Revenue boss whose spouse is oil company lawyer declares conflict of interest has been fixed. It hasn’t.

Lucinda Mahoney said when Gov. Mike Dunleavy’s office called her in January to ask about naming her revenue commissioner, she immediately brought up the conflict of interest she has with her husband’s legal practice.

Her husband, Steve Mahoney, is a veteran lawyer who has represented oil companies in legal cases against the state and local governments. Lucinda said he divides his practice at Manley & Brautigam between work for nonprofits and work for oil companies.

Lucinda, who has more than 30 years of business and government experience, told the Senate Finance Committee Thursday that her message to the governor’s office was that she would be interested “only if that ethical issue could be resolved. And you know I didn’t know if it could be resolved.”

“I did express immediate concern about the conflict of interest regarding my husband’s legal practice,” she said.

Her explanation about how the conflict of interest has been dealt with leaves a lot to be desired, however, and not just because the revenue commissioner has a great deal to do with the regulation and taxation of the oil industry.

She said the solution from the Dunleavy administration is that a “Chinese wall” has been set up to block the flow of information, so that she is not involved in any state cases handled by her husband. Those matters will be handled by Mike Barnhill, the deputy revenue commissioner, or others.

She said that Steve Mahoney checked with the Alaska Bar Association, which found that as “long as this wall was built around me such that I wouldn’t be involved, they believed it would be a workable situation.”

A former associate to her husband, Ryan Fitzpatrick, who also worked on cases against the state, is now an “oil and gas revenue specialist” under Lucinda at the Department of Revenue.

One of the major issues Steve Mahoney and Fitzpatrick worked on over the years challenged the valuation of the pipeline, with the companies seeking lowering property taxes. In 2013, Steve wrote that a state board had set a value the owners found “aberrant and irresponsible.” In the early 1990s, Steve testified before the Legislature for the Alaska Oil and Gas Association. His name also came up in a dispute in 2013 in which the oil companies claimed a member of the state review board was biased.

Sen. Bill Wielechowski said he found it challenging to figure out how she could avoid dealing with industry issues in the revenue position. She made it clear she would only recuse herself from certain matters.

“It is my intention that I would not be involved in anything historical associated with any of the issues or any of the matters that my husband has been involved with,” she said. “But prospective looking, for example, if there would be you know a bill to change oil tax formulas, I would be involved in that going forward, but not looking historical.”

Now it’s true that Alaska is a small state and it’s hard to find people who have no conflicts of interest, but this is a big one, given the role of the revenue commissioner in advocating and setting policies that impact the oil industry and resource development and the role of her husband in looking to lower taxes for his clients.

She said she would support whatever revenue policies are in the best interests of Alaska, which is a fine thing, but strictly a matter of opinion.

Of even greater concern to me during the hearing was the non-answer that Lucinda gave to the biggest budget question facing Alaska right now.

The proposed Dunleavy budget would exhaust all state savings except the Permanent Fund in the next fiscal year. With low oil prices, the state would be $365 million in the hole next year.

Sen. Bert Stedman asked what the state should do.

"Obviously this is extremely complicated,” she replied.

She said she doesn’t have all “the detail and the data to provide a solution off the top of my head. I believe that I have a department here that is very skilled and we would need to work together along with the political body and collaboratively come up with some solutions."

That non-answer is in keeping with Dunleavy’s dithering, but it’s not what Alaska needs from the revenue commissioner now at this critical moment.

Dunleavy appointed her Feb. 4, which is more than enough time to develop an answer that is not off the top of her head. The stock market collapse, the oil price collapse and the multiple threats to the economy are urgent matters.

The fiscal year begins July 1. While the governor doesn’t want to cut the dividend, cut services or raise taxes with the recall looming, big decisions have to be made within weeks. Mahoney should tell legislators if the plan from the governor is to do nothing and blame the Legislature.

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