Sullygate: Why we need an independent investigation

For other news stories & posts on this topic, see my bibliography on all things Sullygate. (Fully updated as of 4/12/2010)

I took a Sullygate break for a couple of weeks, & everyone in Anchorage was pretty much focused on the last week’s municipal elections anyway.

But it’s time to break silence: the Assembly will be taking up the matter again at tomorrow night’s Assembly meeting (April 13).  That’s because there’s still a resolution outstanding related to the George M. Sullivan Irrevocable Life Insurance Trust, which was not dealt with at March 23 Assembly meeting.  This is Resolution No. AR 2010-92 introduced by Assemblymember Harriet Drummond [Ref #1] (you can also read the full text of the resolution in my March 20 post [Ref #2]), which shows up as agenda item 11.B under “Old Business” on the Assembly’s April 13 agenda.   As I summarized in my March 23 “livetweeting” post,

Drummond’s resolution: it was moved & seconded to postpone it indefinitely on the grounds that the memo from the deputy municipal attorney (in combination with the Ethics Board ruling today) had answered all questions — which it hadn’t. But — that motion failed along fairly predictable liberal v. conservative lines. Another motion postponed it to the April 13 meeting, after the municipal election. [Ref #3]

The other resolution discussed that evening, introduced by Matt Claman, was postponed indefinitely — effectively killing it. As I wrote on March 23,

Claman’s resolution: also moved & seconded, by the same people (Birch/Ossiander) to postpone indefinitely. This motion succeeded with a vote of all except Claman, mainly because his resolution called on the Sullivan “insurance” matter to be sent to the Ethics Board; but now the Ethics Board has already ruled.  Claman had written the resolution before knowing that Mayor Sullivan had apparently taken the matter to the Ethics Board himself. [Ref #3]

Reviewing the Ethics Board “ruling”

The “ruling” by the Municipality of Anchorage Ethics Board was less a “ruling” than an informal advisory opinion, prepared at Mayor Dan Sullivan’s request for such an opinion.  Basically, the Ethics Board — by means of a memorandum from Ethics Board Chair Marissa K. Flannery — said that Mayor Dan Sullivan had no direct financial interest in the George M. Sullivan Irrevocable Life Insurance Trust (in fact, by the rules of the trust, he was prohibited from benefiting from it himself); but —

The Board finds that your obligation to the Trust as a fiduciary creates a private interest that is distinct from the public interest at large. As such, the Board believes that you should have made a disclosure to the Board of Ethics on or before the City was required to take action related to the Trust. [Ref #4]

Mayor Sullivan had presented a copy of his father’s death certificate to the MOA Benefits Department in late 2009; the Ethics Board says that at that time, or shortly thereafter, he should have disclosed the potential conflict of interest to the Ethics Board because “Municipal employees who work under your direction would be required to take some official action related to the Trust.” [Ref #4] Mayor Sullivan also should have told the Ethics Board exactly how he proposed to manage the potential conflict of interest, so that the Ethics Board could review it to ensure that his approach was “sufficient to maintain the integrity of the decision making process” under municipal law. [Ref #4] The Ethics Board made no formal review of those factors, and to the extend it discussed them, depended upon Mayor Sullivan’s own account of the steps he had taken in his March 18, 2010 letter requesting the advisory opinion, as well as further information provided by him and by the Employee Relations Department earlier on March 23.

Now that I’ve looked at the Ethics Board memorandum more closely, seems to me that media reports after it was issued were titled a little more strongly than warranted.  For example, the Anchorage Daily News story, posted at ADN’s website on March 23, was originally titled “Board rules against Sullivan in trust deal” — creating a false impression  (1) that the memorandum was a formal “ruling” rather than an advisory opinion; (2) that the Ethics Board found more strongly against Sullivan than it in fact did.  Later, after that evening’s Assembly meeting, the article was lengthened and its title was made far more accurate: “Mayor should have revealed potential conflict, board rules — INSURANCE: City employees would have to act on the matter” [Ref #5] — but not before it had an effect on the title of my own post discussing the memorandum (before I’d had a chance to review it myself) — “Sullygate: MOA Dept. of Law analysis; Ethics Board rules against Mayor Sullivan”. [Ref #6]

