Tension heightens between Axon, city

Mar. 7—Being shot with a Taser gun can cause intense, burning pain and muscle spasms.

That might also describe the apparent reaction of Rick Smith to a City of Scottsdale letter.

A dispute about an Axon executive contacting the employer of a Planning Commission member heated up with a pointed exchange.

Stung by a March 1 letter from City Attorney Sherry Scott, who demanded Axon keep its employees in check, Smith fired a lengthy rebuttal the next day — ending by doubling down on a warning he might just take his business elsewhere.

After being told Axon's actions could have a "chilling effect" on city volunteers, Smith attempted to flip the switch, saying "this public spectacle is having a chilling effect on both our interest in staying in Scottsdale and surely other employers are watching how this is being handled."

The letter was not the Axon founder and CEO's first suggestion about leaving town.

During a Planning Commission meeting three weeks ago, Smith mentioned Atlanta and Seattle as alternative sites if Scottsdale rejects his mammoth expansion plan.

Four days before the letter to Scott, Smith and Axon hosted a group call to discuss Axon's staggering Taser stun gun and body camera sales.

Early in the call, Smith called Scottsdale "anti-development" and hinted Axon might relocate.

During the call, Meta Marshall, a Morgan Stanley analyst, asked, "Is there a kind of drop-dead deadline when you're hoping to kind of make a decision on what city to do the expansion?"

"We hope to have a decision by sometime this summer," he said.

He added the Scottsdale plan he unveiled last year "has kind of dragged on for a while, so ... we'd like to get moving on it."

Rocky going

Meanwhile, his unprecedented plan for 50 acres of former state land in Scottsdale seems to be moving in the wrong direction.

In January, the Airport Advisory Commission scoffed at Axon's plans. Though the board has no power on its own, commissioners unanimously rejected Axon's request to recommend the plan to City Council — the ultimate arbiter.

At two subsequent meetings, Planning Commission members also had no enthusiasm for the Axon rezoning request needed for its plan of 2,000 apartments and a hotel, in addition to a new headquarters.

In mid-February, Christian Serena, a volunteer on the city's Planning Commission, complained to the city attorney that an Axon representative called his employer.

Serena later met with Scott, who seemed to back up his story in a stern March 1 letter to Axon.

"I strongly urge Axon to instruct its employees that they should not be contacting the private employers of volunteer city board and commission members regarding their public work on behalf of the city," Scott wrote.

Axon repeatedly denied any of its representatives inappropriately communicated with Serena's employer, Merrill Lynch, about him.

Serena's rather vague email to Scott did not accuse anyone from Axon of attempting to sway his vote.

But, Serena — who publicly grilled an Axon representative over trying to build apartments on land sold by the state as only for industrial/business purposes — wrote "a person who claimed to represent Axon's leadership contacted my employer wanting to discuss my public comments about the applicant's case."

Multiple sources told the Progress Scott's letter to Axon came after she met with Serena.

"I am delighted that my statement has been validated," Serena told the Progress.

"I commend the city attorney for verifying the truth," he added. "Ensuring the integrity for both the city and our residents is paramount."

At the meeting with the city attorney, sources say, Serena provided more details about his allegations.

They included "contemporaneous documentation" — notes he wrote shortly after Merrill Lynch management told him about the alleged calls from an Axon executive who was "livid" over Serena's treatment of Axon during a meeting.

"Over the top" reaction

Smith's response to the Scott letter also was emotionally fired.

"At the Jan. 24 Planning Commission meeting, Planning Commission member Christian Serena was aggressively opposed to Axon's project, which will bring hundreds of high paying jobs and hundreds of millions of dollars in economic benefit to the city," Smith began the hot letter.

He described Serena's behavior as "so over the top that my 14-year-old son even noticed that Mr. Serena's demeanor stood out in a way that felt emotional and personal."

Smith continued his letter outlining a chain of events, stating Axon "came to learn that Mr. Serena works as a licensed financial advisor and fiduciary for Merrill Lynch/Bank of America.

"Over the past several years, Mr. Serena's employer has approached Axon on several occasions in attempts to win our banking business, worth tens of millions of dollars."

