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August 20, 2014

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Ties to influential business interests power Sandoval’s political career

THEY GO WAY BACK

Pete Ernaut and Greg Ferraro, Republican lobbyists who represent energy and gaming interests, approached then-Judge Brian Sandoval to run for governor last year. The three have been friends since the 1980s, when they were at UNR together. Their relationship epitomizes the clubby world of Nevada politics.

Brian Sandoval

Gov. Jim Gibbons, center, answers questions with candidates Brian Sandoval, left, and Mike Montandon during the Republican gubernatorial debate in Reno on Friday, April 23, 2010. Launch slideshow »

In fall 2001, just a few months after resigning as chairman of the Nevada Gaming Commission, Brian Sandoval turned to the companies he had recently been regulating and asked them to contribute to his campaign for attorney general.

They responded enthusiastically. On Sept. 17 of that year, Excalibur, Mandalay Resort Group, Mandalay Bay Resort Casino and Circus Circus, all listing the same Strip address, gave $10,000 each.

Gaming companies and their executives would continue giving, their total exceeding $400,000, until Sandoval’s landslide victory in 2002.

It was another impressive bullet point on Sandoval’s resume, as well as another instance in which he moved easily between the interconnected worlds of public service and private interest.

Sandoval, who is challenging Gov. Jim Gibbons for the Republican nomination next month, is hardly unique in his several turns through Nevada’s revolving door.

His likely Democratic opponent, Rory Reid, was once a gaming lawyer and is now chairman of the Clark County Commission, which has jurisdiction over the Strip. Reid has turned to casinos to bundle hundreds of thousands of dollars for his campaign for governor.

But Sandoval’s career, marked by swift successes and experience in all three branches of government, is emblematic and offers a window on the inner workings of the elite echelons of Nevada politics and business.

It’s a tight network with just a handful of figures in gaming and a few other industries. Lobbyists for those industries deliver campaign money to candidates. Lobbyists have the elected officials’ ear. Lobbyists win legislative and regulatory battles, helping businesses earn more profit, which means more money for campaigns. And the cycle continues.

Sandoval has been a part of that network for years, as an assemblyman who raised money from gaming; a gaming regulator; an attorney general candidate and then attorney general who raised money from gaming; a federal judge who heard cases involving gaming companies; and now, even as he runs for governor, as an attorney with the influential law and lobby firm Jones Vargas.

“This is classic Nevada politics,” said Eric Herzik, a UNR political scientist and registered Republican. “You can look at almost any major state politician, and you see this kind of back and forth, particularly around gaming. The only place he didn’t make a stop is R&R,” Herzik quipped, referring to the advertising and lobbying powerhouse.

If Sandoval wins, however, R&R will be well positioned. His chief advisers are Pete Ernaut, a principal of the firm, and Greg Ferraro, a former R&R lobbyist who now has his own firm. Both are Republican lobbyists with wide reach, representing gaming, mining, developers and utilities.

On the day Sandoval announced he was running, he acknowledged to the Reno Gazette-Journal that the two lobbyists, who are also close friends, first approached him, and ultimately succeeded, in persuading him to run.

“Frankly, when they came to me the first time, seriously, I didn’t think it was a serious consideration,” he told the newspaper.

The friendship illustrates the clubby world of Nevada politics, with relationships that often go back to childhood: The three have known each other since they were at UNR in the 1980s. Ferraro and Sandoval went to rival high schools and were in rival fraternities. Ernaut was a year younger, a cut-up who transferred to USC to make it in showbiz.

Ferraro worked for legendary Nevada Republican Sen. Paul Laxalt; Sandoval interned.

“The friendship goes back to before any of us had amounted to anything,” Ferraro said.

Gibbons, though heavily backed in 2006 by such Republican establishment figures as Ferraro and Sig Rogich, is out of favor with the state’s powerful interests. His administration is considered aloof and erratic, which is the opposite of what lobbyists want. Gibbons has also embarrassed these players during his tumultuous tenure. In a real sense, powerful interests, who are used to having a sympathetic ear in the Governor’s Mansion, have been without a governor who could be counted on.

So Republicans have now turned to Sandoval, helping him raise $900,000 in a few months before the January reporting period — no doubt he’s raised more since.

That they would turn to him in a time of need is not surprising.

Sandoval began his career as an assemblyman, smart and ambitious, a Republican whose Hispanic heritage put him on the right side of demographic trends. The first donor to his 1994 campaign was the Republican caucus. The second was the mining lobby. The third: MGM. Gaming was his biggest donor.

Sandoval was elected twice and served in the Assembly with Ernaut, who would later become chief of staff to Gov. Kenny Guinn.

Sandoval was appointed to the gaming commission in 1998 by Gov. Bob Miller.

Miller’s chief political adviser was gaming lobbyist Billy Vassiliadis, CEO of R&R Partners, which Ernaut would later join.

Guinn would name Sandoval chairman of the powerful commission.

Radha Chanderraj, who served with Sandoval on the commission, called him “a great chairman.”

She said Sandoval was well prepared and steered the commission on the right course during a difficult time of industry growth and consolidation. “I agreed with most of his decisions, and regardless respected his reasoning in the decisions he made. He was ethical and intelligent,” she said.

Gaming lawyers seconded that endorsement.

Sandoval had a problem, however. The commission job was part-time and the most it ever paid him was $55,000, a modest sum for a rising star with a growing family.

