Alaska Corruption and the Failed Impeachment of Gov. Bill Sheffield
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Governor Bill Sheffield grins as he walks back to the Capitol building in Juneau flanked by his attorneys John Conway and Philip Lacovara in 1985. (MICHAEL PENN / Anchorage Daily News) |
William
Jefferson Sheffield was another father figure governor of Alaska. Elected in
1982, he was the executive for one term—until 1986—and the only one to be
impeached.
Perhaps
corruption in Alaska at this time was inevitable.
William
Jefferson Clinton, the 42nd president of the United
States, would be impeached in December, 1998. But the shadow of Richard
Nixon’s impeachment in August
9, 1974 hung over the Alaska event involving Sheffield.
Alaskans
knew Sheffield in the old days as a bartender. By definition that means he
helped some people self-medicate and provided uncertified counseling services.
He became a successful hotel owner. Upon election as a bachelor he had a hot
tub installed in the Governor’s Mansion.
On the bright side, in 1983 Gov. Sheffield initiated purchase of
the 482-mile Alaska Railroad. President Ronald Reagan signed legislation
authorizing transfer of the Alaska Railroad to the State of Alaska.
October 26, 1984: Governor Sheffield appointed the first Board
of Directors of the Alaska Railroad Corporation. Board members included James
Campbell (chair), Frank Chapados (V. Chair), Lewis Dickinson
(founding partner of Dowl Engineers), Myron Christy (retired CEO of
Western Pacific Railroad Company), Gerald Valinske (member of United
Transportation Union and Alaska Railroad employee), Richard Knapp (Commissioner
of Transportation and Public Facilities), and Loren Lounsbury
(Commissioner of Commerce and Economic Development). Frank Turpin was
appointed the first President & CEO of this state-owned enterprise.1
In 1985 the transfer of ownership of the Alaska Railroad took
place. The State of Alaska purchased it from the Federal Government for $22.3
million.
But the Sheffield Administration is not remembered much for that.
For
background: Article II, Sect. 20 of the Alaska Constitution provides for all
civil officers of the State to be subject to impeachment by the Alaska
Legislature. Originating in the Senate, the motion for impeachment must be
approved by a 2/3rds vote of the members. The trial must be held in the House
of Representatives. Alaska’s senate has only 20 members.
A 1985
grand jury report alleged that this governor had attempted to steer a state
office lease in Fairbanks to a political supporter and recommended that the
legislature initiate impeachment proceedings against Sheffield. The legislature
did convene a special session and began a hearing but there was no statutory
implementation of this constitutional section. In Alaska’s constitution important
preliminary questions were undefined, including whether impeachment was
reviewable by the courts, argued the lawyers. This provided a legal hole large
enough to drive a locomotive through. In the end, the Senate Rules Committee
which heard the evidence, did not find sufficient cause for the full senate and
house to proceed with this legal exercise.2
That
is the sanitized version of what happened, but there is more to this sleezy
story.
I
remember well in Juneau that the State of Alaska was experiencing high income
from oil production in those days and everybody had a scheme to throw money at.
In his 1997 book Extreme Conditions, Pulitizer Prize winning
journalist John Strohmeyer documents conditions from sudden oil wealth leading
to big time Alaska political corruption.
The money
is gone.
Strohmeyer’s
story begins on the North Slope where Prudhoe Bay is located.
As the seat of the North Slope
borough, which taxes all of the Prudhoe Bay oil fields, Barrow is the richest
city, per capita, in the United States, and possibly in the world. In recent years it has also probably
attracted the greatest number of unscrupulous people, per capita. That they
have managed to extort many millions of dollars of Eskimo wealth is a scandal
little known beyond Alaska.3
The North
Slope Borough (NSB) was created in June 1972 by an essentially Eskimo election
that voted for it 402-27. Alaska courts validated that election to establish
the largest local government in the world with some 5,700 mostly Inupiat
Eskimos residing in an area the size of Minnesota. Forming a local borough
government was culture clash at its most extreme.
A
desire by Barrow patriarch and first mayor Eben Hopson to bring Barrow
into the modern age attracted many advisors to Barrow. He desired for the
community to have all the amenities found in Anchorage or Fairbanks. Residents
wanted running water and flush toilets, which required digging and building a
utilidor. With their new wealth they believed they could have anything. But Hopson
died in 1980.
