Arizona AG says Arizona Commerce Authority’s CEO forums violate state’s gift clause

Jan 17, 2024, 10:28 AM | Updated: 10:32 am

Fans watch golfers during the WM Phoenix Open...

The Arizona Attorney General's Office announced Jan. 16, 2024, that CEO forums organized by the Arizona Commerce Authority around sporting events such as the WM Phoenix Open violate the gift clause of the state constitution. (Getty Images File Photo)

(Getty Images File Photo)

PHOENIX – The Arizona Commerce Authority’s practice of hosting expensive junkets for corporate executives in an effort to lure business to the state is illegal, the Arizona Attorney General’s Office announced Tuesday.

The Arizona Commerce Authority (ACA), which was created to stimulate the state’s economy in the wake of the Great Recession, has operated CEO forums around major sporting events for years. Recruiting out-of-state companies is part of the organization’s mission.

The Arizona Auditor General flagged the CEO forum practice during its September 2023 sunset review of the ACA and asked the Attorney General’s Office to review the strategy. Attorney General Kris Mayes revealed the findings in a letter to the ACA.

“As they currently exist, the CEO forums violate the gift clause of the Arizona Constitution. The current structure of the CEO forums confers significant value on invited private executives and their guests without obtaining any value cognizable under the gift clause,” the letter says.

The ACA said it disagrees with the ruling.

“From the beginning of this program, we’ve conferred with internal and external legal counsel to ensure it aligns with all state requirements. We are reviewing the AG’s opinion and will continue to work with legal counsel to consider next steps,” Alyssa Tufts, ACA public relations director, said in a statement to KTAR News.

What are the Arizona Commerce Authority’s CEO forums?

The attorney general’s letter listed the cost of CEO forums planned around the Super Bowl and WM Phoenix Open golf tournament in recent years. For example, the ACA spent more than $2 million on a four-day forum organized around those events in 2023, according to the letter, which cited Auditor General data.

The letter said the ACA can host future events “that confer nominal value on attendees” but indicated that two upcoming CEO forums fail to meet that standard.

The events in question are planned around the WM Phoenix Open in February and the NCAA Final Four men’s basketball tournament in April. The ACA was expected to spend more than $1 million on those forums, according to the letter.

“The ACA should not hold future CEO forums that violate the gift clause, and the attorney general will seek to enjoin any future illegal payment of public monies,” the letter says.

The Attorney General’s Office also said it will open a separate investigation into the ACA’s grant program.

Could Arizona gift clause ruling could have larger ramifications?

Mayes’ announcement caught the attention of the Arizona business community, and not in a good way.

Danny Seiden, president and CEO of the Arizona Chamber of Commerce and Industry, a separate entity from the ACA, said the attorney general’s stance could have implications beyond the CEO forums.

“It has the ability to freeze all the economic development programs, not just with the ACA, but at the city levels, too,” Seiden told KTAR News 92.3 FM’s The Mike Broomhead Show on Wednesday. “It’s a very, very dangerous opinion … and could have very dire consequences for our economy.”

Seiden believes Mayes’ ruling misinterprets the state law by downplaying the value of business generated through methods like the CEO forums.

“I think that this will end up back in court, as so many attorney general opinions do, and it will be settled there,” he said. “Because you cannot allow something like this to stand.”

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Arizona AG says Arizona Commerce Authority’s CEO forums violate state’s gift clause