AKLEG Day 114: 'Cover-yourself behavior'

While some trustees are eager to investigate embarrassing leaks, others are more focused on the conditions that caused them.

Good afternoon, Alaska!

In this edition: The Alaska Permanent Fund’s Board of Trustees held a special meeting today, ostensibly to investigate leaked emails that documented executives’ serious concerns about the inappropriate and potentially unethical behavior of a trustee who’s particularly close to the governor. However, the meeting ended up being about a lot more than email security when another trustee dared say there could, in his view, be some merit to the underlying allegations.

Current mood: 👀👀

‘Cover-yourself behavior’

(Photo by Gabriel/Adobe Stock)

The Alaska Permanent Fund’s Board of Trustees met at a special meeting today to discuss the leak of emails documenting staff concerns with Trustee Ellie Rubenstein’s efforts to steer business to close associates by coordinating and setting up several meetings with fund managers. The emails, acquired by political writer Jeff Landfield, bring another round of scrutiny on the Board of Trustees, which has faced mounting concerns after its abrupt firing of former CEO Angela Rodell, ongoing accusations of meddling by the Dunleavy administration and the board’s decision to entertain a Rubenstein-authored plan that would have required the fund to heavily borrow to take on risky private equity investments before nixing it as a bad bet. The emails also suggest Rubenstein has a special line of communication with the governor, relaying in one email that Dunleavy plans not to reappoint Board of Trustee Chair Ethan Schutt.

The leak has incensed Rubenstein and some members of the Board of Trustees, who called the special meeting with the express purpose of addressing the leaks. Trustee Adam Crum, a close Dunleavy ally and current Revenue commissioner, framed the leaks as a severe threat to the Alaska Permanent Fund, worrying there may have been an external breach of the systems.

However, today’s meeting became about far more than email security after some members gave credence to the underlying concerns, raising red flags about other members’ behavior beyond Rubenstein’s apparent efforts to steer business to her family and business associates. That includes secretive meetings, threats against staff and a steep increase in trustee requests for business meetings.

While several members of the Board of Trustees seemed keener on tracking down the source of the leaks, Trustee Craig Richards said they should be more focused on why the staff felt compelled to record Rubenstein’s actions in the first place and why someone felt strong enough about them to leak them to the media. He suggested that they need to consider governance changes that would more clearly outline the role of trustees to better protect the staff, suggesting trustees have been overstepping their role and interfering with fund operations.

“We have the specific ethical allegations against Trustee Rubenstein, which I presume will ultimately be handled through the state’s ethics process. We’ve got, in my mind, some of the broader behavior of this board that has resulted in an atmosphere at the Permanent Fund where we’re seeing the need of employees to do your standard cover-yourself behavior,” he said. “In my mind, the key thing is I’m less concerned about leaks than I am about fixing the behavior that caused the leaks. … To me, as a stepping stone to get to governance reform, that’s fine, but it’s ultimately governance reform that’s going to be necessary to solve the core underlying problem here.”

Crum and Trustee Jason Brune, who Gov. Mike Dunleavy appointed to the board after resigning as the Environmental Conservation commissioner last year, hotly disputed that point during the hearing.

“I want some more definition because those were some pretty large allegations about trustee behavior,” Brune said, demanding specifics.

Trustee Richards replied that it was precisely why he thought the meeting was premature and should have waited until their regular meeting later this month, but he relented after Brune continued to insist he give specifics.

“OK, well, I’ll say it. It’s just not how I’d prefer to do it. What I’ve witnessed in the last two years, maybe 18 months, is I’ve witnessed among some trustees a large increase in the number of referrals the staff are getting related to investments and investment managers,” he said. “It’s increased volume to a point where staff has obviously become uncomfortable. That’s been communicated, yet the behavior still occurred. There’s also the fact that there have been a lot more discussions not at the table at the board recently, where things are getting decided behind closed doors. Well, discussions are occurring behind closed doors in a way they didn’t used to.”

