Fiesta Bowl sues insurance company - East Valley Tribune: Arizona

Fiesta Bowl sues insurance company

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Posted: Friday, November 25, 2011 4:55 pm | Updated: 3:37 pm, Thu Dec 1, 2011.

The already embattled Fiesta Bowl has a new legal fight on its hands.

And it's with the company officials thought actually would be defending them in their other battles.

In a lawsuit filed in Maricopa County Superior Court, attorneys for the Arizona Sports Foundation, the formal name for the Fiesta Bowl, charge that Axis Insurance Co. is not living up to the terms of its contract. Specifically, the lawyers say Axis is refusing to step up to protect the foundation and its employees in the multitude of investigations and lawsuits that have sprung up about the way the bowl has done business.

Bowl attorneys also want Axis to pay all the legal fees now being incurred, fees they say which already have topped $5 million.

A spokesman for Axis said he could not comment on the litigation.

Central to the fight is the insurance policy that Shane Swindle, the lead bowl attorney, said was purchased to protect against various claims.

Swindle said in all the time there was coverage, going back to 2006, there was only a single claim, the one which started with the investigation that the Arizona Secretary of State launched in 2009 over whether the bowl violated campaign finance laws by reimbursing employees for political contributions.

But that led to more investigations, including a grand jury probe by the Attorney General's Office, an investigation by the Internal Revenue Service, and various subpoenas that involve the U.S. Department of Justice and the Maricopa County Attorney's Office.

Swindle said bowl officials notified Axis of the claim. He said the company acknowledged receipt of that notice but never stepped up.

"Instead of providing the required defense, Axis left the Fiesta Bowl and its officers, directors and employees to fend for themselves," Swindle wrote. Then, earlier this year, Swindle said the insurance company "seized on selected results from the Fiesta Bowl's own investigation of the claims as a pretext for denying coverage to the Fiesta Bowl" as well as most of those involved.

Swindle did not detail the reasons proffered by Axis, though most policies of this type have exceptions and exclusions. The most common of these involve violations of the law.

But Swindle, in his lawsuit, said the denial was "inconsistent with, and contradicted by, the (insurance) policy, the underlying facts and Axis' legal obligations."

That investigation came up with a series of irregularities, some unusual and some potentially illegal.

For example, John Junker, who was president and chief executive officer until being ousted, ran up charges on his credit card at the Bourbon Street strip club in Phoenix, entertaining a Fiesta Bowl employee and a Maricopa County sheriff's lieutenant who owns a consulting firm that provides security for the bowl.

Junker told investigators that the more than $1,200 that was billed to the Fiesta Bowl was not just for food and drink but "in all likelihood" included paying some women to dance for them. But Junker said there was a business purpose for the visit to the club.

"We are in the business where big strong athletes are known to attend these types of establishments," he told investigators. "It was important for us to visit, and we certainly conducted business."

That spending, though, is dwarfed by the $33,000 the Fiesta Bowl spent for a 50th birthday party for Junker in Pebble Beach, Calif.

But the legal problems are deeper.

Potentially the biggest - and the ones with possible criminal implications - are that the Fiesta Bowl got employees to make donations to the campaigns of politicians, which were reimbursed from bowl funds. That becomes an illegal contribution of corporate money to influence elections.

According to an investigative report, more than $48,000 was laundered that way, including $15,000 reimbursed to Junker.

The biggest recipient was U.S. Sen. John McCain, who received $19,500 over several campaigns. Jon Kyl, the state's other U.S. senator, got $3,000 in similarly reimbursed donations.

Earlier this month a federal grand jury indicted Natalie Wisneski, who had been the bowl's chief operating officer, on nine separate counts relating to the campaign contributions. One involves filing a false tax return for denying in those documents that the Fiesta Bowl had any lobbying for political expenses.

And the U.S. Attorney's Office said the investigation is continuing, with the cooperation of the now-revamped Fiesta Bowl organization.

There are separate investigations into trips to sporting events the Fiesta Bowl gave to legislators and a member of the Tempe City Council.

Lawmakers are entitled to accept free travel. But they are supposed to report it on annual financial-disclosure forms. After the investigation started, several legislators have amended their forms for prior years.

State law, however, prohibits legislators from getting tickets to sporting events, regardless of whether the value is reported.

Separately, the Bowl Championship Series fined the Fiesta Bowl $1 million for financial improprieties but opted not to revoke its status as one of four sites that on a rotating basis host the national championship football game.

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