Henkimaa

For other news stories & posts on this topic, see my bibliography on all things Sullygate.

Emailed on 13 April 2010:

Honorable Elvi Gray-Jackson
Honorable Dan Coffey
Honorable Patrick Flynn, Chair
Honorable Chris Birch
Honorable Harriet Drummond
Honorable Mike Gutierrez
Honorable Jennifer Johnston
Honorable Debbie Ossiander
Honorable Bill Starr
Honorable Sheila Selkregg
Anchorage Municipal Assembly

Dear Members of the Anchorage Assembly:

My name is Melissa Green. I have been a resident of Anchorage since 1982 (excepting a three-year period in Seattle), am a 19-year employee of the Justice Center at University of Alaska Anchorage, and have lived in Assembly District 4 since 2001. Though this letter is especially intended for my representatives on the Assembly, Elvi Gray-Jackson and Dan Coffey, this information is important enough to send to all of you.

I am writing to urge passage tonight of Assembly Resolution No. AR 2010-92 providing for an independent legal counsel to review and report to the Assembly on $193,000 in public monies paid out to the George M. Sullivan Irrevocable Life Insurance Trust.

The March 22 memorandum from Deputy Municipal Attorney Rhonda Fehlen Westover leaves many questions unanswered. The background timeline in the memorandum notably omits anything about the Sullivan Trust that occurred between 1984 and 2002. In particular, no mention is made of January 7, 1992, when former Mayor George Sullivan’s so-called “premiums” were reduced to $833.67 per year (see http://www.henkimaa.com/2010/03/20/a-sullygate-timeline/#1992) or of November 29, 1995 when Mr. Sullivan’s “premiums” were again reduced, this time to $555.84 (see http://www.henkimaa.com/2010/03/20/a-sullygate-timeline/#1995). Nor does the memorandum make any attempt to explain how these “premium” reductions were calculated, contrary to the Salary and Emoluments Commissions original resolution 82-1, which provided that Mr. Sullivan’s life insurance was to be provided “at the same rate and with the same coverage as in existence on January 1, 1982.” According to a memorandum from then-Manager of Records and Benefits Susan Lindemuth on February 18, 1982, the premium amount therefore should have been $1,042.20 per year, an amount confirmed in an August 4, 1982 letter from Susan Lindemuth to Mr. Sullivan.

No one with the Municipality or Assembly has yet explained this, or even made any attempt to explain it. Nor has anyone explained why the Municipality apparently never informed Aetna that George Sullivan had ceased to be an MOA employee when his accrued leave ran out on October 31, 1982. According to the letter of March 21, 2002 from Melissa K. Dietrick, Key Account Manager at Aetna (included as Exhibit M in the Westover memorandum),

The Municipality included Mr. Sullivan on the most recent life insurance census (from 2001) in the category of eligibility identified as, “all permanent employees covered under the Anchorage Municipal Employees Association Agreement, who are scheduled to work on a regular basis 20+ hours per week.” Aetna must assume that individuals listed on the census are eligible under the definitions of the plan. It is the employer’s responsibility to administer the eligibility of the benefit plan.

In other words, the Municipality lied to Aetna about Mr. Sullivan being a permanent employee covered under the AMEA agreement. No one has yet explained who exactly promulgated this lie, why they promulgated it, or why it persisted for what appears to have been the entire period of this so-called “life insurance policy” — leading to a considerable payoff earlier this year for the beneficiaries of the Sullivan Trust.

Furthermore, even if Mr. Sullivan had been covered by the MOA’s group insurance, he could not have been covered for $193,000. Per Ms. Deitrick’s letter,

However, the amount of life insurance for this eligibility group is not equal to $193,000. This group’s basic life insurance benefits are limited to $15,000 or $30,000. The premium for Municipality of Anchorage group life insurance is $.16 per $1,000 of coverage. or $28.80 annually for $1 5,000 benefits and $57.60 for $30,000.

Which again brings us to the question: who calculated the “premiums” in 1992 and 1995?

From other correspondence with Aetna’s Lynda Gable on January 30, 2002,

This means Muni kept those dollars on hand in the claims funds. I don’t know if intent was to have them handle a death claim directly, but Aetna never received any premiums. The insurance fund was the reserves that Muni held and those funds were never submitted to Aetna nor included in any of our premium calculations from a risk standpoint to the best of my knowledge. [emphasis added]

Which would seem to indicate that the changes in Mr. Sullivan’s “premiums” in 1992 and 1995 were based on something other than what his risk really was — and in contradiction to an email from Susan Lindemuth earlier on January 30, 2002, that

He was covered as part of the MOA group and therefore, part of that “risk”. There was no separate policy with Aetna or any other insurance carrier for him…and no separate “premium” was paid to any outside party. As the life insurance rates changed over the years, he was informed and paid the appropriate premium amount…or the kids paid on his behalf.

We had a split funded agreement with Aetna…so we paid the “retention” monthly and funded the life insurance claims when incurred. His coverage amount ($93,000 [sic]) was included in the volume reported to Aetna.

I have twice suggested to Assembly Chair Patrick Flynn that Susan Lindemuth should be contacted to address these questions (once on his blog on March 10, and again on March 11 when he was a guest on the Shannyn Moore Show on KUDO 1080 AM). Ms. Lindemuth’s apparent close relationship with Mayor Dan Sullivan’s chief of staff Larry Crawford — who was also City manager under mayors George Sullivan, Tom Fink, and Rick Mystrom, both of the latter under whose administrations the “premium” reductions took place — gives even more strength to the appearance of possible conflicts of interest, at best; and back-room dealmaking and public corruption at worst (see http://www.henkimaa.com/2010/03/22/sullygate-the-lindemuthcrawford-relationship/).

Ms. Westover’s memorandum points out that Mr. Sullivan, at his retirement from municipal employment, could have converted his group life insurance benefit to an individual whole life policy, but that he did not do so in part because of his reliance on the SEC Resolution 82-1 and his supposed continued participation in the MOA group plan. But had Mr. Sullivan converted in 1982, his private insurance premium at the outset (per a February 18, 1982 memo from Susan Lindemuth) would have been $961.00 per month ($11,532 per year) — which would have added up to over $285,000 over the past 25 years in the unlikely event his premiums would have remained the same. Instead, Mr. Sullivan and his family paid a total of $19,662.84 (per Dennis Wheeler’s February 2, 2010 memorandum to the Assembly) — a fraction of the cost of a private policy. Mr. Sullivan’s expectation of such a high rate of return for his Trust’s beneficiaries could in and of itself been a strong financial motivation for backroom dealing, so long as Mr. Sullivan had allies who were effect it.

After that, all that would be necessary would be a succession of administrations and assemblies who would simply throw up their hands and say “we have no choice but to pay” without investigating further. So far, that’s what we’ve had. But as a citizen of the Municipality of Anchorage, I hold that the Assembly has a responsibility to me and other Anchorage citizens to find out the truth of these matters.

Besides the questions listed in the language of AR 2010-92, here are some of my questions:

• 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?

Even if the Assembly can take no legal action to recover the public monies you authorized the Municipality on February 16 to pay out for this supposed “life insurance” policy, you can — and should — take action to find out why these missteps were taken, and who was responsible for them — no matter who they are.  That can happen if an independent investigation is undertaken, as called for in AR 2010-92.  I urge you to pass it.

Thank you.

Sincerely,

Melissa S. Green

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).