Smith said Serena's employers "have been unsuccessful in winning Axon's business" — then suggested this created a "conflict of interest" on Serena's part.

"One of our employees has their personal investments managed at Merrill Lynch by the same small office of which Mr. Serena is a part," Smith wrote.

"That Axon employee spoke with their personal banker at Merrill Lynch to inquire whether Merrill Lynch had any policies relating to potential conflicts of interest given that Mr. Serena was publicly undermining Axon's project after Axon declined to do business with his company."

Later, Smith narrated, Serena's supervisor called the Axon employee "and was clearly concerned about this issue. He asked if we wanted Merrill Lynch to take any action, including requiring Mr. Serena to recuse himself.

"Our employee said 'no' and gave clear instructions that he did not want them to take any action whatsoever and asked that they not even inform Mr. Serena about the inquiry; 'don't want any pressure put on a commissioner to vote a certain way' was the exact statement."

Smith then demanded to know what the city's policies are, regarding conflicts of interest.

"Did Mr. Serena self-report a potential conflict prior the Jan. 24 meeting, and if so, what process did the city undertake to determine whether or not a conflict existed?"

No violations charged

Despite Scott's strongly-worded letter, the city has not accused Axon of violating any policies or laws.

Indeed, in the wake of the heated letter exchange, the city released a statement:

"Regarding the Axon development proposal and the city Planning Commission, given the facts available to the Scottsdale City Attorney's Office, it does not appear that anything unlawful occurred."

Even before Axon purchased state land in 2020, Smith's company was in close contact with the city, negotiating and signing a development agreement.

Later, when Axon made a formal plan submittal to the city, the company was assigned a planning staff member to assist Axon with the complex process needed for development.

"When an applicant begins a development project, they consult with planning staff and are provided information to understand the process," Kelly Corsette, a city spokesman, explained.

When boards and commissions reviews are needed, Corsette said, "it is not uncommon for the applicant to be informed about channels through which they can reach out to board/commission members and City Council members for feedback during the process.

"Those channels would not have included contacting commission members personally, but Axon was not given express direction to not contact commissioners prior to March 1," Corsette said.

Corsette confirmed Axon was not advised "they should not be contacting the private employers of volunteer city board and commission members regarding their public work on behalf of the city" prior to Scott's March 1 letter.

No conflict found

Regarding Smith's demands for an investigation of Serena, the city's statement says, "nor does it appear that the commission member in question has a conflict of interest in the case."

Asked about whether he felt he had any potential conflicts with Axon that required recusal, Serena told the Progress, "I agree with the city."

The city's statement concludes, "Absent any other facts, the city considers this facet of the Axon development proposal discussion closed."

Regarding the process of potential conflict of interest and recusals, prior to beginning service on a city board or commission, "members must review the city's Code of Ethical Behavior, complete an online training course and disclose in writing any specific, known potential conflict of interests they may have," Corsette said.

Trainings are repeated every year, he added.

"If something arises on a board or commission agenda that may present a conflict for a member of those bodies, they are to immediately refrain from participating in any manner in the decision-making process," Corsette said.

The city spokesman stressed "a conflict of interest is defined in state law as, essentially, a situation in which an individual is financially impacted in a non-speculative way."

"When an agenda item in which they have a potential conflict of interest comes up for consideration, the elected or appointed official must state publicly that they have a conflict, recuse themselves, and leave the room while the matter is being discussed and acted upon.

"In addition, they must then update their personal interest disclosure form in writing and file it with the city clerk's office."

The city's ethics policy also notes anyone who feels a potential conflict of interest violation exists can file a complaint with the city attorney.

Axon did not do this.

After Smith's letter, the Progress asked several follow up questions, including if Axon talked to employers of the other Airport Advisory and Planning commissioners who spoke against the project.

"The city says this is a closed matter," said David Leibowitz, an Axon spokesman who is also a contributor to this newspaper. "Given that, Axon isn't going to discuss the issue any further."

'Nonlethal' damage?

According to the March 1 letter Scott sent to Axon attorney Charles Huellmantel, "I am not attempting to silence Axon's leadership in any way.

"The city maintains open channels for communications regarding Axon's pending development application as well as the city's many board and commission members, who serve at the pleasure of the City Council," Scott wrote.

