Thursday, July 31, 2008

Open Letter to the Anchorage Assembly

Is it your desire to live in a corrupt state? A state where the measure of your success is judged by how much you can steal rather than how much you can contribute? If so, all you have to do is stay the course because the FBI cannot clean up Alaska or its largest city, if Alaska’s community leaders dig in their heels to resist the cleanup.

I spent several years forcing every member of the Alaska Legislature to look at the corruption in their midst. Most said they couldn’t see what I was talking about. Some said, “not my job” while others said, “There is nothing I can do.” Not one single Legislator was willing to stand against corruption.

When our forefathers created three branches of government it was their expectation that when one of the three branches stepped out of line, the other two branches would take use their collective powers to restore the wayward branch’s compliance with a system of laws. It is a duty of the office you hold to take action.

Had our state’s system of checks and balances functioned properly, had Murkowski’s Attorney General not attempted to obstruct justice, the FBI wouldn’t be in the middle of our state’s business, cleaning up the mess made possible by elected officials saying “not my job.” When the executive branch of government fails to clean its own house, there is no person with a greater obligation to confront corruption in the executive branch of government than you.

When rational people appear to make irrational decisions, it's usually because they have a hidden incentive you didn't know about. For twenty five years, a majority of both houses of Alaska’s Legislature appeared to make an irrational decision to let oil companies take Alaska's oil for a tiny fraction of what it was really worth. However, their decision wasn’t irrational at all. A majority of Alaska’s Legislature justified that the gratuities they took from Veco were worth the tens of billions of dollars the state lost because they did.

Now at seven convictions and counting, the cost of twenty five years of corruption is obvious. Alaska went from massive deficits to massive surpluses on the heels of Veco’s exposure. Those who attribute the surpluses to rising oil prices would be wrong as millions of barrels were leaving Alaska un-taxed. Zero tax equals zero income to Alaska regardless of the price of oil.

About nine months ago, Mayor Begich gave away the city’s economic interest in a Municipal parking garage through a cleverly written lease. A gift worth about ten million dollars to the developers of a 22 story building next door. In the absence of intervention, Jerry Neeser and Mark Pfeffer will be in position to tell prospective tenants of their 22 story building that they control the parking, facing those prospective tenants with the prospect of riding bicycles to work or renting from the only landlords with parking.

Ponder for a moment the reaction from Penny’s shoppers had the Mayor given all the parking within three blocks of the downtown mall to Nordstroms. Would other store owners sue the city? Of course they would.

The days that a mayor can give away a parking garage with confidence jail time won’t follow are gone and it is time for you to decide which side your on. If you want a government run by white collar crime all you have to do is pretend you don’t know what I’m talking about.

Four years ago I wrote an article published in most Alaska newspapers suggesting that Veco was paying bribes to large numbers of legislators and that their bribery was costing this state tens of billions of dollars. The name calling from the rich and powerful throughout the state started before the ink was dry on the newsprint. Since that day you have seen five confessions and three convictions by jury, all from within the ranks of those who said I was dead wrong.

Three years ago I accused Ben Stevens of taking bribes from Veco. His protests were quite similar to Mark Begich’s protests today. Had I not done so, neither Mark nor I would be running for the US Senate because Ben would have already filled his daddy’s shoes in Washington.

Two years ago I wrote an article detailing how Ted Stevens was laundering federal money into the pockets of his boy and his boy’s business partner Trevor McCabe, by funneling the money through a handful of Seattle based fish processing companies, who were funneling money back to Trevor McCabe and Ben Stevens through consulting fees. Six months later the offices of the processors were raided by the FBI and Trevor McCabe is now cooperating with the FBI’s ongoing investigation with hopes of shortening his jail time. ----(Anchorage Daily News, Feb. 10, 2008, McCabe 's attorney, Michael White of Seattle, said, " Trevor has been instructed by his lawyer to continue to cooperate with investigators and make no public comments.")

