In Alaska, scandal flows like crude

In Alaska, scandal flows like crude
Scott Martell, Los Angeles Times, 17-Aug-2007

Stevens and Alaska, a Longtime Partnership
William Yardley, New York Times, 17-Aug-2007

Ex-legislator asks for separate trial from co-defendant
Lisa Demer, Anchorage Daily News, 17-Aug-2007

Kott: "I had to get 'er done. So, I had to come back and face this man right here," pointing to Allen. "I had to cheat, steal, beg, borrow and lie."

Allen: "I own your ass."

Scott Martell
Los Angeles Times
August 17, 2007

There are generally two views here about the career trajectory of Bill J. Allen, an oilman and political wheeler-dealer who over four decades built his VECO Corp. into one of the state's largest and most influential companies.

He was driven by greed, or by a thirst for political power.

How Allen wielded his considerable influence is a major strand in a knot of political scandals that have touched both of Alaska's U.S. senators -- including longtime powerhouse Republican Ted Stevens -- its sole congressman and at least six members of the Legislature.

And the scandals -- some overlapping, some stand-alone -- have shaken the state's small political world to its core.

Allen's relationship with Stevens is key to some of the inquiries. The VECO executive oversaw the 2000 renovation of Stevens' home in Girdwood, a picturesque enclave about 40 miles south of Anchorage. Federal agents searched the house in late July. Stevens has declined to discuss the investigation other than to say that he has done nothing wrong.

But in a sign that the investigations are broadening, National Science Foundation spokesman Dana W. Cruikshank confirmed Anchorage Daily News reports Thursday that the FBI was looking into $170 million in contracts VECO won beginning in 1999 to support foundation polar research programs. When the first contract was awarded, Stevens was an influential member of the Senate Commerce Committee, which oversees the foundation.

Cruikshank referred questions on the investigation to the FBI. Officials there did not respond to a request for comment.

Stevens' success in steering federal money to Alaska projects is legendary.

So is Allen's reputation for getting his way with state political leaders.

The power that the two men wield across this vast state is demonstrable.

Former state Rep. Jim Whitaker visited Stevens' Senate office in Washington about four years ago and noticed a framed newspaper page that ranked Alaska's most powerful men. Stevens was No. 1.

Right behind him: Bill Allen.

"I doubt that paper's still there," said Whitaker, a Republican who is now mayor of the Fairbanks North Star Borough.

The scope of the scandals is staggering in a state with fewer than 700,000 residents -- smaller than San Francisco.

Allen and VECO Vice President Richard L. Smith have pleaded guilty to bribing or attempting to bribe five state representatives, three of whom have been indicted.

Allen and Smith said in court documents that they illegally funneled more than $400,000 to political candidates, including about $243,000 to an unidentified politician believed to be Ben Stevens, Ted Stevens' son and the former head of the state Senate. He has not been charged.

Search warrants have been executed on several businesses and homes -- including those of Ben Stevens -- as investigators try to untangle connections among Allen, the Stevenses, Rep. Don Young (R-Alaska) and state politicians.

In another unrelated controversy, Alaska's other U.S. senator, Republican Lisa Murkowski, recently announced she was returning 1.27 acres she had bought along the Kenai River for $179,000, or about $100,000 less than what local real estate experts reported it might be worth, according to an overview in a complaint filed July 24 with a Senate ethics panel.

Of all the scandals and investigations, the one that has drawn the most attention here -- and that could lead to a watershed change in Alaska politics -- centers on Allen, a high school dropout from Socorro, N.M., who arrived in Alaska in the 1960s as a welder.

When oil was discovered in Prudhoe Bay in 1968, Allen formed the VECO oil-services company with a partner who later left, and then rode the roller-coaster economy of the Alaska oil fields.

"For whatever reason, probably because he was around in the early days, [Allen] had a good relationship with the major oil companies," said Robert C. Ely, an Anchorage lawyer who did work for VECO until 1983. "He provided what the oil companies wanted in terms of service. You know: 'No problem,' 'Right away sir,' 'We'll get right on it.' They liked that responsiveness."

Still, VECO tumbled into bankruptcy protection in the early 1980s after the price of oil dropped and expansion attempts failed.

VECO held on, though, and when the Exxon Valdez ran aground in 1989, spilling millions of gallons of oil into Prince William Sound, Exxon tapped VECO as the main contractor to clean it up.

By then, Allen had become a political player, though Ely said Allen was more interested in pro-development policies than partisan politics.

