Legislature(2003 - 2004)

04/01/2004 08:02 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 1, 2004                                                                                          
                           8:02 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bruce Weyhrauch, Chair                                                                                           
Representative Jim Holm, Vice Chair                                                                                             
Representative John Coghill                                                                                                     
Representative Bob Lynn                                                                                                         
Representative Paul Seaton                                                                                                      
Representative Ethan Berkowitz                                                                                                  
Representative Max Gruenberg                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 476                                                                                                              
"An   Act   establishing   the   Alaska   Statehood   Celebration                                                               
Commission; and providing for an effective date."                                                                               
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 527                                                                                                              
"An  Act  relating  to  the   Alaska  Securities  Act,  including                                                               
reports,  proxies,  consents, authorizations,  proxy  statements,                                                               
and other  materials, civil penalties,  refunds of  proceeds from                                                               
violations, restitution, and  investment adviser representatives;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 459                                                                                                              
"An Act requiring an auditable  paper trail for electronic voting                                                               
machines; and providing for an effective date."                                                                                 
                                                                                                                                
     - MOVED CSHB 459(STA) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 460                                                                                                              
"An  Act  relating  to  absences  to  provide  care  for  certain                                                               
relatives for  purposes of  permanent fund  dividend eligibility;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 331                                                                                                              
"An Act  relating to federal  requirements for  governmental plan                                                               
and  other qualifications  for the  teachers' retirement  system,                                                               
the  public  employees'  retirement   system,  and  the  judicial                                                               
retirement system; and providing for an effective date."                                                                        
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 476                                                                                                                  
SHORT TITLE: AK STATEHOOD CELEBRATION COMMISSION                                                                                
SPONSOR(S): REPRESENTATIVE(S) ANDERSON                                                                                          
                                                                                                                                
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       STA, FIN                                                                                               
04/01/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
                                                                                                                                
BILL: HB 527                                                                                                                  
SHORT TITLE: ALASKA SECURITIES ACT                                                                                              
SPONSOR(S): STATE AFFAIRS                                                                                                       
                                                                                                                                
03/01/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/01/04       (H)       STA, JUD, FIN                                                                                          
03/09/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
03/09/04       (H)       Heard & Held                                                                                           
03/09/04       (H)       MINUTE(STA)                                                                                            
03/26/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
03/26/04       (H)       Scheduled But Not Heard                                                                                
04/01/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
                                                                                                                                
BILL: HB 459                                                                                                                  
SHORT TITLE: PAPER TRAIL FOR ELECTRONIC VOTING MACHINE                                                                          
SPONSOR(S): REPRESENTATIVE(S) GARA                                                                                              
                                                                                                                                
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       STA                                                                                                    
03/09/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
03/09/04       (H)       Heard & Held                                                                                           
03/09/04       (H)       MINUTE(STA)                                                                                            
03/18/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
03/18/04       (H)       Heard & Held                                                                                           
03/18/04       (H)       MINUTE(STA)                                                                                            
03/30/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
03/30/04       (H)       Heard & Held                                                                                           
03/30/04       (H)       MINUTE(STA)                                                                                            
04/01/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
                                                                                                                                
BILL: HB 460                                                                                                                  
SHORT TITLE: ALLOWABLE ABSENCES AND PFDS                                                                                        
SPONSOR(S): REPRESENTATIVE(S) KERTTULA                                                                                          
                                                                                                                                
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       STA, FIN                                                                                               
04/01/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JIM SHINE, Staff                                                                                                                
to Representative Tom Anderson                                                                                                  
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Read the sponsor statement and answered                                                                    
questions during the hearing on HB 476, on behalf of                                                                            
Representative Anderson, sponsor.                                                                                               
                                                                                                                                
GARY R. CONNER, 1st Deputy Bureau Chief                                                                                         
Investment Protection Bureau                                                                                                    
Office of New York State Attorney General (AG) Elliot Spitzer                                                                   
New York, New York                                                                                                              
POSITION STATEMENT:  Testified during the hearing on HB 527.                                                                    
                                                                                                                                
VINCE USERA, Senior Securities Examiner                                                                                         
Division of Banking, Securities & Corporations                                                                                  
Department of Community & Economic Development (DCED)                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and answered questions on behalf                                                                 
of the division during the hearing on HB 527.                                                                                   
                                                                                                                                
WALTER JOHNS                                                                                                                    
No address provided.                                                                                                            
POSITION STATEMENT:  Testified in opposition to HB 527.                                                                         
                                                                                                                                
