Lawmakers agree state ethics laws fall short

Posted: Thursday, January 27, 2005

An outside investigator shined a light on a murky area of Alaska ethics law when he found that the attorney general's potential to profit from a state business agreement did not rise to the standard for lawbreaking.

Alaska law does not say how much is too much when a state employee has a financial stake in a company.

That lack of a standard is what caused former U.S. Attorney Robert Bundy to conclude that Attorney General Gregg Renkes' role in a trade agreement between Alaska and Taiwan could have benefited KFx Inc. - a company in which Renkes owned more than $100,000 in stock - but wasn't an illegal conflict of interest.

Bundy's report to Gov. Frank Murkowski concluded, however, that Renkes broke the law by failing to ask for an ethical determination before playing a major role in the coal deal that involved technology by KFx Inc.

The lack of standards muddied Renkes' case and made it a close call, Bundy said.

"This controversy could have been avoided had a statute or regulation provided specific standards on when stock ownership constitutes a conflict of interest," Bundy's report said. "Accordingly, we recommend that the governor take steps to establish these standards."

Lawmakers agreed that changes need to be made.

"I think Bundy did a good job of outlining the black hole," said Rep. Beth Kerttula, D-Juneau. "It's incumbent for us to get this fixed and get this fixed quickly."

House Majority Leader John Coghill, R-North Pole, said the Legislature needs to address what he called a gray area of the law.

"The answer is yes. When, I don't know," he said. "The first thing we want to consider is that this thing runs its course before taking it up. We want to let the news die down, so we can be a little more deliberate."

Renkes owned .02 percent of KFx's outstanding shares, the value of which peaked at more than $126,000.

Bundy used a 1989 attorney general's opinion to determine whether Renkes owned enough stock to be considered a conflict. That opinion measured excessive personal interest at owning 1 percent or more of a company's outstanding shares.

Bundy's findings hinged on that standard.

Several states - including Connecticut, Delaware, Florida, Massachusetts, New Jersey, Ohio and Pennsylvania - use a percentage of a company's outstanding shares to draw the line for conflict of interest, Bundy's investigation found. Others - Idaho, Oregon, Washington - draw the line at a certain dollar value of the stock.

And others use a combination, such as Kentucky's law of $10,000 or 5 percent of the shares in a company.

At a news conference on Tuesday, Bundy said he would recommend $10,000 or 1 percent as the standard for Alaska.

Murkowski has asked Bundy to draft legislation that would create a standard for Alaska. The legislation should be introduced as soon as possible, regardless of the furor over Renkes, he said.

"Politics, in my opinion, shouldn't conflict with reasonable ethical review to make sure that other folks are not caught in this kind of dilemma," Murkowski said.

House Judiciary Committee member Les Gara, D-Anchorage, said the law should set limits on the dollar value of the investment, and not be based on percentage of outstanding shares.

The places that use the latter standard are protecting the interests of business, not the state, Gara said.

"Those are the states that want to let the fox guard the chicken house," Gara said.

He said under the standard used in Bundy's report, a lawmaker hypothetically could own $15 million in ConocoPhillips stock and still be in compliance with ethics laws when deciding who builds a gas pipeline from the North Slope.

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