He added that there has also been a marked uptick in direct communications between some trustees and the staff, which has left managers feeling undermined and some employees fearing that their jobs could be on the line. That’s likely a reference to a series of emails where Rubenstein complained about an analyst with whom her father was “unimpressed” and questioned the capabilities of the fund’s team that works on private equity investments, the area in which Rubenstein is closely involved.

He suggested that this kind of interference is why people leak.

“There have been probably some indirect threats around people in a way that they’re leading to feel threatened around their employment or the status with the company, which is why we’re seeing leaks,” Richards said. “That’s my observation.”

“I’m not actually familiar with any of that at all,” Crum shot back.

“OK, well, that’s been my observation,” Richards replied.

Crum said if Richards was so bothered by the side conversations, what was he proposing to fix it?

“Again, gentlemen,” Richards replied, “I’m sitting here trying to say that the right way to handle this is not to sit here and point fingers at each other or point fingers at members of the staff. The right way to handle this is to come up with expectations around communications. If everyone is in alignment that the things I’ve talked about are things that shouldn’t be occurring, then it should be no challenge at all to adopt a series of governance reforms to prevent behavior that I view as a little inappropriate.”

Brune churlishly pointed out that Richards was pointing fingers, insisting that nothing he has done has been untoward or unethical. However, it should be noted that Brune has, at previous meetings, entertained the possibility of holding meetings outside Alaska to avoid the provisions of the Alaska Open Meetings Act.

For her part, Rubenstein never weighed in on the discussions.

The only time she spoke was to second a motion by Brune that would have allowed them to kick a Department of Law lawyer out of a closed-door executive session. The Board of Trustees is permitted to enter into secret closed-door meetings if the content could be sensitive and undermine the fund if made public, but they’re also very limited in what they can do. They’re not supposed to make decisions or stray from the stated topic. That’s something Trustee Richards suggested has happened before.

Trustee Richards and Chair Ethan Schutt supported the lawyer’s presence throughout the meeting, arguing that it was necessary to ensure that they didn’t deviate from the purpose of the executive session and violate the Open Meetings Act. They both argued that dismissing the lawyer wouldn’t help build or restore trust with the public.

In a remarkable exchange, Brune said he didn’t think it was needed.

“I definitely want him there, but I want us to have a frank discussion in the absence of him, if appropriate,” Brune said.

Richards and Schutt were on the losing end of that vote, with Rubenstein, Brune, Crum and Trustee Ryan Anderson (the commissioner of Transportation) voting in favor of more lax rules for the executive session. Richards and Schutt then followed it up by opposing the motion to go into an executive session altogether, arguing that they were uncomfortable with the prospect of openly defying the Open Meetings Act. They were on the losing of that vote as well, with the Dunleavy-aligned Trustees voting the other way.

The executive session, which was focused on internal reports about the leaked emails, took about two hours. Following the meeting, Chair Schutt said they received a report that showed no evidence of an external hack of the Permanent Fund. He said the governance updates Trustee Richards had discussed will also be worked on in the coming weeks. He also acknowledged that he had been made aware of the allegations against Rubenstein in January and that those concerns are being reviewed.

He also added that the Department of Law attorney remained throughout the hearing and was never dismissed as Brune had suggested they could do.

Why it matters

Strange things are afoot in the Alaska Permanent Fund.

Setting aside the potential issues of self-dealing—which I would assume the Department of Law is already working on doing—the leaked emails also demonstrate that Trustee Rubenstein has tried to take a particularly heavy-handed and active role in the daily operations of the Alaska Permanent Fund. And with suggestions that she’s got the governor’s favor—a point backed up when the governor said last week the ethical issues are for the Board of Trustees to sort out (when he’s the only person with the power to remove her from the spot)—it’s no wonder that staff were taking notes in what Trustee Richards described as “cover-yourself behavior.”

That it’s Trustee Richards, who was at the heart of the controversial firing of former CEO Angela Rodell, who is now the one calling to rein in the trustees and protect employees, ought to say something about what is happening there.

Once again, legislators are calling for hearings and investigations, but now, unlike then, it doesn’t appear the Board of Trustees are all on the same page.

Stay tuned.