"His politics was essentially his relationships with the people who made the decisions about the projects in the North Slope," Ely said.

"That wasn't political politics, that was good-customer- relations politics."

But the "political politics" was there too.

In 1983 Allen collected $41,080 in political donations from 415 VECO employees and doled the money out to five candidates selected by VECO, an action that the Alaska Public Offices Commission ruled illegal. Allen paid a $28,000 fine.

His pro-development philosophy toward the North Slope in particular came out during his deposition in that case. "If there's not any work up there, people can't work up there," Allen said. "If there's not a market, they sure can't work for me or anybody else."

Allen's biggest effect has been through political fundraising and the access that buys. Allen used his wealth to become the oil industry's chief lobbyist, and was so entrenched in Juneau that when he ran afoul of state lobbying regulations, he got them changed.

"To me he was one of those tall, gruff cowboy types who I always thought lived by a code," said former state Rep. Ethan Berkowitz, a Democrat. "It was his own code."

And Allen was the face of Big Oil in Juneau, even if the companies maintained their own lobbyists.

"They knew what he was doing and they could have reined him in," Berkowitz said. "There's no question that his business was dependent on their good graces."

Allen's guilty plea to bribery charges came as a shock even to politicians who had seen Allen at work.

"Everybody knew that VECO had an inordinate amount of weight in the Legislature, but very few of us knew that they were actually putting out anything other than campaign contributions," said former state Rep. Harry Crawford, a Democrat. "Rick Smith, he was good for buying drinks any time in Juneau, that sort of thing. You knew that was there but didn't know that he was providing actual money."

Court records paint a sordid picture of bribes big and small. Allen and Smith regularly booked Suite 604 of the Westmark Baranof hotel in Juneau, where they talked over deals both legal and illegal.

Both men admitted to handing out bribes of a few hundred to several thousand dollars to unidentified legislators, promising jobs and agreeing to fraudulent schemes to hide the flow of cash.

At times, it seemed as though Allen was a member of the Legislature himself. Crawford recalled a showdown over an oil-tax measure near the end of the 2006 legislative session. Crawford offered an amendment establishing an oil tax at a higher rate than Allen and the oil industry wanted, a measure that Crawford's colleague, Rep. Bruce Weyhrauch, a Republican, had just voted for.

"The minute we got that amendment passed the speaker slammed down his gavel" and called for a brief recess, Crawford said.

"Weyhrauch went back and talked to Bill Allen and talked to other legislators."

Crawford said Allen was also passing notes to legislators on the floor, using GOP Rep. Tom Anderson as a courier -- a practice barred by House rules. Anderson has since been convicted of accepting bribesin an unrelated scandal.

"A few minutes after Bill Allen had passed the notes, they called us back into session again and Weyhrauch stood up and moved to rescind our action," Crawford said.

"There was very little I could do, but I could tell who was in charge of the floor that night."

Weyhrauch has been indicted on charges he accepted Allen's bribes. The indictment includes allegations that Weyhrauch cast his first vote mistakenly, then maneuvered to get the amendment squelched.

Observers suggest no one was forced to take Allen's bribes.

"It was easy to avoid Bill Allen, and Rick Smith, and the oil industry in general," said Whitaker, the former legislator. "It was clear they were there to protect their own interests first, at the expense of the state. For me it wasn't a difficult thing" to maintain distance. "For others, it was."

The repercussions from the scandals are wide, and deep.

Republican Sarah Palin won the governor's seat in November largely based on agenda of reform, and has been pushing for tougher ethics policies.

Stevens, 83, was appointed to his Senate seat in 1968 and won it on his own two years later. Young has been the state's sole House representative since winning a special election in 1973.

Both had been considered shoo-ins for reelection in 2008.

But with the stain of corruption spreading, other Alaskan politicians are beginning to talk of challenging Stevens and Young for their seats. Berkowitz is mulling a run, though he is not certain whom he would challenge.

And Ray Metcalfe, a former Republican state representative who has been one of Stevens' loudest critics, said he would probably challenge Stevens in next year's Republican primary.

"The landscape has changed markedly," said Metcalfe. "I would be crazy not to."

scott.martelle@latimes.com

ANCHORAGE Senator Ted Stevens, 83 years old, 39 years in office and all but eternal in the minds of many Alaskans, notwithstanding a couple of prickly months in the spotlight, is home again.