REPRESENTATIVE GARA                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As sponsor of HB 459, introduced amendments                                                                
to a committee substitute.                                                                                                      
                                                                                                                                
LAURA GLAISER, Director                                                                                                         
Division of Elections                                                                                                           
Office of the Lieutenant Governor                                                                                               
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified on behalf of  the division during                                                               
the hearing on HB 459.                                                                                                          
                                                                                                                                
SANDRA ZIRNHELD                                                                                                                 
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:   Testified on  behalf of herself  during the                                                               
hearing on HB 459.                                                                                                              
                                                                                                                                
AURORA HAWK, Staff                                                                                                              
to Representative Beth Kerttula                                                                                                 
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:      Presented   HB  460   on   behalf   of                                                               
Representative Kerttula, sponsor.                                                                                               
                                                                                                                                
IRIS MANYA PUNGOWIYI-REED                                                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the hearing on HB 460.                                                                    
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 04-52, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
CHAIR  BRUCE WEYHRAUCH  called the  House State  Affairs Standing                                                             
Committee meeting  to order at  8:02 a.m.   Representatives Holm,                                                               
Seaton,  Coghill, Berkowitz,  and Weyhrauch  were present  at the                                                               
call to  order.   Representatives Lynn  and Gruenberg  arrived as                                                               
the meeting was in progress.                                                                                                    
                                                                                                                                
HB 476-AK STATEHOOD CELEBRATION COMMISSION                                                                                    
                                                                                                                                
Number 0043                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  announced that the  first order of  business was                                                               
HOUSE BILL  NO. 476,  "An Act  establishing the  Alaska Statehood                                                               
Celebration Commission; and providing for an effective date."                                                                   
                                                                                                                                
Number 0052                                                                                                                     
                                                                                                                                
JIM  SHINE, Staff  to Representative  Tom Anderson,  Alaska State                                                               
Legislature, on behalf of  Representative Anderson, sponsor, read                                                               
the sponsor statement as follows:                                                                                               
                                                                                                                                
     January  2009   will  mark  the  50th   anniversary  of                                                                    
     Alaska's  admission as  the 49th  state  of the  United                                                                    
     States  of  America.   It  is  important the  State  of                                                                    
     Alaska recognize  this landmark  with a  celebration of                                                                    
     the state's  magnificent heritage  and to  reflect upon                                                                    
     the  opportunities  that  50 years  of  statehood  have                                                                    
     brought to the state.                                                                                                      
                                                                                                                                
     House  Bill 476  will  establish  the Alaska  Statehood                                                                    
     Celebration Commission.   This commission shall consist                                                                    
     of 17  members; 12 public members  [shall be] appointed                                                                    
     by the governor.   ... At least two  shall be residents                                                                    
     of  and be  appointed from  each of  the four  judicial                                                                    
     districts in  Alaska.  The  presiding officer  from the                                                                    
     Alaska House  of Representatives and the  Alaska Senate                                                                    
     will appoint  a majority and minority  member from each                                                                    
     body.  The  governor ... or a designee  ... will occupy                                                                    
     the 17th seat.                                                                                                             
                                                                                                                                
     The Alaska Statehood  Celebration Commission shall plan                                                                    
     and  administer all  official state  activities leading                                                                    
     up to  the 50th anniversary  of Alaska statehood.   The                                                                    
     commission will initiate the  public process to solicit                                                                    
     ideas about the celebration.                                                                                               
                                                                                                                                
     In  addition, the  commemorative  quarter honoring  the                                                                    
     State  of  Alaska  ...  will  be  issued  in  the  same                                                                    
     calendar   year   in   which   the   Alaska   Statehood                                                                    
     Celebration occurs.                                                                                                        
                                                                                                                                
MR. SHINE  told the  committee that through  his own  research he                                                               
has  discovered   that  other   states  have   [drafted]  similar                                                               
legislation.  For  example, legislators in Wyoming  and Utah have                                                               
created commissions  to celebrate their  centennial celebrations.                                                               
In  response to  a  question  from Chair  Weyhrauch,  he said  he                                                               
believes   Alaska  did   something   like  this   for  its   25th                                                               
anniversary.                                                                                                                    
                                                                                                                                
Number 0249                                                                                                                     
                                                                                                                                
REPRESENTATIVE  COGHILL asked  how  many years  would be  spanned                                                               
with the commission.                                                                                                            
                                                                                                                                