Over the past year, I have written extensively about John Rubini and the several real estate investments he has made with Mark Begich and Ted Stevens. Through the hand in hand cooperation of Rubini’s carefully selected business partners, Rubini has secured hundreds of millions of dollars worth of real estate that once belonged to the federal government and tens of millions in tax breaks through the passage of special legislation Ben Stevens pushed through the Legislature and a companion ordinance pushed through by Mark Begich.

Begich said the tax breaks were for the troops living in the base housing Ted Stevens had earmarked into the hands of Jon Rubini and Ted Stevens’ brother-in-law for free. However, the only thing Mark’s Tax breaks achieved, was an increase to the bottom line for his business partner Jon Rubini and the brother-in-law of Ted Steven’s, while they raised the rents on the troops.

The other excuse Begich used was that he wasn’t sure if the Municipality could tax Rubini’s privately owned military housing setting on ground Rubini leases from the federal government for one dollar per year. Before you buy into that argument, read the clip below on taxation, directly from Alaska’s constitution:

Article 9 - Finance and Taxation § 5. Interests in Government Property: Private leaseholds, contracts, or interests in land or property owned or held by the United States, the State, or its political subdivisions, shall be taxable to the extent of the interests.

Rubini’s rewards were well worth the $52,000 Rubini dressed up as real estate deals to pay Mark Begich. He gave Begich a small interest in two high-rise office buildings so he could buy him out when he needed a favor, much like he did with Ted Stevens when he bought Ted out of the Arctic Slope Regional Corporation building for $1,050,000. (All public record).

I highly doubt that there is anyone left on the Assembly who isn’t aware that the National Archives purchased Jon Rubini’s eight acres between your chambers and Lowe’s Hardware, believing it was zoned B-3. They paid him $3,525,000 for property he had picked up one year earlier for $1,550,000. They based their purchase price on the belief that the property was zoned B-3 and had been appraised at $4,495,000. The property was R-3 not B-3 and it was not appraised anywhere near $4,495,000.

When was the last time you saw a real estate professional, a mayor, or private investor get caught perpetrating or assisting in the sale of property to the federal government under fraudulent pretenses and not go to jail? – Are you willing to risk the possible consequences of helping Mark sweep this one under the rug?
(For any assembly member who will take the time to look, I will be happy to review documentation that demonstrates decision makers at the National Archives had been advised that the property they purchased was zoned B-3. They were advised of that before they started looking, and during their comparative evaluations, and after the purchase was complete.)

I recently asked assembly chair Matt Claman to review the agreement to eliminate Jon Rubini’s taxes. Claman couldn’t have ran any faster from the subject. That’s exactly what I meant by community leaders digging in their heels to resist the cleanup. When honest people compromise their principles in favor of victory or unity, they have also lost sight of their reason for having cared in the first place.

Turning back to Municipal gifts of parking garages, I am going to sue the Municipality for the illegal appropriation of public assets into the hands of a private person, If the assembly fails to intervene in Mark Begich’s gifts of the Sixth and Seventh Avenue parking garages to Mark Pfeffer and Jerry Neeser.

The appropriation lacks public purpose, was not voted on by the body with the authority to appropriate, and even if the assembly had done so, the assembly would have violated Alaska’s constitutional prohibition barring grants and special privileges of special appropriations to individuals without a public purpose. See clips from Alaska’s constitution below. For details on the gift of the parking garage, go to: of Parking Garage Explained.doc

Article 1 - Declaration of Rights § 15. Prohibited State Action:
No bill of attainder or ex post facto law shall be passed. No law impairing the obligation of contracts, and no law making any irrevocable “grant of special privileges” or immunities shall be passed. No conviction shall work corruption of blood or forfeiture of estate.

Article 9 - Finance and Taxation § 6. Public Purpose:
No tax shall be levied, or appropriation of public money made, or “public property transferred,” nor shall the public credit be used, except for a public purpose.

Before Begich gave Mark Pfeffer and Jerry Neeser a parking garage, he required the parking authority to lease 67 parking spaces from them at $432 per space, ($29,000 per month) while arranging to rent parking spaces to Mark Pfeffer and Jerry Neeser on the other side of the street at $75 per space.