Congress is in recess. Summer rules. And so does "Uncle Ted."

"I think they are making a big thing out of nothing," John Fields, 81, a retired construction worker said of questions of corruption surrounding the senator.

"Without him," Mr. Fields said, "I don't know what Alaska would be."

Mr. Stevens is the longest-serving Republican in the history of the Senate. His former interns are now executives, lobbyists and community leaders. The airport here is named for Mr. Stevens. Runways and windmills and septic systems in remote Alaska Native villages were built with money he helped push through Congress.

In the more than six years that he was chairman of the Senate Appropriations Committee, the money that Alaska received from the federal government doubled. The state still receives more money per capita than any other.

Yet fears of the unknown have been stirring in the outsize soul of the Last Frontier. Last month, federal agents searched Mr. Stevens's house in Girdwood for clues to his relationship with a businessman who recently pleaded guilty to bribing state lawmakers. The senator's son Ben has been accused of accepting bribes when he was president of the State Senate. Neither senator nor son has been charged with a crime, but indictments in Alaska politics suddenly seem to come as often as earmarks, the pork-barrel federal spending and state security blanket that the senator has long made a specialty.

Still, set aside those noisy protesters outside the annual pig roast fund-raiser Senator Stevens attended the other day for Representative Don Young, and it almost seems like old times.

"It was just a bunch of crazies," Bill Sheffield, a former governor and the host of the pig roast, said of the approximately 70 protesters. "Look, nobody's guilty until they're convicted."

Speak to the rotary club? Standing ovation for Mr. Stevens. Visit Elmendorf Air Force Base to celebrate the arrival of the new F-22 Raptor fighter jet? This would not be possible without you, Senator. Meet old friends and political contributors for that regular fund-raiser out at the fish camp? Bait will be provided.

Democrats are talking boldly, and even some Republicans suggest, that all the public taint has pushed Alaska politics to a turning point for the better. "Maturity" and "transparency" are the words often used. But no well-known candidate has announced plans to challenge the senator as he seeks his seventh full term in 2008.

"It's not just a political calculation," said Ethan Berkowitz, a Democrat considering a challenge to Mr. Young. "There's a real genuine respect for his ability. He's good at what he does."

The senator has long played on state worries that, without his loud, powerful voice in the Senate, Alaska would be an afterthought in Washington.

In his remarks to the Anchorage Downtown Rotary Club this month, the senator defended his use of earmarks and ran off a long list of projects he said he had helped make possible, including modernizing Alaska Native villages and fisheries restoration. A day after the rotary meeting, Mr. Stevens was the only elected official on a small stage with military leaders at the Elmendorf base when six of the new F-22 jets rumbled into the blue overhead, marking their formal arrival at the base. The senator noted that plans for a precursor to the plane first gained momentum in 1981, "my first year as chairman of the Defense Appropriations Subcommittee in the Senate."

The senator has made clear that he thinks little of the investigation and the news media's coverage of it. At the rotary club luncheon, he said he was proud of his work in the Senate, "regardless of the slings and arrows I've faced attacking what I've tried to do for Alaskans in Alaska."

All three members of Alaska's Congressional delegation are under scrutiny. Mr. Young is under federal investigation for his ties to VECO, the oil services company that until recently was headed by Bill J. Allen. Mr. Allen, who oversaw renovations to Senator Stevens's house in Girdwood, a ski resort outside Anchorage, is one of two VECO executives to enter plea deals. Lisa Murkowski, the state's junior senator, is the focus of an ethics complaint for her purchase of a house on the Kenai River from a longtime friend at what critics say was a below-market rate. Ms. Murkowski, a Republican, has since said she will sell the house back.

Gov. Sarah Palin, a Republican elected last fall in part for her promise to make ethics reforms, has steered clear of the problems and distanced herself from the party establishment.

Asked about fears that the state would be at risk without Mr. Stevens in the Senate, Governor Palin, sitting in her Anchorage office on a sofa draped with the skin and skull of a grizzly bear her father shot, said: "I will never be that pessimistic to think that the state's future hinges on one individual or on government dollars to sustain us. We should not be afraid of change."

One place where Senator Stevens has apparently not been seen during his August homecoming is at his home in Girdwood, a modest two-story dwelling that had been one story before the renovations. Mr. Stevens has told friends that he was given notice that investigators were going to conduct a search and that he offered them a key. They declined and found their own way inside.

On a recent afternoon, a white van from Action Locksmith was parked outside the house in a light rain. The man driving the van said he had come to change the locks on the house.

