The Anchorage Daily News (and The Associated Press) implies that state Attorney General Gregg Renkes violated ethics rules during recent negotiations between the state and Taiwan on marketing Alaska resources.
However, "the rest of the story," as Paul Harvey might intone, implies instead that Renkes and his boss, Gov. Frank Murkowski, are victims of a questionable Wall Street shenanigan. The Daily News, owned by blue-staters and staffed by greenies in a red state, might have let political bias trump thorough reporting. The shenanigan, unreported in Alaska newspapers, is a scheme to short-sell stock in a company that has a patent on a method that might make Alaska coal marketable.
A major character in "the rest of the story" is stock handicapper Manuel Asensio. He is a practitioner of selling short in the stock market. His latest target is KFx, according to Canada's Globe and Mail. KFx has a patent on a process that dries damp coal. A Wall Street Journal article on Asensio explains that short-sellers borrow shares of the target company from a broker and sells the shares. Then the short-seller goes to unusual lengths to drive the value of the stock down. Asensio does this by circulating what he calls "research reports" to disparage the value of a stock. After the price plunges, he buys it at the lower price and replaces the high priced borrowed stock and pockets the difference between the two prices. Such manipulation earned Asensio as much as $6 million a year, the Journal reports.
According to the Philadelphia Inquirer, Asensio has participated in this maneuver 26 times. He claims the money he earns is his fee as a bounty hunter seeking to protect investors from overpriced stocks.
Companies have sued him with marginal success. One or more started a Web site called asensioexposed.com. Web site owners are not identified but they provide a lot of information on the short-seller such as that the National Association of Securities Dealers has filed six complaints against him. He was fined $75,000 on one.
The Globe and Mail also reports that Asensio is promoting International Coal Group, a competitor to Alaska coal.
On Sept. 30, Asensio circulated a research paper on KFx reporting that Renkes serves on the Taiwan-Alaska Trade and Investment Cooperation Council that is trying to interest Taiwan businesses in Alaska's Beluga coal. Asensio criticized the governor and charged Renkes has a conflict of interest because when he was in private law practice in Washington, D. C. KFx gifted him stock in the company valued at $91,250. That is among many of Asensio's inaccuracies.
Renkes knew some KFx people from the days he was with the U.S. Senate Energy Committee but they were never his clients and never paid him in stock or cash. His investments were made through a financial adviser and much of the money came from the sale of his home in Virginia. Also, contrary to speculation, KFx is not part of any agreement with the state or with Taiwan business or government interests. If KFx wants to lease its technology it must deal with holders of the Beluga coal leases, the Hunt Trust, which also is not in any agreement between the state and Taiwan.
However, when the governor announced, without mentioning names, that there is a process that could make the Beluga coal saleable, KFx jumped in with promotional news releases.
The day after Asensio's Sept. 30 report on KFx, the Anchorage Daily News ran a story on Renkes: "State official could profit in trade deal." And the day after, on Oct. 2, Asensio issued another report quoting the newspaper story. Asensio and the newspaper alternated critical stories on Renkes through October.
The fuss resulted in appointment of former U.S. Attorney Robert Bundy to determine if anything Renkes or Murkowski announced in the agreement between Taiwan and Alaska was unethical promotion of KFx for personal gain. Renkes' investment adviser sold his KFx stock on Oct. 6. Renkes resigned from the Taiwan-Alaska Trade Council.
But there is more. Some states have ethics rules stating that if a government official holds 1 percent or less of the stock in a company it is "insignificant" and there is no ethical conflict. That is reasonable because good government requires successful people with good management skills instead of people straight from the womb. In an attorney general's ethics opinion for the Alaska Permanent Fund and trustee Byron Mallott in 1989, that 1 percent rule was applied to Alaska.
Gov. Tony Knowles' Attorney General Bruce Botelho, his Chief of Staff Jim Ayers, and Lt. Gov. Fran Ulmer, or their immediate families (spouses and offsprings), reported holding stock in Cisco Systems while the state of Alaska was negotiating with Cisco for services, a closer tie than the KFx situation. The negotiations were canceled after Murkowski was sworn in as governor.
This does not imply dishonesty or unethical behavior by Knowles' administrators. Like Renkes, their stock is handled by investment advisers. No Alaskan is wealthy enough to hold more than 1 percent of Cisco stock, much less 1 percent of any oil company doing business in Alaska. Is Renkes being held to a higher standard? Maybe Bundy will report that in "the rest of the story."
Lew Williams Jr. is former publisher of the Ketchikan Daily News.