Before that Mark Begich attempted to persuade the Municipal Assembly to purchase City Hall from Jerry Neeser for about ten million dollars more than it was really worth.

After Jerry Neeser, Mark Pfeffer, and John Rubini landed the contract to build the new convention center, Mark Begich fattened their bottom line by waving dozens of inspection and code compliance requirements that any other developers in town would have been forced to comply with. Begich also gave Jerry Neeser free access to fifteen acres in the heart of downtown to store equipment and construction materials. I highly doubt that Mark Begich would have arranged wavers or free storage for any other developers.

If Mark Begich’s appetite for doing favors for Jerry Neeser, Mark Pfeffer, and John Rubini doesn’t raise every red flag for corruption in your body, there is something dreadfully wrong with your moral compass.

As you may recall, in the case of Ben Stevens, I first tried to recall him for doing Legislative favors for Veco. The Division of Elections, APOC, several Legislators, the Attorney General, and Alaska’s Superior Court, all said he had broken no laws and no crime had been committed. Now even former Governor Murkowski’s chief of staff has pleaded guilty to participating with Veco’s criminal activities and it’s a good bet he won’t be the last.

It would be disingenuous to pretend you don’t sense corruption. And I can only think of one reason why you would say you didn’t. The buck stops with you. Should you fail to act, I will take the city to court and be as relentless at uncovering who is doing what for whom and why as I was with Ben Stevens and Veco.

Ray Metcalfe

Wednesday, July 23, 2008

Black Gold - Corruption Tour

Tuesday, July 22, 2008

Mark Begich and Anchorage Sweetheart Deals

Gift of Parking Garage Explained

On the September 9, 2007 editorial page of the Anchorage Daily News, a staff reporter wrote “When the Begich administration leased a downtown parking site from influential developer Mark Pfeffer, the city overpaid -- by a lot.”

The Daily News concluded its editorial saying:
“Without subpoena power or wiretap authority, it's impossible to know if the mayor's defense is just a smokescreen. But whether it was favoritism or just an honestly overpriced contract, it turned out to be an embarrassingly bad deal for a mayor who prides himself on his business acumen.”

The editorial was in response to an appraisal I (Ray Metcalfe) wrote on the value of a 67 space parking lot located on the corner of 6th and G in downtown Anchorage. I had reviewed the lease executed between Augustine Development LLC (Owned by Jerry Neeser and Mark Pfeffer, partners with John Rubini in the construction of the new Convention Center two blocks away) and The Community Development Authority, formerly known as the Anchorage Parking Authority, who agreed to lease Mark Pfeffer’s property described as:

Lots 9B and lot 12 of block 53 of the Original Townsite of Anchorage, according to the official plat: Plat number 81-124 of the Anchorage Recording District, and I have made the following observations, value estimations and conclusions.
The Community Development Authority is a quasi-privately operated subsidiary of the Municipality of Anchorage (MOA). Possession of the leased property has been delivered over to the Anchorage Parking Authority — ostensibly for the purpose of operating a 67-space public parking lot.
The closest comparable property is a seventeen space parking area in the same block, adjacent, and immediately west of the subject property. It shares a property line with the subject property; and there are no obstructions to prevent drivers from driving between the two adjacent parking areas.
Augustine Development, LLC owns both the subject property and the 17 space comparable property next door, which is within the same ½ block as the subject property and was part of the property he acquired with the purchase of the Inlet Inn.
At the time Augustine Development, LLC, owned by Mark Pfeffer, purchased the Inlet Inn, February 2nd, 2007. At the time, Diamond Parking, a privately owned parking lot operator, was leasing the 17-spaces of paved parking area on the 6th Avenue side of the Inlet Inn, (approximately 5,700 square foot and part of the Inlet Inn’s property) paying approximately $47 per parking space per month, to the owners of the Inlet Inn. Diamond Parking then retailed the spaces, which it acquired at wholesale prices, to the general public, retailing it for a profit, averaging around $150 per month in gross retail revenues per space.