Basically, the memorandum was important — but not nearly as big of a deal as some comment made it out to be:

1. It was not a formal opinion or ruling, but rather an advisory opinion, issued at Mayor Sullivan’s request.
2. It was not the result of a formal investigation of Mayor Sullivan’s actions to ascertain if they conformed with municipal law, but was based instead on Mayor Sullivan’s own account (and those of the Employee Relations Department).
3. It gave out no sanctions.

Whether it should have — that’s another story.  Section 2 of Assemblymember Matt Claman’s proposed resolution AR 2010-105 would have provided:

The current Mayor shall submit the question of whether he had a conflict of interest, and if so, how the conflict should be managed, to the Ethics Board for public hearing, complete review, and written report. [Ref #7]

But as the Assembly voted on March 23 to table Claman’s resolution indefinitely — effectively killing it — it is unlikely that any such formal ethics investigation, complete with public hearing and full review and report, will ever take place.  If Mayor Sullivan’s intent in requesting an advisory opinion was to forestall a full and public review, he succeeded.

It’s possible that if a full formal ethics review had taken place, it would have given pretty much the same findings that the Ethics Board made in its informal advisory opinion. Or it could be that the Ethics Board would find that Mayor Sullivan’s actives were even more questionable ethically. Either way, we’ll never know.

Reviewing the MOA Department of Law’s memorandum

A day before the Ethics Board memorandum came out, the municipal Department of Law issued a memorandum — by Deputy Municipal Attorney Rhonda Fehlen Westover — regarding the Sullivan Trust. Westover’s review was undertaken at the request of Assembly Chair Patrick Flynn. [Ref #8] I first saw the memorandum on March 23, before that evening’s Assembly meeting.  As I wrote at the time,

[T]he opinion of the MOA lawyers is very clearly that the MOA was obligated to pay, given that they could find no indication that MOA had ever informed the Sullivan Trust or its agents that George Sullivan was not in fact covered by the Muni’s group plan with Aetna.  While I remain suspicious of a backroom deal, so far there is no proof of one.  But there are still outstanding questions that to my mind demand investigation, such as why Aetna was apparently never told that Sullivan was a nonemployee until the fact came to light at latest in 2002; why Aetna in 2002 reported never receiving information about Sullivan such that he was not included in the risk for calculating premiums; or why his so-called “premiums” were reduced in 1992 and 1995. [Ref #6; emphasis added]

These questions still remain: Westover’s memorandum does not answer them.

Nearly two weeks after the Westover’s memorandum, Assembly Chair Flynn wrote on his blog,

In reviewing the available facts it appears at least four mistakes occurred during the decades-long process that led to the disbursal of these funds:

1. Back in 1982 the Assembly should never have passed the resolution calling for the extension of life insurance benefits to George Sullivan.  I don’t dispute that former Mayor Sullivan led an extraordinarily distinguished public service career but using public resources to extend special privileges almost invariably leads to, at the very least, the perception of impropriety.
2. When it first became apparent that the city’s private insurance carrier (Aetna) would not carry a life insurance policy for a former employee, in 2002, then-municipal attorney Bill Greene’s assertion that the city had to continue providing coverage without any apparent attempt to seek redress stuns me.  In my opinion his decision that, “there is no option to not provide the coverage,” represented an abdication of his duty to our city.  That said, once other municipal officials went along with Mr. Greene’s interpretation I do think the obligation was cemented.
3. As mentioned above, Mayor Dan Sullivan’s failure to disclose his role as trustee continues to surprise me.  I’ve witnessed him recuse himself on at least one other matter and Assembly members regularly provide disclosures on the record for even tenuous connections to issues before us.  I cannot understand why he wouldn’t have thought to do so, especially since I don’t think the outcome would have changed dramatically.
4. Finally, I take responsibility for the fact that the Assembly failed to get more of the information now available on the table prior to voting.  We relied on the Department of Law’s summary but should have asked for more details, and I apologize that we didn’t. [Ref #9]

But Mr. Flynn’s summation almost entirely ignores the questions I raised above.  After listing the four errors he ascertained, he went on,

So now what?

