The head of the Alaska Permanent Fund Corporation tried to assure legislators that a series of leaked emails that showed internal concerns about ethical conflicts around investment decisions was just “noise” at a hearing this week, but legislators across the political spectrum see it much differently.
At a hearing of the Legislative Budget and Audit, a joint committee of the House and Senate charged with oversight of state agencies, APFC CEO Devon Mitchell tried to restore trust by assuring legislators that the multibillion-dollar fund’s managers are staying on course despite the fund being rocked by a series of troubling headlines.
“I don’t believe the staff has allowed whatever you might have read about over the course of the last year in publications impact their professionalism and dedication to duty to the fund and the corporation,” he said. “In my role, I try to ensure staff that whatever they might read about in some publication isn’t their concern; it should be my concern. They should focus on their job, and the investment team should focus on their asset class and continue to do their work regardless of noise they might hear otherwise.”
While the fund has been in the headlines many times over the last few years — for things such as the abrupt firing of its well-liked CEO, for entertaining a risky plan to heavily invest in private equity and for opening an Anchorage office against legislator wishes — the most alarming development is the leak of a string of emails detailing what can only be described as deeply ethically-questionable efforts by Trustee Ellie Rubenstein to steer investments toward her family and business partners.
Those emails, which the Alaska Landmine first published, cover several executives’ efforts to document what they saw as ethically dubious. Rubenstein, a close ally of Gov. Mike Dunleavy, is the daughter of David Rubenstein, who is part of one of the world’s largest private equity investment firms. Among those emails is an apparent effort by Rubenstein to directly question the performance and capabilities of an employee after a poor meeting with David Rubenstein.
Mitchell said he isn’t aware of any instances where staff employees were prevented from doing their jobs. The leaked emails also suggest that investors never acted on any of Rubenstein’s meetings, partly because they were concerned about the appearance of an ethical problem.
Both Republicans and Democrats on the committee were less than convinced.
“I’m not sure I would refer to it as noise,” said Rep. Andy Josephson, D-Anchorage. “There’s been an accumulation of things. The dispute over the Anchorage office. The emails and whether there’s been a thumb put on the scale of investment decisions that are outside the norm. Even the decision to invest money in the state was another one of those types of issues.”
Rep. Ben Carpenter, a Nikiski Republican and one of the Legislature’s most right-wing members, largely agreed with the sentiment. He said there may have been nothing wrong but suggested that it might be worthwhile for the Legislature to audit the fund’s performance to ensure that’s the case for the public.
“If they were just isolated events, it would paint one picture, but because there’s a series of things, it kind of paints a different picture,” he said. “Therefore, because of the checks and balances that exist within our form of government, here we are … We have a responsibility to Alaskans to make sure we’re doing our due diligence as legislators who provide oversight for the corporation.”
And the concerns over the fund’s performance aren’t just hypothetical. Mitchell spent much of the hearing explaining the growing risk that the fund won’t have enough cash available to fund the government and pay dividends. Mitchell warned that the fund will start the next fiscal year on July 1 facing a $600 million shortfall, but said that investment earnings over the year should be enough to bridge the gap. He conceded, however, that poor investment returns could create a “doomsday scenario” where the fund couldn’t meet the funding transfers outlined in state law.
Under the laws governing the Alaska Permanent Fund, 5% of the fund’s total value is supposed to be available each year for government spending and dividends. That runs into a structural problem, however, because only a small portion of the entire fund, known as the earnings reserve account, can be spent. The Alaska Constitution prevents the rest from being spent.
Investors also conceded during the hearing that the fund’s controversial in-state investment plan, which began in 2019, has generated some losses. Some of its venture capital investments have also generated “several hundred-million-dollar write-downs.”
Rep. DeLena Johnson, R-Palmer, also raised concerns about the Board of Trustee’s decision to maintain an Anchorage office despite the Legislature explicitly not funding it. She and several other legislators have argued that the fund should have to justify the office with legislators before pushing ahead. Mitchell responded that the Board of Trustees saw the value and believed they had the right to ignore legislators’ limitations under the state budget laws.
Johnson said it sets a bad precedent and could harm the relationship between the fund and the Legislature.
Legislators generally said they wished the Alaska Permanent Fund could return to being uneventful, noting that much of the last several years of its operation have brought distraction after distraction.
“What we mostly want is the typical, historical story of the permanent fund doing its work,” said Rep. Josephson. “Even if those stories are mundane, we want mundane.”
Matt Acuña Buxton is a long-time political reporter who has written for the Fairbanks Daily News-Miner and The Midnight Sun political blog. He also authors the daily politics newsletter, The Alaska Memo, and can frequently be found live-tweeting public meetings on Twitter.