State should consider looking Outside for Permanent Fund trustees, $450,000 study says
In selecting future trustees of the Alaska Permanent Fund, the state should consider looking Outside of Alaska for candidates, according to a 7-page memo prepared by a consultant to Gov. Mike Dunleavy.
“An expanded geographic scope may provide a broader field of candidates for consideration who have relevant expertise,” the $450,000 report from Alyssa DaCunha and Bejamin Neaderland of WilmerHale says.
A Dunleavy press release says he supports “all the recommendations contained in the report.”
Before allowing the governor to go Outside for trustees, the Legislature should adopt new rules that would apply real standards to the in-state recruiting of trustees, instead of allowing the governor to appoint almost anyone.
It is a superficial document that was not worth $450,000. Dunleavy’s office should have demanded and received something of more value.
The report suggested steps to monitor conflicts of interest with annual surveys and institute rules on how trustee investment referrals are handled, a major factor in the Gabrielle Rubenstein debacle. She made dozens of investment referrals, according to corporate emails leaked in early 2024.
The fund could either ban investment referrals from trustees or set firm rules on how they are handled, the report says.
Among the other recommendations, the report says that to improve recruitment, the corporation should look at allowing more employees to work remotely Outside Alaska.
“The APFC currently has a few team members who work outside of the state and visit the state as needed, but perhaps this number could be expanded to attract top talent,” the memo said.
Improved communication is another issue, both within the corporation and with the public.
“There is a perception among some in the public that APFC trustees can and do make individual investment decisions for the Fund. In fact, under the governance structure of the Fund, it is the professional investment staff that make individual investment decisions, while the trustees advise broadly on asset allocation, governance policies, the Executive Director evaluation process, and other matters,” the report says.
While that statement is technically correct about how things are supposed to work, one or more trustees could direct individual investment decisions if the board had an executive director that allowed such things to happen. It was only because of an unauthorized leak that the public became aware of the many investment referrals that Rubenstein was making, as that practice was kept secret by the corporation.
It is notable that the report does not deal with the main failing of the Permanent Fund structure, which is the lack of checks and balances. The board is made up of six people, two of whom are state commissioners hired by the governor.
The other four members are chosen by the governor with no legislative confirmation required. There is no formal or public vetting process for soliciting the names of nominees to the board.
Current board members include a former Dunleavy employee, Jason Brune; a former Dunleavy attorney, Craig Richards; a former head of a Dunleavy support group, John Binkley; and Ethan Schutt. The two Dunleavy employees on the board are Adam Crum and Ryan Anderson.
The structure of the Permanent Fund board is long overdue for an overhaul.
Expansion of the board and creation of a formal selection process with compensation for service as a trustee needs to be part of the picture. The idea that a $400 daily meeting honorarium, plus per diem, is sufficient for what the four public trustees are supposed to accomplish is ridiculous.
At the time the six-member board was created no one was thinking of an $80 billion fund with complex investments all over the world. It began as an investor in bonds, with no money in the stock market, real estate, hedge funds, etc.
The main issues raised by Rubenstein’s behavior are likely to be forgotten or at least downplayed as time goes on.
At the end of August, Dunleavy hired a Washington, D.C. law firm under a no-bid $50,000 contract to provide “a review of the framework of the Permanent Fund corporation and the board composition, expertise, diversity and succession planning to assess and evaluate the strengths, weaknesses, opportunities, and concerns to make informed strategic decisions . . .”
In an all-too-familiar pattern with the Dunleavy administration, the contract was extended and extended again to $450,000, nine times the amount claimed on August 19 as sufficient.
The first contract claimed the company would be paid “a sum not to exceed $50,000” and the work was to be completed by December 31, 2024.
Dunleavy Chief of Staff Tyson Gallagher signed that contract as “procurement officer” and “project director” on August 28, 2024, one day after WilmerHale partner Alyssa DaCunha signed for her company.
I’m guessing that Gallagher and DaCunha both knew on August 28 that the sum would exceed $50,000, despite the signed statement to the contrary.
Here is the original contract.
A little more than one month later, on October 4, Gallagher signed a $50,000 increase in the contract, pushing the total to $100,000. DaCunha signed it on October 3.
I’m guessing that Gallagher and DaCunha both knew on October 4 that the sum would exceed $100,000, despite their signed assurances to the contrary. “This amended contract shall not exceed a total of $100,000,” the amendment says.
Here is the contract amendment from $50,000 to $100,000.
Under that amendment, the comprehensive review of the governance of the Alaska Permanent Fund was still supposed to be finished by December 31.
Less than a month later, the contract was inflated again, this time by $350,000.
Gallagher and DaCunha signed the second extension on October 28 and October 31. “This amended contract shall not exceed a total of $450,000,” it says.
Here is the contract amendment from $100,000 to $450,000.
This amendment extends the life of the contract by six months, to the end of June 2025.
The amendment also alleges that the scope of work has been expanded to include information uncovered with the first $100,000 of legal expenses. The claim is that this is a “second phase.”
The amendment claims that in reviewing regulations and documents, the law firm uncovered “a number of areas for further review.”
All of this was obvious before anyone signed the first contract.
With the additional money, it will do more research and interviews to create “fulsome recommendations on options” for improving the governance of the fund and avoiding conflicts of interest.
Fulsome means either flattering or comprehensive. I think the contract amendment mean that the law firm will have an abundance of ideas by the end of June.
It should not have taken $100,000 with the D.C. law firm to decide that there are many elements to this task.
I oppose the practice of signing contracts for $50,000, claiming that is the full amount, when both sides know that is not enough to do the job.
But Dunleavy likes to spend state money on contracts hither and yon.
I support an external review of the governance of the Permanent Fund because the current structure, created by the Legislature 45 years ago during a simple time for Alaska investments, is hopelessly out of date. The system gives far too much power to one person—the governor. There are no checks and balances, the board is too small and there should be a public vetting process for its members.
I oppose the idea of doing an external review in secret, with the total project controlled by the governor’s office. The public has to be involved. The Legislature has to be involved.
But that’s not what we have here. In response to a public records request for the contracts and any draft reports and the final report submitted by WilmerHale, the governor’s office said everything about this is secret except for the contracts.
“Please note that Appendix C, Scope of Services, includes the following language: ‘The State of Alaska affirms that any correspondence, communications, and related documents are covered by one or all of the following privileges: the attorney-client communication privilege, attorney work product, and the executive privilege. The state will assert the appropriate privileges if a request under the Alaska Public Records Act is received.”
The desire to keep secrets from the public for political reasons is what this is all about. Claiming that these various privileges apply to this contract by putting that language in the contract does not mean the privileges apply.
State law specifically says that draft reports and other documents are public records.
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