On one hand I honestly feel that a third-party review of this issue will reach the same conclusion reached by myself and the Department of Law; like it or not, the city was/is obligated to make this payment.  On the other hand, I also feel that the third-party review of financial matters in the waning months of the Begich administration will find no significant evidence of impropriety.  And since I supported the latter intellectual consistency suggests I should support the former, right?  Yet some might argue that, even if something was amiss in either circumstance, there likely isn’t any action the Assembly could take in response.  A reasonable point, but others argue we should at least get all the facts on the table. [Ref #9]

Nothing here about the problems that I’ve been elucidating on this blog from the very first, all of which seem to go back to the actions — or inactions — of longtime MOA Records and Benefits Manager Susan Lindemuth and those under her supervision.  Whether or not these actions, or inactions, were taken at the behest of the Sullivan family, the Sullivan Trust, or their agents; whether or not the Sullivan family, the Sullivan Trust, or their agents were aware of them — there is ample evidence in the record of something having gone awry in MOA Records and Benefits handling of the Sullivan “insurance” matter which demand answers.  Even if the Assembly can take no legal action to recover the public monies it paid out for this supposed “life insurance” policy, it can — and should — take action to find out why these missteps were taken, and who was responsible for them — no matter whose door they lead to.  And the only way that can happen is if an independent investigation is undertaken, as called for in Harriet Drummond’s resolution.

I’ve already suggested that an independent investigation is necessary due to the potential for conflicts of interest due to the relationship between Susan Lindemuth and Mayor Sullivan’s chief of staff Larry Crawford (also city manager under mayors George Sullivan, Tom Fink, and Rick Mystrom). [Ref #10] As early as March 10 I wrote in a comment on Mr. Flynn’s blog,

Start by asking Susan Lindemuth, who was Manager of Records & Benefits when this stuff was first set up. I’ve been told she now works in HR at the Alaska RR. [Ref #11]

On March 11, when Mr. Flynn was a guest on Shannyn Moore’s radio show on KUDO, when I called in and again mentioned the necessity to talk with Ms. Lindemuth, Mr. Flynn said that he knew Ms. Lindemuth well — which makes sense, given that he himself, according to his Assembly biography, works with the Alaska Railroad Corporation in marketing and logistics.  It’s likely that Mr. Flynn himself might have mixed feelings about following the evidence where it may lead, if only out of friendship — which further underscores the need for an independent investigation.

Here yet again is a list of questions — by no means necessarily comprehensive — to which the citizens of Anchorage deserve an answer:

• Did Records and Benefits Manager Susan Lindemuth, or those under her supervision, fail to inform Aetna when his “life insurance policy” became effective on January 1, 1983 that he was in fact no longer an employee of the Municipality?
• Did Records and Benefits Manager Susan Lindemuth, or those under her supervision, fail to inform Aetna when the George M. Sullivan Irrevocable Life Insurance Trust was set up at the end of 1983/beginning of 1984 that he was in fact no longer an employee of the Municipality?
• Why was Aetna apparently never told that George Sullivan was a nonemployee until the fact came to light at latest in 2002?
• Why did Aetna apparently never receive information about George Sullivan such that he was not included in the risk for calculating premiums (per information given by Aetna in 2002)?
• How, then, were Mr. Sullivan’s so-called “premiums” reduced in 1992 and 1995?  How were those “premiums” calculated?
• Were members of the Sullivan family and/or agents of the Sullivan Trust at any time aware of any of these failures on the part of municipal employees?
• To what extent were other municipal employees, up to and including municipal attorneys, city managers, and other appointed members of the administrations of mayors Tony Knowles, Tom Fink, Rick Mystrom, George Wuerch, Mark Begich, Dan Sullivan, and acting mayor Matt Claman aware of these failures?
• Why did it take until February 2010 for these questions to be asked — only after the monies were paid out to the Sullivan Trust?