The Anchorage Parking Authority, owned by the Municipality of Anchorage, now also known as the Community Development Authority, initially leased the 67-space (24,511 square foot of property adjacent to the above referenced 17 spaces,) from Mark Pfeffer’s Augustine Development, paying Mark $29,000 per month, or $432 per space.
The City of Anchorage agreed to pay Mark Pfeffer’s Augustine Development over nine times as much as an adjacent private lessor agreed to pay to a private lessee in an arm’s length fair market transaction. There is no question that Mr. Pfeffer was aware of the wholesale and retail values attributable to the adjacent property because Pfeffer had purchased the Inlet Inn’s interest in the lease agreement between the Inlet Inn and Diamond Parking. Pfeffer had also been negotiating with Diamond parking prior to Mark Begich’s instruction to the Anchorage Parking Authority, to make what turned out to be a vastly superior offer. The Parking Authority needed look no further than across the street to see that Diamond Parking’s parking lot adjacent to Mr. Pfeffer was 80% vacant almost every day of the week.

Parking facility operators will generally offer private land owners a fixed monthly payment equaling approximately 1/3 of whatever they determine to be the projected likely gross income they could expect to derive from the property, or alternatively, for those land owners willing to share the risk of unexpected shortfalls in income, parking operators will generally offer a fluctuating ½ of whatever the actual parking space rents turn out to be.
According to figures the Parking Authority released after this investigation began, the spaces Begich arranged for the city to rent for $29,000 per month were running about 80% empty and bringing in about $10,000 per month. As demonstrated by the 17 spaces next door, which also run about 80% empty, the industry standard that a private company would have paid Pfeffer for the same deal would have been 1/3 of the anticipatable gross monthly income, or about $3,300 per month. The remaining $25,700 in payments Mark Begich arranged for Mark Pfeffer to receive from the Anchorage Parking Authority was nothing less than a money laundering shell game neither of them thought anyone would notice.
Before the original Begich/Pfeffer fleecing agreement was replaced by the much more clever agreement outlined below, it had funneled seven payments of $29,000 per month, or $203,000 of your city’s dollars into the pockets of Mark Pfeffer and Jerry Neeser.

In an understatement worthy of the Guinness Book of Records, Carma Reed, the former head of the City’s parking agency acknowledged to the Anchorage Daily News that the City was losing money on its $29,000 lease payments. She also said they planned to renegotiate the agreement.
Keep in mind that the City’s act of leasing spaces from Mark Pfeffer doesn’t add one single parking spot to available parking in Anchorage. Mark Pfeffer is perfectly capable of running his own parking lot and collecting the $10,000 it makes each month if Diamond Parking failed to make a management offer that pleased him. Either way, it would not add or subtract one more parking space for the parking public to choose from.
However, the Parking Authority did renegotiate. They increased the number of spaces the City was leasing from Pfeffer to 87 spaces. And they reduced the rent per space to $166 per space per month, equaling three times what private industry had previously been paying next door. The net effect was to reduce the payment to Pfeffer from $29,000 to $14,500, thereby continuing to pay Pfeffer about $10,000 per month more than a private company like Diamond Parking would have been willing to pay.

That’s not quite the way Begich described it when he announced his decision to get tough on negotiations, but that was the net effect.

They also failed to highlight one more major addition to the new deal. The new deal gave Mark Pfeffer what, in real estate technical terms is called a leasehold interest. It conveys valuable leasehold interests in Anchorage’s parking facilities, worth tens of millions of dollars, to Mark Pfeffer and his partners over the next 22 years. Mark Pfeffer is effectively being given a City parking garage so he doesn’t have to spend his own money to build the parking he will need to make his building he is building across the street economically viable.
Mark Pfeffer is being given the right to lease 570 parking spaces in the parking garages of the City of Anchorage.
Rather than making parking available to individuals and letting those individuals choose which developer to lease office space from, Begich has chosen to hand over control of Anchorage’s public parking to one developer. A developer he hopes will remember his generosity for the rest of his political career.