MR. SHINE  answered that the  effective date would be  January 1,                                                               
2005,  so there  would  be up  to  four years  of  planning.   He                                                               
indicated that other  states have decided it's  important to plan                                                               
ahead  for  a 50th  anniversary,  and  he mentioned  including  a                                                               
public process for initiating ideas.                                                                                            
                                                                                                                                
REPRESENTATIVE  COGHILL   turned  to  page  2   of  the  proposed                                                               
legislation.    He  noted  that  there  would  be  at  least  two                                                               
legislatures involved, and he asked how that would work.                                                                        
                                                                                                                                
MR. SHINE  said he doesn't know,  but suggested that it  would be                                                               
left  to  the  discretion  of   the  governor.    He  stated  his                                                               
assumption  that  two  new  members would  be  appointed  to  the                                                               
commission.                                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL  highlighted [paragraph]  (2), on  page 2,                                                               
beginning on line 8, which read as follows:                                                                                     
                                                                                                                                
     (2) the  speaker of the house  of representatives shall                                                                    
     appoint one member of the  house of representatives who                                                                    
     is a  member of the  majority caucus and one  member of                                                                    
     the house  of representatives  who is  a member  of the                                                                    
     minority  caucus, in  consultation with  the leadership                                                                    
     of that caucus;                                                                                                            
                                                                                                                                
REPRESENTATIVE  COGHILL  noted  that  the  same  applied  to  the                                                               
Senate.   He said he wonders  if a provision for  transition from                                                               
one legislature to the other should be included.                                                                                
                                                                                                                                
Number 0432                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH asked  Mr. Shine  to take  those concerns  under                                                               
advisement.  [HB 476 was heard and held.]                                                                                       
                                                                                                                                
HB 527-ALASKA SECURITIES ACT                                                                                                  
                                                                                                                                
Number 0450                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  announced that  the next  order of  business was                                                               
HOUSE BILL  NO. 527,  "An Act relating  to the  Alaska Securities                                                               
Act, including reports,  proxies, consents, authorizations, proxy                                                               
statements,  and other  materials,  civil  penalties, refunds  of                                                               
proceeds  from violations,  restitution,  and investment  adviser                                                               
representatives; and providing for an effective date."                                                                          
                                                                                                                                
CHAIR  WEYHRAUCH  informed  the  committee that  he  had  invited                                                               
Warren  Buffet,  Berkshire Hathaway,  Inc.,  to  testify and  Mr.                                                               
Buffet's office  responded with issues  related to the bill.   He                                                               
indicated  that the  issues that  were brought  forth were  those                                                               
relating  to  the  tension  between  corporate  governments,  the                                                               
desire  to  maintain  a flourishing  capitalist  system  in  [the                                                               
United  States],  and  the  role   of  state  government  in  the                                                               
oversight of corporations.                                                                                                      
                                                                                                                                
CHAIR  WEYHRAUCH  expressed  the   need  to  ensure  that  Alaska                                                               
maintains  a  healthy  oversight   through  its  public  policies                                                               
enacted  by the  legislature and  a  system of  laws that  invite                                                               
participation by the private sector  into the state.  Conversely,                                                               
he expressed  the need  to ensure  that those  corporations doing                                                               
business  in Alaska  do  so in  an honest  and  ethical way  that                                                               
profits both the  corporation and the people of Alaska.   He also                                                               
indicated the  need to ensure  that the  State of Alaska  has the                                                               
appropriate tools  to enforce the  public policies it  enacts and                                                               
exact  some  sort of  retribution  to  cover  the cost  of  state                                                               
government's  action in  enforcing its  laws while  ensuring that                                                               
those   harmed   by   improper  corporate   actions   are   fully                                                               
compensated.                                                                                                                    
                                                                                                                                
CHAIR  WEYHRAUCH mentioned  communicating through  the office  of                                                               
New York's attorney  general, Elliot Spitzer.  He  noted that Mr.                                                               
Spitzer  is  known for  his  aggressive  activities in  enforcing                                                               
state policies  against mutual funds and  other corporations that                                                               
have  charged exorbitant  or hidden  fees, for  example, and  for                                                               
attempting to recover  those [fees].  He opined that  some of the                                                               
actions of  that attorney general's  office have  been admirable.                                                               
Chair  Weyhrauch  noted that  the  first  person to  testify  was                                                               
associated with the New York attorney general's office.                                                                         
                                                                                                                                