Got any more questions?  Add them in comments.

But more importantly: call or email your Assembly representatives and demand an independent investigation. Tell them to pass Assembly Resolution AR 2010-92 at tomorrow night’s Assembly meeting.

Update 4/13/2010: Another legal analysis

And maybe that legal analysis from Deputy Municipal Rhonda Westover wasn’t so on top of the legalities after all.  Check out this morning’s post at The Mudflats, where Mudflatter “Legal Eagle” discusses the memorandum’s flawed legal reasoning. The analysis begins:

The MOA Dept. of Law’s memorandum analyzing the insurance payout is high flawed, and conclusory at best. It ignores several important legal principles, and conflates lines of contract law. It’s clear that it was written to support Dennis Wheeler’s contention that there was an enforceable contract, without a thorough analysis of Alaska law. [Ref #12]

Read the rest of the analysis at The Mudflats.  Then write or call your Assembly representative(s) and demand passage or AR 2010-92.

References

1. Resolution No. AR 2010-92, a resolution of the Anchorage Municipal Assembly to authorize engaging the services of independent legal counsel to review and report to the Assembly on the legal and contractual obligations, if any, and the authority of the Assembly, if any, regarding payment of $193,000 in municipal funds to the George M. Sullivan Irrevocable Life Insurance Trust, and providing for an appropriation. Assemblymember Harriet Drummond. Scheduled for discussion at the 23 March 2010 Anchorage Assembly meeting.
2. 3/20/2010. “Sullygate: Two resolutions to be introduced at Anchorage Assembly on March 23″ by Melissa S. Green (Henkimaa). Includes full text of resolutions to be introduced by Assemblymembers Harriet Drummond and Matt Claman.
3. 3/23/2010. “The Daily Tweets, 2010-03-23: Livetweeting Assembly meeting w/ Sullygate resolutions” by Melissa S. Green (Henkimaa).
4. 3/23/2010. “Re: Request for Advisory Opinion 2010-1″ by Marissa K. Flannery, Chair, Municipality of Anchorage Board of Ethics.
5. 3/23/2010. “Mayor should have revealed potential conflict, board rules — INSURANCE: City employees would have to act on the matter” by Rosemary Shinohara (Anchorage Daily News). A briefer version of this article was originally published on the ADN website as “Board rules against Sullivan in trust deal.”
6. 3/23/2010. “Sullygate: MOA Dept. of Law analysis; Ethics Board rules against Mayor Sullivan” by Melissa S. Green (Henkimaa).
7. Resolution No. AR 2010-105, a resolution of the Anchorage Municipal Assembly, regarding payment of $193,000 in municipal funds to the George M. Sullivan Irrevocable Life Insurance Trust. Assemblymember Matt Claman. Scheduled for discussion at the 23 March 2010 Anchorage Assembly meeting.
8. 3/22/2010. AR 2010-33: “Memorandum to Assembly Chair Patrick Flynn and Assembly Members re: Appropriation for George M. Sullivan Irrevocable Life Insurance Trust” by Rhonda Fehlen Westover, Deputy Municipal Attorney. Municipality of Anchorage, Office of the Municipal Attorney.
9. 4/3/2010. “Matters of (the George Sullivan) Trust” by Patrick Flynn (Patrick Flynn’s Blog).
10. 3/22/2010. “Sullygate: The Lindemuth/Crawford relationship” by Melissa S. Green (Henkimaa).
11. 3/10/2010. “Insurance information” by Patrick Flynn. (Patrick Flynn’s Blog).
12. 4/13/2010. “Municipality’s Legal Memorandum Looks Hinky. Show Us the Contract!” by Mudflatter “Legal Eagle” (The Mudflats).