Defense seeks to dispute claims of Kott's 'friends'

Attorney looks to make inroads after recordings, witnesses

Posted: Monday, September 17, 2007

ANCHORAGE - If former state Rep. Pete Kott hopes to be acquitted of federal corruption charges, he will have to overcome three days of testimony by men he once considered close friends.

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Former VECO Corp. executives Bill Allen and Rick Smith acknowledged at Kott's trial their own guilt in bribing elected officials and testified that the seven-term lawmaker had accepted their money, a $2,750 political poll and the promise of a job once he left office.

Smith is scheduled to continue his testimony Monday; Allen was on the stand three days last week.

Allen, VECO's founder and former chief, told jurors he once let the man who called him "Uncle Bill" live at his home for three months during a particularly busy time for Kott's hardwood flooring business. The temporary digs saved Kott the ride home to Eagle River every night, Allen said.

Smith, the former VECO vice president for government affairs, said VECO relied on Anchorage Republicans Ben Stevens and John Cowdery in the state Senate to advance their pro-oil industry agenda. In the House, it was Kott. Neither Stevens nor Cowdery has been charged.

"We used Pete in a lot of those ways. He was very significant for us. He had always carried our water," Smith said, and over the years, they became friends.

Kott is charged with conspiracy to solicit financial benefits for his service as a legislator, extortion "under color of official right," bribery and wire fraud.

VECO is one of Alaska's largest oil field services companies, providing engineering, construction, operation and maintenance services to petroleum producers. When its sale was completed Sept. 7 for $400 million, Allen said, he owned 5 percent of the company and 80 percent was owned by an Allen family trust, with his three children each holding one-third of the trust.

As part of their investigation, federal authorities wiretapped the cell phones of Allen and Smith from late 2005 through August 2006. They also planted a hidden video camera in a hotel room rented by VECO during the 2006 legislative session.

Prosecutors opened the trial Monday with three days of recorded conversations, then reinforced the selected dialogue with testimony from Allen and Smith. Nicholas A. Marsh, a trial attorney in the Public Integrity Section of the U.S. Department of Justice, said the evidence would prove Kott sold out.

Defense attorney James Wendt could present his case as early as Tuesday. He contends there was nothing illegal about Kott planning strategy with the VECO officials on legislation important to most Alaskans. But his first obstacle in defending Kott may be the recorded conversations, salted with profanity, sometimes fueled by booze and interspersed by the occasional crude reference to women.

In cross examination of government witnesses so far, Wendt has asked questions that seek to cast doubt on the motives of Allen and Smith in claiming that Kott accepted bribes. Wendt contends Kott did not trade his political influence for the promise of a job, as prosecutors have said, and that VECO was not even in a position to offer him one.

On Friday, he tried to turn the tables on one of the prosecution's main tools. Instead of focusing on what the thousands of hours of recordings say, Wendt stressed what they didn't say - Kott eliciting a concrete proposal for a VECO job, or asking that a political poll to be done for his campaign.

Many of the conversations secretly recorded by the government were centered on VECO's strong push for legislation that could lead to construction of a natural gas pipeline tapping North Slope reserves. Before petroleum companies would take on the financial risk of a project that conservatively could cost $20 billion, Allen testified, petroleum producers wanted certainty in oil taxes. With industry critics calling for changes in Alaska's tax system, that meant a new oil production tax of no more than 20 percent.

Smith said Friday his company was willing to do almost anything to pass a tax bill backed by producers - even if it meant bending the law.

In one meeting secretly videotaped by the FBI, and recounted by Smith, he said the company might have to "get dirty" to line up lawmakers.

"It could be jobs," Smith said of the illegal incentives. "It could be actual dollars."

VECO's tactics eventually did cross the line, Smith said.

Kott told Smith late in the 2006 session that he knew Rep. Bruce Weyhrauch, R-Juneau, had been offered work by VECO. The news alarmed Smith.

"My concern was that Bill and I didn't want anyone to know that Bruce Weyhrauch had approached us to do work with VECO," Smith said. "We were concerned it was illegal."

Weyhrauch was to have been tried with Kott, but was able to separate his case and faces trial later.

Smith testified he helped hatch a plan to funnel cash to Kott for his re-election. Meeting Kott at the Rendezvous bar in Juneau, away from the usual hangouts for the legislative crowd, he and Kott agreed that Kott should give him a phony $7,993 invoice for refinishing hardwood floors at Smith's Anchorage home.

Smith told his boss, Allen, that he would handle the payment arrangements.

"I didn't want him to be tainted," Smith said. "If anyone should get hit with this situation, it would be me."

Kott periodically referred to a project VECO had in Barbados, a prison, and joked he wanted to be warden.

"It was just a reminder that we were going to provide a job for Pete at some point," Smith said.

But in questioning Allen, defense attorney Wendt said a job offer for Kott likely was an empty promise.

Allen confirmed that VECO almost was sold in 2005 and Kott knew it. If Kott had won re-election in 2006, he would have been in office through the end of 2008 and state law would have prohibited him from taking a lobbying job for a year after that. By that time, he implied, Kott had to know that the company might have been sold and someone other than Allen could be running the company.

Wendt got Allen to confirm that Kott had received other job offers, including one from a harbormaster.

Wendt also tried to make the point that Kott had voted against the official VECO position on a workers compensation bill, benefits for public employees and tort reform.

Smith in May pleaded guilty to two counts of conspiracy and one count of bribing lawmakers. He expects to be sentenced 10 to 11 years in prison. Allen said he expects the same term for his guilty plea to conspiracy and bribery. Their plea agreements required them to cooperate with the prosecutors.

Wendt questioned why they were testifying, implying that it was in the hope of receiving reduced sentences. Did Allen really expect jurors to believe that he would do nothing to get his sentence reduced so he wouldn't die in prison, Wendt asked.

Allen insisted he took the rap to protect his children and his employees, and that he would stick to his agreement with prosecutors.

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