Oil tax heart of FBI probe, special session

Governor wants lawmakers to up rate to 25 percent

Posted: Thursday, October 18, 2007

JUNEAU - The Alaska Legislature reports back to work today to review the state's year-old oil tax, which lies at the heart of federal investigations in Alaska.

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Under pressure from the oil industry, notably former executives of VECO Corp., lawmakers passed the tax last year.

Since then, two of VECO's top executives have pleaded guilty to bribing Alaska lawmakers, and three members of the body that passed the tax been convicted or await trial on bribery charges.

Additionally, U.S. Sen. Ted Stevens and Rep. Don Young have also come under increased federal scrutiny since the Legislature last adjourned in June.

Stevens is under federal investigation because VECO employees helped renovate his house; Young also is under investigation for campaign finance practices, according to a federal law enforcement source. Young reported to the Federal Election Commission on Monday that he's spent $446,845 on legal fees this year.


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Gov. Sarah Palin said the tax passed at the urging of former VECO executives is tainted.

She says it's also not bringing in enough money. The state has projected a shortfall of $800 million from it, at a time when North Slope oil is fetching record prices, around $85 a barrel.

Palin wants lawmakers in this special session to raise the tax on the net profits of oil companies from 22.5 percent to 25 percent.

"Oil is being sold at a premium to hungry markets around the world," Palin said last month after she rolled out her plan. "Now more than ever the state needs to make sure an appropriate value for the state's share is received."

House Speaker John Harris, R-Valdez, said he understands this session comes with perhaps the greatest scrutiny the Legislature has faced, but Palin's proposal will be debated like every other piece of legislation.

"The governor feels like it didn't get fair and complete hearing the last time, and there could be some truth to that," Harris said. "So, we do it all over again."

Three former Republican state representatives were charged in May, accused of trading their votes for the tax in exchange for money or the promise of a future job with VECO, an oil field services company recently sold to CH2M HILL.

Vic Kohring goes on trial Monday in Anchorage. Pete Kott was found guilty of bribery and he awaits sentencing. The trial for Bruce Weyhrauch has been delayed.

Former state Rep. Tom Anderson, R-Anchorage, was sentenced Monday to five years in prison on unrelated bribery charges. He was accused of accepting money from a prison lobbyist, who was actually working undercover for the FBI.

One current lawmaker will be absent from this special session: Senate Rules Chairman John Cowdery.

Cowdery said last month that he would not take part in the special session after former VECO Vice President Rick Smith testified in Kott's trial that the company relied on Cowdery in the state Senate to advance their pro-oil industry agenda.

Cowdery's office was searched last year by the FBI, but he has not been charged in the corruption probe. He's denied any wrongdoing.

Some lawmakers are concerned about corruption being the driver and focal point of the special session.

Rep. Jay Ramras, R-Fairbanks, said it's creating an unhealthy legislative environment. He also questioned the timing of a special session amidst Kohring's corruption trial and Anderson's sentencing.

"It makes a difference to those of us who attend the special session," Ramras said. "It's an inappropriate climate.

"This is bellwether economics that we are engaging in and this should not be a populist lynch mob beating on the oil industry," Ramras said.

Sen. Charlie Huggins, R-Wasilla, said he understands the corruption backdrop is inevitable, but still agrees with Ramras.

"This is about the fiscal destiny of the state," he said. "To beat around the periphery on the politics is disconcerting, and not in the best interest of the state."

Minority Leader Beth Kerttula, D-Juneau, said many lawmakers backed the current system without illegal influence, but the state still is being shortchanged.

"There are people who believed in it and supported it, and I disagree with them completely," she said. "But they weren't all bought off. They are wrong but not corrupt."

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