Permanent Fund board refuses to deal with substance of leadership crisis

It’s not the leak that matters, it’s the substance of the leak, the conflicts of interest.

But the trustees of the Alaska Permanent Fund Corporation want to focus on preventing future leaks, ignoring the behavior of trustee Gabrielle Rubenstein, as documented by Marcus Frampton, the chief investment officer of the corporation, and Allen Waldrop, the director of private equity for the fund.

Frampton took the extraordinary step in January to privately document what he believes are the serious conflicts of interest that Rubenstein has brought to the operation of the fund.

“I think the most serious topic and perhaps more uncomfortable to address are Trustee Rubenstein’s conflicts of interest in the private credit space,” Frampton wrote.

He said she had made “dozens upon dozens of investment manager referrals” to the fund since her appointment in July 2022 by Gov. Mike Dunleavy.

Frampton said he and other executives were told in January by Deven Mitchell, the executive director of the fund, that “trustee Rubenstein is saying we have the wrong people managing private credit and we need a bigger private credit allocation.”

She is on the board because she is a Trump supporter and her father is billionaire David Rubenstein, 74, one of the richest people in the United States and a co-founder of the Carlyle Group. Her mother is Alice Rogoff, former publisher of the Alaska Dispatch.

Waldrop wrote on February 5 that Rubenstein “introduced” Lara Clarke of the Carlyle Group to the APFC. He also said that Rubenstein arranged a meeting between a Permanent Fund investment advisor and her dad without telling APFC executives.

The emails, leaked to the Alaska Landmine, show a pattern of Rubenstein acting not like a trustee, but a dealmaker. She has meddled in matters that should be left to the staff.

She does not belong on the trustees, but she has the backing of Dunleavy and there is no legislative oversight of the fund. An independent investigation is needed.

If Rubenstein is correct that Ethan Schutt will not be reappointed to the board, then her position will be strengthened by whichever political supporter Dunleavy picks to replace Schutt.

Anchorage Rep. Cliff Groh wrote this week to the Legislative Budget & Audit Committee asking for a hearing, an important first step. Groh calls out the trustees for their “inadequate response” to this crisis.

Part of that inadequate response was the damage control hearing Monday. A trustee committee chaired by Rubenstein called a meeting with four days notice to talk about a study completed a year ago.

The Permanent Fund hired Funston Advisory Services in early 2023 to review internal governance policies and recommend changes.

The Funston report can be found in this document, starting on page 49.

The report has some good recommendations—including asking the Legislature to expand the number of trustees—but the board sat on this report and did little about it until the leak of documents about Rubenstein’s behavior.

One of the “high priority” recommendations in that 2023 report called for new rules on interactions between trustees and employees of the corporation.

“Revise policy on trustee requests for information from staff and on referral of investments or vendors,” the consultants said a year ago.

Here is the recording of the May 9, 2023 meeting. At that time Steve Rieger was chairman of the governance committee. He was replaced by Dunleavy in August.

Consultant Keith Johnson gave this explanation why a policy change was needed to monitor trustee interactions with the corporate staff.

“One of the reasons why this is a difficult and important issue is that we have seen at other funds this result in potential for undue influence or ethics violations in terms of behind-the-scenes trustee contacts with staff members that other board members are not aware of, or information that’s being requested which doesn’t make it back to the board,” he said.

He said there should be an official record of contacts by trustees with staff members.

“And also that it deals with referrals of service providers or investment opportunities to the staff. And confirms that your regular standards for due diligence and regular processes apply to those kinds of referrals,” Johnson said.

“The log of that is made available to either the audit committee or the board on a regular basis so that everyone is aware there is some transparency to the board about just what’s going on. And the board’s being fed back any information that’s being requested so everybody’s coming from the same, a level playing field in dealing with the issues that you’re seeing,” Johnson said.

Gabrielle Rubenstein, then a member of the governance committee, not the chair, said then that on a typical day she was dealing with 10 to 20 calls about investments for work as an investor.

She said that once or twice a day someone would ask her for contact information for Frampton, the chief investment officer of the Permanent Fund.

She said that since she didn’t make investment decisions for the Permanent Fund, she didn’t have any conflicts of interest in passing the information along to Frampton.

“Of course I don’t make investment decisions. Marcus hears the email and I, after that I don’t do anything about it,” she said. “So that’s the one I’m going to care about because it directly falls on me more than anybody. Obviously when I took the seat I knew what would happen, right?”

Trustees should not be dealmakers for the Permanent Fund.

Frampton obviously didn’t interpret her actions and introductions as inconsequential.

“As we all know she has made dozens upon dozens of investment manager referrals in her 18 months on the APFC board,” Frampton wrote in January. “Many of these have been in the private credit space and my team has declined to pursue all of them.”

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