Number 0689                                                                                                                     
                                                                                                                                
GARY R.  CONNER, 1st Deputy  Bureau Chief,  Investment Protection                                                               
Bureau, Office  of New  York State  Attorney General  (AG) Elliot                                                               
Spitzer,  indicated  he  would explain  the  New  York  statutory                                                               
scheme  and  describe  some  of   the  approaches  and  corporate                                                               
responses.   He  revealed that  he  is not  familiar with  Alaska                                                               
statutes and would only be  addressing the New York system, which                                                               
he characterized as "somewhat different than most all states."                                                                  
                                                                                                                                
MR. CONNER  stated that New  York has never adopted  the "Uniform                                                               
Security  Tax";  therefore,  it   does  not  hold  administrative                                                               
hearings or issue orders.  He  noted that the State of New York's                                                               
securities laws  were enacted  in 1921,  well before  the federal                                                               
statutes.  He said, "We issue  the issuers of securities, not the                                                               
securities  themselves."    He  offered  examples.    Mr.  Conner                                                               
explained  that the  statute is  largely  an anti-fraud  statute,                                                               
designed  to  prevent  fraud  in  the  offer  of  securities  and                                                               
commodities.   New  York's  definition  of fraud  is:   "Any  act                                                               
tending to deceive  or mislead the purchasing public."   The Act,                                                               
which is  to be construed  liberally, is designed to  protect the                                                               
inexperienced investor.                                                                                                         
                                                                                                                                
MR. CONNER  said, "One of the  advantages we have in  New York is                                                               
that,  in  any  civil  action  we  may  bring  -  or  misdemeanor                                                               
prosecution, we do not have to  show intent, ... proof of a sale,                                                               
[or] ...  damages.  It's  a per  se liability statute,  meaning a                                                               
violation - whether  knowing or not - can get  you in jeopardy in                                                               
terms of  a civil  action."   Mr. Conner  noted that  the statute                                                               
also provides that any violation  may result in either a criminal                                                               
or civil penalty.  He  explained the distinction between the two.                                                               
He said  that the main  tool [the New  York AG's office]  uses is                                                               
its ability to  issue subpoenas and request  information prior to                                                               
bringing  any  action.   The  penalty  for refusing  to  respond,                                                               
testify, or show up is a misdemeanor.                                                                                           
                                                                                                                                
MR. CONNER  said that the  investigations can be  conducted based                                                               
on any source of information, as  well as based on any allegation                                                               
of  fraud or  merely because  it's in  the public  interest.   He                                                               
noted that  the basic investigations  [the AG's  office] conducts                                                               
are  kept   confidential.    He   explained,  "Although   we  are                                                               
investigating something, we do not  know at the beginning whether                                                               
or not there actually is wrongdoing,  so we believe that those we                                                               
are looking at need protection there."   He offered examples.  At                                                               
the end  of the investigation, he  said, a choice can  be made in                                                               
how to proceed:   "One way is  civil, one way is  criminal, or we                                                               
can do both."                                                                                                                   
                                                                                                                                
MR. CONNER noted  that one of the tools [the  AG's office] has is                                                               
to obtain ex parte orders from  the court, prior to commencing an                                                               
action.   Those  orders direct  the  witnesses to  appear and  to                                                               
produce  documents.   He added,  "And we  can also  get ex  parte                                                               
injunctive relief,  based upon a  standard of what is  proper and                                                               
expedient."   He clarified that  it's not the  normal preliminary                                                               
injunction standard, but is a much  lower standard.  The ex parte                                                               
orders  result in  public testimony;  the public  can attend  and                                                               
hear whatever is  being said by the witnesses.   Because it is an                                                               
investigation, there is not cross-examination.                                                                                  
                                                                                                                                
MR. CONNER  said that if  the decision is  made to bring  a civil                                                               
action,  the  remedy   in  that  civil  action   is  a  permanent                                                               
injunction from the  securities business.  He  said, "The statute                                                               
is all  or nothing; a  judge has no  discretion."  He  offered an                                                               
example.    He continued,  "In  those  actions  we can  also  get                                                               
restitution,  we  can get  damages,  and  we can  have  receivers                                                               
appointed,  as  well  as  other   types  of  creative  injunctive                                                               
relief."  Mr. Conner noted  that the criminal provisions prohibit                                                               
fraud,  deception,  and  concealment,  among other  things.    He                                                               
offered examples.   He said,  "If we have any  criminal violation                                                               
that we  are proceeding  on, we  can also  use the  state's penal                                                               
laws ...."                                                                                                                      
                                                                                                                                