"In fact, the city embraces civil dialogue on any issue impacting the city and is constantly seeking citizen input."

In a Feb. 27 letter to Scott that followed her first communication regarding Serena's email, Huellmantel told her, "I have no knowledge of any Axon employee or representative contacting the Commissioner's employer to impact his vote at commission meetings or his opposition to Axon's proposal."

A week before the Scott letter and Smith response, the Planning Commission gave Axon an indefinite extension on its rezoning request for the former state land near the Loop 101 and Hayden Road.

According to the development agreement Axon reached with the city in 2020, both sides acknowledged "planning and development activities for the property could extend over several years.

"The parties agree that they will act in good faith and with reasonableness" throughout the development process, according to the agreement, signed Aug. 10, 2020, by Isaiah Field, Axon counsel, and by then-Mayor Jim Lane Sept. 21, 2020,

"The parties agree to cooperate with one another and to take all actions reasonably necessary to implement this agreement within a reasonable time after request by the other party, including but not limited to the timely granting of approvals and processing of applications relating to the implementation of this agreement."

Indeed, Axon's original plan, for a "Star Wars"-inspired headquarters on the land was quickly approved by the city — it did not require rezoning.

Then, in an abrupt shift, Huellmantel hosted a meeting with Axon's neighbors in the Stonebrook II complex of 174 homes.

The attorney stunned the locals with new plans for four apartment buildings totaling 2,000 units and a hotel — all five stories high.

The attorney said — a point later echoed by Smith — the Silicon Valley-like "corporate campus" was needed to attract tech workers to Scottsdale.

But the plan requires rezoning, as the state land carries industrial/commercial use zoning.

A crucial section of the development agreement notes:

"Nothing in this agreement shall be taken as a promise by city to rezone the property or amend the zoning and development standards existing on the property."

As such, Axon had to submit a request for rezoning — and quickly ran into headwinds.

First, a rival developer alerted the city and state that Axon's plans for residential use of the land "cheated" the state's land trust — which helps fund schools — of millions of dollars.

Scott put the brakes on the project in the fall, demanding Axon receive permission from the state to proceed.

Armed with a general letter from the state's land trust department, Huellmantel resubmitted the Axon request in December.

The flat rejection by the Airport Advisory Commission and sharp demands by Serena and other members of the Planning Commission puts Axon's rezoning request in danger, however.

While Scottsdale City Council will ultimately decide on Axon's plan, several council members told the Progress — under condition of their names not being used — they tend to agree with the company's neighbors.

Stonebrook residents have complained over the last year that Axon's plan will be invasive to their community and cause a traffic nightmare.

Yet many officials also want Axon to remain here.

As Serena himself said at the Jan. 24 Planning Commission meeting, "Scottsdale is better off having Axon here."

Indeed, City Councilwoman Tammy Caputi points out, "Our Economic Development department estimates that Axon will contribute $6 billion to Scottsdale's economy over the next 10 years.

"They are one of our major employers and a longtime partner. Setting aside the new development request that's been proposed — and has yet to come before council — they are a valued and respected company in our city," said Caputi, who is running for reelection this year and has received campaign donations from Axon.

Councilwoman Solange Whitehead said, "I valued Axon when I approved the (expanded headquarters) a few years back and continue to value the company's mission, economic impact, partnership with Scottsdale Police Department today."

Whitehead said neighbors also value Axon, but "the current focus is on Axon's apartment proposal which I believe needs to be scaled back in height, density and unit count."

Despite Scott's letter, the city's statement attempts to show a welcoming attitude:

"As one of the largest employers in Scottsdale and a longtime business founded here, the city remains committed to providing Axon with a thorough, open and responsive process through which the company's proposal for additional development around its previously approved corporate headquarters campus will be discussed."

Axon's take?

While Smith has slammed Scottsdale, it sounds like he has not slammed the door on the city.

"Axon is going to continue to look at all possible options in regards to its world headquarters proposal," said Leibowitz.

The bottom line appears to be that, though both sides have fired shots, the exchange between Axon and the city may prove to be "nonlethal" — like the temporary pain induced by a Taser blast.