Obviously, earning money from the gaming industry was out of the question, so Sandoval turned to another powerful player, the electric utility now known as NV Energy.

He began representing the Utility Shareholders of Nevada, which was widely viewed as a proxy for management. His ties to gaming were surely helpful, however, as gaming and utility lobbyists, such as Ferraro, are often the same.

In his new role, Sandoval supported the company’s bids to raise electricity rates.

When the Public Utilities Commission rejected a $110 million rate hike, Sandoval, on behalf of shareholders, joined a lawsuit against the commission, court papers show.

He would later tell the Reno Gazette-Journal that those shareholders were thousands of senior citizens who rely on utility dividends to pay their bills.

Finally, as his campaign for attorney general began, he said he would reappoint Timothy Hay as the state’s consumer advocate. The consumer advocate is charged with representing residential and small business utility ratepayers in the face of a utility monopoly trying to maximize shareholder value.

Hay had developed a reputation as a dogged advocate for ratepayers against the utility, having recently beaten back the $110 million rate hike and, later, $437 million in proposed rate hikes.

Sandoval, with help from the state’s gaming and other powerful industries, won the attorney general election in a landslide. According to the National Institute on Money in State Politics, gaming interests contributed $470,000 of his $1.6 million total. Financial backers also included the blue chip gaming law firm of Lionel Sawyer & Collins, where Rory Reid is a partner.

What happened next is in dispute.

Sandoval had sat on an audit committee that scrutinized consulting and other costs racked up by the consumer advocate’s office.

Hay’s defenders think this was a first sally of a wide-ranging attempt to push him out to the benefit of the electric utility.

In a Sun interview, Sandoval said scrutiny of consulting contracts was part of an examination of the financial health of the entire office. “We had to save money. There wasn’t targeting of anybody in the attorney general’s office,” he said.

In another money-saving effort, Sandoval wanted Hay to move from leased space next to the Public Utilities Commission, where his staff did most of its business, across town to the attorney general’s office.

Hay’s defenders thought this was an attempt to interfere with and disrupt his work and bring Hay to heel on behalf of the electric utility.

Sandoval said that’s not true.

“I have great respect for the consumer advocate office,” he said. “I don’t remember specific disagreements we had, but I never interfered with his cases. The office was autonomous.”

Perhaps, but a former Republican legislator said Sandoval was clear in his intent: He wanted Hay gone. “He didn’t think the advocate was doing a good enough job for consumers, and he wanted to make a change,” the legislator said.

Assembly Speaker Barbara Buckley, a Democrat known for her focus on consumer issues, said she remembers Sandoval wanting Hay out, but disputed the notion that Hay was ineffective. “He did a phenomenal job,” she said.

Sandoval and state Sen. Randolph Townsend soon discovered that by statute Hay’s four-year term should have ended Dec. 31, 2004, even though his certificate of appointment said his term was up in June 2005. Sandoval and Townsend obtained a legal opinion from the Legislative Counsel Bureau stating as much.

Hay was out.

In an interview, Hay said: “We didn’t have a close relationship. Part of that was he had a close relationship with the utilities,” said Hay, who now represents liberal interest groups and has given Rory Reid’s campaign $750.

Sandoval quickly moved on when Sen. Harry Reid, Rory’s father, and Sen. John Ensign, son of casino mogul and Sandoval backer Mike Ensign, recommended him for the federal bench.

This being Nevada, he inevitably handled numerous cases involving the casino companies that had supported him — Mandalay, MGM, International Game Technology. Sandoval said that before ruling on those cases he researched the legal question of deciding cases involving previous political donors and determined he was on safe ground.

And he was, according to Charles Gardner Geyh, an associate dean and expert in legal ethics at Indiana University Maurer School of Law. Given that Sandoval wasn’t elected but rather granted a lifetime appointment, the contributions were a “step removed” and so didn’t require Sandoval to recuse himself.

Today, gaming companies and their executives are again supporting Sandoval, while lobbyists Ernaut and Ferraro run the campaign. Sandoval’s fellow lawyers at Jones Vargas include power lobbyists Mike Alonso and James Wadhams, state Sen. Bill Raggio and Joe Brown, who is on the Gaming Commission. Tony Sanchez, a former Jones Vargas attorney, is now a senior executive with the electric utility.

Sandoval said voters should have no doubt that he will represent them despite his ties to business interests.

“A guy’s got to make a living,” he said when asked about his job at Jones Vargas. “Throughout my public service career, I’ve always been my own man. I’ll do what’s in the best interest for the state of Nevada.”

There are two important companies, however, that are not supporting Sandoval, and their lack of support reveals the true nature of a governor’s race in which voters will likely face a choice between two sheep from the same flock.

Mirage has committed $100,000 for Rory Reid, while Harrah’s has given him at least $20,000 so far. Neither is giving to Sandoval.

This might reflect devotion to Reid’s father, the Senate majority leader. Nevada’s establishment — Democrat and Republican alike — has circled the wagons for the elder Reid in his re-election, and some of them may want to avoid helping sully the family name by giving Sandoval money with which to attack the son.

Vassiliadis, Ernaut’s CEO at R&R Partners and the gaming industry’s chief lobbyist and advertising figure, is a key adviser to Harry Reid.

It’s not clear how close Vassiliadis and Rory Reid are.

Still, it’s not much of a stretch to say that in the governor’s race, R&R Partners and its establishment clients can’t lose.

Sun researcher Rebecca Clifford-Cruz contributed to this story.

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