Indictments cloud Legislature

Peninsula lawmakers and their colleagues must rebuild trust

Posted: Wednesday, May 09, 2007

A tragedy, a huge cloud, a betrayal of the public trust, violations well beyond the meager margins of legislative ethics convention: those are expressions being used this week by Kenai Peninsula state lawmakers to describe the upheaval caused by the federal indictments against sitting and former lawmakers and VECO executives.

“I don’t know where this is all going to end up,” Sen. Tom Wagoner, R-Kenai, said Tuesday during an interview with the Clarion. “I think there are more indictments to come.”

An investigation that came to light last year when FBI agents raided several Juneau legislative offices has so far resulted in the indictment of one sitting and two former state lawmakers on a variety of charges, including extortion or conspiracy to commit extortion, bribery and wire and mail fraud.

Pleading not guilty at their arraignments May 4 were state Rep. Victor Kohring, R-Wasilla, and former state Reps. Pete Kott, R-Eagle River, and Bruce Weyhrauch, R-Juneau.

Then came a second shoe, this one squarely atop those who head Alaska’s most powerful oilfield services company.

On Monday, VECO’s Chief Executive Officer Bill Allen and Vice President for Community and Government Affairs Richard Smith appeared in U.S. District Court to plead guilty to bribery and conspiracy charges as part of a plea bargain with the U.S. Justice Department’s Public Integrity Section, with which the two are cooperating.

The men said they’d illegally shelled out over $400,000 in cash and other compensation to public officials, most of it — reportedly around $240,000 from 2002 through 2006 — to former Sen. Ben Stevens, R-Anchorage.

Stevens is not currently under indictment, but a man referred to as “Senator B” in federal documents appears to be Ben Stevens.

Wagoner said the indictments and guilty pleas have cast a pall over the legislature even as it gears up for the final run toward the end of the legislative session, a period during which lawmakers could decide the fate of Gov. Sarah Palin’s Alaska Gasline Inducement Act and will determine the fiscal year 2008 state budget.

Public reaction to the scandal is already being felt. An informal and unscientific poll by the Clarion this week asks people if they trust state lawmakers. By late Tuesday afternoon, there were 77 online responses, 70 of which were no.

“I would have expected that reaction,” Wagoner said. “It’s human nature.”

He called the affair a tragedy.

Rep. Paul Seaton, R-Homer, said reestablishing that confidence will take some work — even for lawmakers who had nothing to do with the scandal.

“Each (lawmaker) will have to go back to his or her district and talk with the people who elected them,” he said.

“It’s a huge cloud on state government in general,” said Rep. Mike Chenault, R-Nikiski, who pointed to the administration of former Gov. Frank Murkowski for helping to initiate the current level of distrust that this week’s events have only exacerbated. Chenault was referring to the debate over the Petroleum Profits Tax and Murkowski’s ill-fated gas pipeline proposal.

“Unfortunately for the state, we are starting to see some things come out of that,” he said.

In the midst of all this, ethics reform legislation has been moving slowly toward floor votes.

Seaton said a comprehensive ethics reform package passed by the House was already in Senate hands, and Senate measures have been forwarded to the House. Ethics reform will pass this year, he said.

The charges against state lawmakers, however, go far beyond mere ethics violations, he said.

“They are not charged with breaking ethics law ... but with breaking felony laws,” Seaton said. “If these allegations are true, this would have been for accepting money or other valuable things, which is against ethics law anyway.”

Sen. Gary Stevens, R-Kodiak, said ethics laws are an expression of the need to remain vigilant regarding the conduct of lawmakers, but they aren’t the last word in curbing behavior.

“It is hard to keep crooks from being crooks,” he said.

Still, ethics reform could, if enforced, help reestablish public confidence in the legislative system.

For his part, Gary Stevens already has tried. For instance, after payments from VECO to Ben Stevens, no relation, came to light last year, Ben Stevens acknowledge having received money for consulting work, but declined to provide details about what he had done specifically for the company.

In reaction, Sen. Gary Stevens introduced a measure seeking to draw a definitive line by preventing a person from being a paid consultant and a state legislator at the same time. That measure did not become law, but its aim might be revisited.

“It was an extreme measure, but a good one, I thought,” Gary Stevens said.

Chenault said it “might be the right thing” for Rep. Kohring to resign, noting that the House had already stripped him of his committee chairmanship. “I don’t know how effective or ineffective he will be. When he goes home, his constituents will talk with him. Maybe then he’ll decide.”

According to the federal plea agreement, VECO’s Allen and Smith are not protected from state charges. Gary Stevens said the two know much about what went on and could be assumed to be “the key to the whole thing.”

Rep. Kurt Olson, R-Soldotna, said deciding whether to charge the two under state law would depend, in part, on what kind of sentences are handed down in federal court.

“The feds have the latitude to put in some significant time,” he said. “If it’s minimal or no time, that option would be available.”

Olson said more important at this point than worrying about jail time and fines is determining just how widespread the corruption problems are, and then to begin reassuring voters that most lawmakers have not sold out.

“Even one doing it is a travesty,” he said.

Almost as soon as justice department charges were leveled against Kott, Kohring and Weyhrauch, talk turned to whether the passage last year of the highly controversial Petroleum Profits Tax law had been tainted.

The PPT taxes the net profits of producers rather than the gross production — the flow of oil and gas out of the ground. At the time, former Gov. Frank Murkowski was also pushing his version of a pipeline construction deal with ExxonMobil, ConocoPhillips and BP, a bill that eventually failed. The oil giants and VECO lobbied hard for the pipeline deal, as they did for the PPT.

As Senate Majority Leader, Gary Stevens’ job was to keep tabs on where legislators stood. He said Tuesday that he did not believe the alleged influence of money on the three lawmakers actually made any difference in the outcome.

“Even though there may have been legislators in the pockets of the industry, those people weren’t able to stop the process from working. We ended up with a higher tax rate than many people wanted.”

Murkowski had insisted on a 20-percent tax rate. State lawmakers eventually adopted a 22.5-percent rate.

Seaton noted that the PPT law had now produced the first returns, somewhat smaller than first hoped, but “pretty much in line” with what could be expected.

Gary Stevens and Seaton said the PPT would continue to be analyzed, but neither expected the federal indictments to send lawmakers into special session to readdress it. Seaton did say, however, that he supported investigating whether the votes of the accused lawmakers were critical, adding that it was “very disappointing” so see that kind of influence.

“I think there was direct and indirect pressure to vote for the lower rate,” Wagoner said. “It could cost the state hundreds of millions of dollars.”

Wagoner, who opposed the PPT, said Murkowski and his chief of staff Jim Clark had led the Legislature down a bad path. He favored a tax on production, not profits, and knowing that would not fly last year, battled unsuccessfully for a tax rate of 25 percent at the least.

Stevens said the PPT would continue to be analyzed because the whole issue of taxes on natural gas would be addressed with regard to the AGIA.

Wagoner said that the cloud of public distrust now hovering over state lawmakers may have a silver lining.

“We may grow out of this to be a healthier and more accountable (legislative) body,” he said. “You have got to be able to learn from your mistakes. If you can’t, you shouldn’t be serving in this legislative body.”

Chenault said lawmakers would “have to climb out of this with our actions.”

Hal Spence can be reached at

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