The
second NSB mayor, Eugene Brower was the former public works director
under Hopson. His administration as mayor proceeded to borrow hundreds of
millions of dollars—the debt swelled from $453 million to $1.2 billion over
three years—by floating bonds backed by the NSB’s considerable oil property tax
base. Legislation in Juneau to cap the run-away spending was proposed amid
fears the state could be left holding the bag when oil revenues declined and
the borough could no longer meet payments. The doors of corruption swung open.4
The
vultures flock.
Former
commissioner of labor under Gov. Bill Egan, Lew Dischner was now a
lobbyist for several large clients, including the Teamsters--the most powerful
labor group in the state. With a considerable network of influence Dischner had
a reputation for delivering hefty campaign contributions to primarily Democrat candidates
for public office. His efforts on behalf of Mayor Hopson resulted in Dischner
becoming borough lobbyist and kingmaker--by engineering the election of Brower.
We know now that some $100,000 for the campaign was laundered through a variety
of people who contributed, but the money actually came from Dischner and a
variety of contractors looking for NSB business.
Mayor
Brower’s other confidant, Carl Mathisen had parlayed minimum previous experience
in Anchorage contracting into a position as borough training program
coordinator, where he had come to know Brower in the Public Works Department. Mathisen
became Mayor Brower’s mentor in the ways of government. As consultant to the
mayor and public works department, handling special works capital projects,
Mathisen soon earned an average of $300,000 per year. Dischner and Matheson
teamed up and recruited a network of vendors who agreed to pay them a 10
percent kickback on any contracts received from NSB.
According
to Strohmeyer:
“The consultants became the
government,” Chris Mello, then contract reviewer for the borough, says. A
California native, barely thirty years old and fresh out of California Western
School of Law in San Diego, Mello was working at his first real job. He admits
he was puzzled by what he saw at first, and then was simply dismayed. “In my
first meeting with Lew Dischner, he told me he was a blood brother to the
mayor, and what he said went,“ Mello says. “Suddenly the borough was starting
hundreds of projects and running them was wrestled away from the borough
employees and turned over to the consultants. We were reduced to clerks.”5
As
costs for the growing number of construction projects awarded in no-bid contracts
escalated, the people of the North Slope began to be concerned that their money
was being siphoned to outside interests. The high school, originally projected
to cost $25 million, soared to $80 million. The mayor’s lifestyle became lavish.
And despite a $250,000 campaign fund raised with Dischner’s expertise, Brower
was voted out of office in the fall of 1984. George Ahmaogak became
mayor! And, during the last five days in office Brower’s administration pushed through
more than $15 million in checks and signed $7.6 million in contracts.
A devastating
subsequent audit by a Fairbanks accounting firm found wholesale fraud. While on
the borough payroll as consultants Dischner and Mathisen had set up firms of their
own to get borough business. Their company North Slope Constructors was
able to shut out other firms by bidding low and then negotiating change orders.
“That substantially increased the size of the contract without substantially
increasing work to be done,” the audit reports.6
As widespread
North Slope Borough corruption became known, Gov. Sheffield was asked about it.
When he replied that he was not aware that any state money had been involved,
he was challenged by the fact that more than $4 million of state money had been
budgeted for a half-dozen projects, questioned in the audit.
The
plot thickened before our eyes
Dischner
had been one of Sheffield’s largest contributors in his campaign for governor.
By spring of 1985 the Fairbanks News-Miner proposed there may be something
amiss about a 10-year, $9.1 million lease the state had signed for office space
in a certain Fairbanks building. Specifications for the bid had been written so
narrowly that only the one building had qualified.
Strohmeyer:
Stan Jones, a
reporter on the News-Miner, dropped the Barrow story and plunged into a
round-the-clock investigation of the Fairbanks lease. He reported that a labor
leader named Lennie Arsenault, who had helped raise $92,000 for
Sheffield’s campaign, had a financial interest in the favored building.
Further, he found that Arsenault had had discussions with the governor
regarding the lease and that employees within the state leasing office had
protested the circumvention of leasing procedures.6
State
prosecutor Dan Hickey impounded all leasing records in the procurement office
and launched a grand-jury investigation of the governor. Sheffield made two
appearances before that grand jury. Alaska attorney general Norm Gorsuch
responded to Hickey’s discovery by recruiting a special prosecutor from
Washington D.C., George Frampton, who had worked as a special prosecutor
with the Watergate grand jury in the impeachment inquiry of Richard Nixon.
The Alaska grand jury worked for ten weeks, calling in more than forty
witnesses and preparing 161 exhibits as it built a case against Sheffield.
