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As senator, Dunn led the state's investigation into Enron's involvement in the 2000-2001 energy crisis. He was first elected to the state Senate in 1998, when he unseated incumbent Republican Rob Hurtt by a 51% to 49% margin. Dunn was reelected in 2002. He ran for the Democratic nomination for Controller in 2006 but lost by 53% to 47% to John Chiang, who would then go on to win the general.
In 2010, Dunn was selected as the Executive Director of the State Bar of California. On November 13, 2014, the State Bar issued a statement saying that Dunn's employment as Executive Director had been terminated by the Board of Trustees. According to the Courthouse New Service, Dunn then filed a whistleblower lawsuit against the State Bar challenging the termination because he had exposed malfeasance and "egregious improprieties." The State Bar denied Dunn's allegations, saying the "Board received a complaint from a high-level employee raising serious, wide-ranging allegations about ... Dunn and certain State Bar employees." In January 2016, The Recorder released a report indicating that State Bar, while under Dunn's leadership, incurred excessive international travel expenses for trips to El Salvador, Mexico, Guatemala, Nicaragua, Peru and Mongolia. Dunn's allegations against the State Bar were diverted to an arbitration proceeding under terms of his contract. In March of 2017, Arbitrator Edward Infante issued a ruling that exonerated the State Bar, which had said it fired Dunn in 2014 for misleading the agency's board about critical policy matters.
He is a founding partner of The Senators (Ret.) Firm, LLP, "a law and political consulting firm where [the founders]...exert a powerful influence on national and statewide issues."