Ex-legislator asks for separate trial from co-defendant

By LISA DEMER
Anchorage Daily News
August 17, 2007

Three weeks before the corruption trial of former state Reps. Bruce Weyhrauch and Pete Kott is set to begin, Weyhrauch wants a judge to split his case from that of his co-defendant.

The motion and supporting documents were filed under seal, out of public view. It's the same story with much of the legal maneuvering in the case. Lawyers involved say they couldn't talk about the issues even if they wanted to.

"There's a lot going on behind the scenes and it involves evidence that we can't discuss before the trial," said Doug Pope, one of Weyhrauch's attorneys.

The trial is scheduled to begin Sept. 5, though that could change. U.S. District Court Judge John Sedwick has yet to rule on several sealed motions.

The corruption case involves accusations that officials with oil field services contractor Veco Corp. bribed the legislators to help push an oil-production tax favored by the industry through the Legislature in 2006.

Veco's former chief executive, Bill Allen, and vice president, Rick Smith, have pleaded guilty to bribery and conspiracy involving four legislators: Kott, Weyhrauch, indicted former Wasilla Rep. Vic Kohring and former Senate President Ben Stevens, who was described but not named in court documents. Kohring has an October trial date. Stevens hasn't been charged.

Allen and Smith are now cooperating with the government and are expected to be key witnesses at the trial. They've resigned from Veco.

It appears from the indictment that the FBI used electronic surveillance of Veco's suite in Juneau's Baranof Hotel to collect evidence.

Kott is accused of taking payoffs totaling $8,993 and the promise of a job from Veco in exchange for doing the company's bidding. Weyhrauch is accused of soliciting legal work from Veco.

Generally, one reason a defendant tries to split off his case is so he won't be tainted by his co-defendant, said Rex Butler, a prominent Anchorage criminal defense attorney not connected with the Kott-Weyhrauch case.

"First of all, one person might be really knee deep in the trouble while the other person is a surface player," Butler said. "The problem is, in a joint trial, if a juror takes one down, they almost always will take both people down."

The specifics of the accusations against Kott and Weyhrauch differ, though they were indicted together May 3 and face similar charges: conspiracy and bribery against both; extortion and wire fraud against Kott; attempted extortion and mail fraud against Weyhrauch.

Kott is described in the indictment as willingly doing Veco's bidding and meeting with Allen and Smith in the Baranof's Suite 604 to plot strategy.

As laid out in the indictment, Weyhrauch's role was smaller. But he is accused of following Kott and Allen's instruction to change his vote on an amendment opposed by the oil industry. He had mistakenly voted the wrong way, the indictment says.

The charging document quotes a conversation between Kott and Allen in Suite 604 after the amendment was defeated on May 7, 2006:

Kott: "I had to get 'er done. So, I had to come back and face this man right here," pointing to Allen. "I had to cheat, steal, beg, borrow and lie."

Allen: "I own your ass."

Co-defendants may want to point the finger at each other, but that can backfire in a joint trial, Butler said.

"Both parties will end up convicting each other," he said.

Defense lawyers also may end up stepping on each other's toes. And there can be problems with evidence when one defendant has made incriminating statements against the other, Butler said.

Plus, defense lawyers like looking like the little guy up against the government with all of its power and resources, Butler said. The image doesn't carry as well with a table full of defense lawyers.

Jim Wendt, who represents Kott, said he probably won't oppose the motion to sever the cases, but he won't join in, either.

As to Kott's defense, "You'll have to wait and see, but our defense is basically that our guy is not guilty," Wendt said.

Weyhrauch attorney Pope said that his client is innocent and never sold his votes.

Prosecutor Jim Goeke declined to comment on the upcoming trial or the maneuvering.

Jury selection is scheduled to begin Sept. 5 with a bigger-than-normal pool of 120 potential jurors from Southcentral Alaska and beyond. Judge Sedwick has ordered that potential jurors be pre-screened with a questionnaire. It asks whether they know the defendants, lawyers or key witnesses; what they've read, seen or heard about the case; and whether they already have opinions about Kott and Weyhrauch.

Kott is a former House Speaker from Eagle River first elected in 1992 and defeated in the 2006 Republican primary. He now lives in Juneau. Weyhrauch is a Juneau attorney who served two terms and didn't run again in 2006.

Find Lisa Demer online at ldemer@adn.com or call 257-4390.