Again,
as reported by Strohmeyer:
On July 2, 1985, the grand
jury returned a devastating report. It charged “a serious abuse of office” by
Governor Sheffield and his chief of staff, John Shively, in their alleged
intervention into the lease process and in their attempt to frustrate official
investigations into the matter. Inspired, according to some, by the climate of
the Watergate hearings, the jurors called Sheffield unfit to hold office and
recommended the senate be called into special session to consider impeaching
the governor.7
Republican
Nixon had resigned August 9, 1974 when facing certain impeachment and removal
from office for the Watergate break-in. Democrat Sheffield fought it.
Sticking
by his story--that he didn’t remember meeting with Arsenault--Sheffield further
argued that consolidating state offices in Fairbanks would save money. Shortly
after the grand jury report Attorney General Gorsuch--who had been appointed to
that position by Sheffield, issued a legal opinion--stating that the
administration should cancel the lease because it was tainted by favoritism--and
immediately resigned. Sheffield quickly then appointed Ketchikan attorney, Hal
Brown, who fired prosecutor Hickey as his subordinate in the Alaska
Department of Law.
A
nagging question: Should Alaskans elect their attorney general as many other
states do or should the top law official serve at the pleasure of the governor?
As
might be expected given the players, the Alaska Senate Rules Committee impeachment
debate resembled Watergate. Republicans were in the majority 11-9 in the senate
and former Watergate committee counsel Sam Dash was brought in to
oversee the proceedings. For his defense, Sheffield hired Philip Lacovara,
counsel to Watergate prosecutor Leon Jaworski.
Dash
argued that Sheffield’s tampering with state leasing procedures might not
amount to an impeachable offense, but perjury would. This is the same “perjury trap”
Americans have become familiar with in recent national political events
surrounding election of Donald Trump as president: Sheffield had
testified under oath four times that he could not remember ever meeting with
Arsenault, while not only Arsenault but also Chief of Staff Shively told the
grand jury in detail about a meeting in which the governor and Arsenault
discussed lease specifications.
Bumpkins
in the Alaska Senate not only rejected Dash’s case for impeachment but also
gutted a subsequent rules committee resolution denouncing Sheffield for
questionable veracity and “significant irregularities.” Instead they called for
a study into state procurement procedures and added a resolution recommending
the Alaska Judicial Council “study the use of the power of the grand jury to
investigate and make recommendations…to prevent abuse and assure basic
fairness.” Five years later Sheffield was further rewarded in a catchall bill--ostensibly
to fund the state’s longevity bonuses and legal expenses to recover disputed
royalty payments from oil companies--which included a payment of $302,653 for
Sheffield’s impeachment legal fees.
Dishner
and Mathisen were prosecuted and on May 23, 1989 a federal jury found Dishner,
now 73, and Mathisen, now 57 guilty of more than 20 counts each of
racketeering, fraud, bribery and accepting kickbacks from contractors. U.S.
district judge James M. Fitzgerald sentenced each man to seven years in
federal prison and ordered them to forfeit more than $5 million in property.
As a
frog jumps from Lilypad to pad, after
leaving the position of Governor, Sheffield served as Chairman of the Alaska ‘Railroad
Board of Directors from 1985 to 1997. In 1997 he was promoted to President and
CEO of the railroad, where he served until 2001.
At age 91 Sheffield was removed from
his director’s seat and named Alaska Railroad Board Member Emeritus in November
of 2019 by Gov. Michael Dunleavy.
But
back in In 2003 Sheffield had been named Director of the Port of Anchorage by
Mayor Mark Begich. Another disaster ensued. In 2013 Sheffield resigned after working at the port for 10
years and being the public face of an ambitious expansion effort that had ended
up way behind schedule and far over budget.
The port is owned and operated by the
Municipality of Anchorage. To date, the project has received $439 million. The
State of Alaska has contributed nearly $220 million, federal government has
given nearly $139 million and the port has added more than $80 million in loans
and tariff generated revenue.9
But
now everything is tied up in court, we are years away from completion of the
re-engineered dock upgrade, and Alaskans can be sure it is going to be
expensive.
Uncle
Bill Sheffield doesn’t do things on the cheap, you know.
References:
2Harrison,
Gordon S., Alaska’s Constitution; a citizen’s guide, Alaska Legislative Affairs
Agency, 2002 S
3Strohmeyer,
John, Extreme Conditions, Big Oil and the Transformation of Alaska, Cascade
Press, 6633 Lunar Dr., Anchorage, AK 99504, 1997, p123.
4Ibid,
p124
5Ibid,
p 127
6Ibid
p 130
7Ibid
p 131
8Ibid,
p 133