MR. CONNER  stated that,  besides the  main securities  laws, New                                                               
York  has  other  statutes.    For  example,  under  the  state's                                                               
business corporation  law, directors can be  removed from offices                                                               
in  corporations.   There  is  also  a  broad statute  under  the                                                               
executive law, in which any fraud  or illegality in the course of                                                               
business is actionable.                                                                                                         
                                                                                                                                
Number 1098                                                                                                                     
                                                                                                                                
MR. CONNER  stated that he would  next offer a brief  overview of                                                               
analyst  and IPO  [initial  public  offering] investigations,  as                                                               
well as talk about the mutual  fund investigation.  He noted that                                                               
30 years ago,  [the New York AG's office]  began an investigation                                                               
of Merrill  Lynch, based upon newspaper  articles indicating that                                                               
research reports by  analysts for the various  companies were not                                                               
really accurate.   He noted  that it  was a difficult  subject to                                                               
address,  because  it's a  complex  financial  analysis that  the                                                               
analysts go  through.  He offered  two cases, both of  which were                                                               
covered by a man named Henry  Blodgett (ph) at Merrill Lynch.  In                                                               
the first case, the stock was  propped up with high ratings while                                                               
the stock prices plummeted, and  the ratings were kept high until                                                               
a  merger  and acquisition  deal  was  consummated.   In  another                                                               
instance, the  ratings for the  stock were downgraded on  the day                                                               
it was  publicly announced  that Merrill Lynch  would not  be the                                                               
banker  for   the  deal.     Mr.  Conner  related   that  through                                                               
investigation, e-mails  "revealed a  corporate culture  where the                                                               
analysts and  many other people  at Merrill Lynch were  very much                                                               
aware that  the ratings were  not accurate."  He  offered further                                                               
details regarding the  e-mails.  He stated that the  heart of the                                                               
case  was that  the  public was  told one  thing  about what  the                                                               
ratings  meant, while  Merrill Lynch  knew  that information  was                                                               
inaccurate.                                                                                                                     
                                                                                                                                
MR.  CONNER  said that  the  AG  could  have brought  a  criminal                                                               
prosecution.  However,  the AG was clear that he  did not want to                                                               
bring Merrill  Lynch down.   He  clarified that  what the  AG was                                                               
trying to  achieve was not  so much  punishment as trying  to get                                                               
the  system  to  work -  to  be  honest.    The solution  was  to                                                               
ultimately get  Merrill Lynch  to agree to  certain reforms.   He                                                               
said, "The company itself seemed  to be dumbfounded about what we                                                               
were  talking about.    And one  of  the ways  the  AG got  their                                                               
attention was by  bringing one of these X party  orders, in which                                                               
the  e-mails  and other  documents  were  attached to  the  court                                                               
papers,  and then  the public  became  aware of  what was  really                                                               
going  on."   Mr. Conner  offered details  regarding some  of the                                                               
reforms that resulted.                                                                                                          
                                                                                                                                
MR. CONNER said the settlement,  which was $100 million, resulted                                                               
in  New York  giving  half of  the money  to  the North  American                                                               
Securities  Administrators  Association.   That  association,  he                                                               
noted, represents  the 50 states,  as well as Canada  and Mexico.                                                               
He said,  "From that moment on,  we started working with  all the                                                               
states,  and we  commenced a  much larger  analyst investigation,                                                               
which  eventually led  to the  $1.4 billion  Wall Street  reform,                                                               
with 10  of the  biggest investment  banking institutions  in the                                                               
country."     He  described  the   effort  on  the   Wall  Street                                                               
investigations and  settlements as  "a broad  investor regulatory                                                               
system looking at an industry."   He noted it was discovered that                                                               
"the  companies themselves  were very  jealous about  being at  a                                                               
disadvantage  from their  competitors, and  fairly early  on they                                                               
took the position they would go  for the reforms, but they wanted                                                               
other  banking institutions  involved."   Mr.  Conner noted  that                                                               
that ultimately happened.                                                                                                       
                                                                                                                                
Number 1395                                                                                                                     
                                                                                                                                
MR.  CONNER  stated  that  part  of  the  analyst  investigations                                                               
involved looking at the issue  of IPOs.  Regarding the inaccurate                                                               
ratings system, it was found  that the executives that were being                                                               
covered with  the ratings were  given advantageous IPOs,  more or                                                               
less  as  favors  for  turning   over  banking  business  to  the                                                               
investment banking house.  He  said, "We then commenced an action                                                               
in which  we thought  to get  the return of  the monies  that the                                                               
executives received  from their  IPO allocations.   We  felt that                                                               
those monies belonged  to the corporations - that  these were not                                                               
the  individuals   who  should  benefit.     And  ultimately  the                                                               
shareholders  were  to benefit."    He  noted  that part  of  the                                                               
settlement  was funding  law school  arbitration clinics  to help                                                               
the investors.                                                                                                                  
                                                                                                                                
