only learned how the system works, he left his mark on it. To argue that a one-year hiatus from the industry he regulated will diminish his ability to influence state policy to the benefit of his new boss is an insult to the public’s intelligence.
It’s enough to piss off anyone who cares about America, Right or Left.
Steven Higgs can be reached at editor@BloomingtonAlternative.com.