The Privately owned Dimond Parking Company leases parking permits in downtown Anchorage, to the public for $150 per month. The publicly owned Anchorage Parking Authority subsidizes the commercial rate by renting spaces to the public at about half the going commercial rate. In this case, the subsidy promised to Neeser and Pfeffer is about $75 per space per month. Begich’s contract with Neeser and Pfeffer allows Neeser and Pfeffer to re-rent their 570 spaces, at the commercial rate, to future tenants in the building they are building on the other side of the street, directly across Sixth Avenue from the parking garage above the bus depot. The net value of Mark Begich's gift to his friends Neeser and Pfeffer calculates to about $40,000 per month over the next 22 years, or a little over ten million dollars in ill-gotten profits cleverly lifted from the pockets of Anchorage taxpayers over time.

The above described actions are what some politicians call “Salting the System.” Ted Stevens has been doing it for forty years. Ted has imbedded an army of beholding foot soldiers throughout the business community and inside of the bureaucracy that regulates it. It was fear of that army that caused so many people to run for cover when I asked for help in exposing the bribery schemes of Veco and Ted’s son, Ben Stevens.

As for the favors Mark Begich is doing for Mark Pfeffer, future developers may not be so lucky. The individuals they hope to make their tenants will be faced with leasing from Pfeffer or doing without parking. Developers competing with Pfeffer will be faced with testing the waters of the bribability of future Mayors or going out of business and Alaska’s political arena will continue to be dominated by those willing to reap huge rewards at risk of jail time for decades to come.
Unlike the 80% empty parking lot the City took off of Mr. Pfeffer’s hands, the parking garage across the street above the downtown bus depot is about 80 % full from 8:00 AM to 5:00 PM five days a week.
At $1 per hour for nine hours per day each space can bring in $9 every business day of the month. Twenty business days times $9 per day equals $180 per month. Subtract 20% to adjust for the fact that on average, each space is occupied only 80% of the time between 8 and 5, and each space has the potential to generate an average of $144 per month. Subtract $75 per space for the base lease that Mark Begich has decided to give Mr. Pfeffer, and, Mark Pfeffer prospectively may soon be collecting $69 per month times 570 spaces, or $39,330 per month. Prior to this agreement, Pfeffer’s booty would have gone straight into the city’s treasury. It is now destined for the pockets of a person Mark Begich hopes to draw from for the duration of his political career.

And just in case you missed it, the City is leasing spaces from Mr. Pfeffer on one side of the street for $166 per month, while agreeing to lease to Mr. Pfeffer on the other side of the street for $75 per month. Meanwhile, to cover the losses, Mark Begich authorized the parking authority to raise the charge for parking meters and double the size of your fines for parking overtime. Mayor Begich attempted to explain away this entire ruse by saying the City needed more parking. However as noted above, this scheme doesn’t add one space to the available parking spaces in Anchorage.
No doubt excuses will be made and the shell game will continue. There is a big difference between the city meeting its obligation to make sure parking is available to the general public and giving parking garages to developers. It makes little difference whether unscrupulous developers extract their ill-gotten booty through jacking up the City’s parking rents, or through stiff-arming competing developers who have no parking, while Pfeffer charges higher rents because he does.

Ted Stevens is now considered vulnerable primarily because of similar corrupt little shell games that I exposed. His shell games are under investigation the U.S. Justice Department and my bet is several of the participants are going to jail before it is over. The only thing that will change if Alaska simply replaces old corrupt politicians with younger ones is who gets the graft.

Last year, the U.S. Justice Department charged Pete Kott with four felonies. One of the charges he was convicted of was violating the federal statute requiring public officials to provide “Honest Services,” and another was conspiracy. Kott was convicted of both and I can’t think of a single reason why the same principles would not apply to the above.
Ray Metcalfe

Saturday, July 12, 2008