Number 1450                                                                                                                     
                                                                                                                                
MR.  CONNER noted  that the  current issue  on the  table is  the                                                               
mutual  fund investigation.    He  said it  was  found that  many                                                               
companies were  disclosing in  their prospectuses  that investors                                                               
could only  make trades  at a  certain rate,  and they  could not                                                               
time their  trades after the  market closed, "or otherwise  to go                                                               
in and out of the market  and get an advantage over the long-term                                                               
investors, which  is what the  mutual fund industry  was designed                                                               
for."   He also noted  that late trading  - trading done  after 4                                                               
p.m. - is prohibited by  the federal U.S. Securities and Exchange                                                               
Commission (SEC).                                                                                                               
                                                                                                                                
MR. CONNER  gave some examples  of cases and reiterated  that the                                                               
AG's policy  was not to bring  down the companies, but  rather to                                                               
clean up  the issues,  make the  public aware,  and to  [hold the                                                               
company to what  it said].  He noted that  the settlements in the                                                               
mutual  fund cases  have also  brought other  types of  remedies.                                                               
For  example, in  one  case,  eight directors  of  the board  are                                                               
agreeing  to resign  because of  their conduct.   He  stated that                                                               
[the AG] has also addressed the  fees that are being charged and,                                                               
in many  of the settlements,  the fees  are being reduced  over a                                                               
five-year period.   He  said the  fee issue  comes from  the fact                                                               
that the  average investor  doesn't really know  what the  fee is                                                               
for a mutual fund.  By  not knowing, investors cannot fairly make                                                               
a  choice between  different funds,  as  to where  to invest  the                                                               
money.    He   stated  that  the  issue  really   comes  down  to                                                               
disclosure.  If the investor was  not told what was going on then                                                               
that was wrongdoing.                                                                                                            
                                                                                                                                
Number 1559                                                                                                                     
                                                                                                                                
MR. CONNER said  there is an alleged perception  that the federal                                                               
government  and  the  states  are   at  odds  over  some  of  the                                                               
investigations.  That simply is not  true, he stated.  Except for                                                               
the  first mutual  fund investigation,  he noted,  [the New  York                                                               
AG's office] has worked with the  SEC and other states.  The same                                                               
is true  regarding the analyst  investigations.  He  clarified as                                                               
follows:                                                                                                                        
                                                                                                                                
     The  issues sometimes  come down  to the  fact that  we                                                                    
     have criminal  jurisdiction in New York,  which the SEC                                                                    
     does   not  have.     And   when   you  have   criminal                                                                    
     jurisdiction,  there are  various safeguards  that play                                                                    
     to the  investigation.  Certainly,  when one is  in the                                                                    
     grand jury,  we cannot  talk about that.   And  some of                                                                    
     our cases,  it looks  like we  spring them,  but really                                                                    
     there are certain prohibitions on us.                                                                                      
                                                                                                                                
MR. CONNER said that the overall  policy the AG has adopted is to                                                               
have honesty in  the business place.  He remarked  that no one is                                                               
against businesses or against making profits.                                                                                   
                                                                                                                                
Number 1628                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH told Mr. Conner  that the State of Alaska manages                                                               
a  $28  billion  fund  and  is  charged  with  following  prudent                                                               
investor  rules and  returning investment  on that  fund to  help                                                               
fund government,  provide dividends  to the people,  and preserve                                                               
the  fund for  future  generations.   He  asked  if Mr.  Conner's                                                               
office handles merger and acquisition issues.                                                                                   
                                                                                                                                
MR. CONNER  answered no, but  said the office might  get involved                                                               
from an anti-trust  viewpoint, as opposed to  a securities issue.                                                               
In  response  to  further  questions  from  Chair  Weyhrauch,  he                                                               
clarified  that  the Act  he  had  previously mentioned  was  the                                                               
"Martin Act",  which was effective in  1921.  He said  it did not                                                               
come about necessarily  because of Wall Street,  but just because                                                               
of general  investments.  He  mentioned "boiler rooms"  and "fly-                                                               
by-night" deals that occurred in  the early 1920s, which prompted                                                               
the  legislature to  consider different  bills.   In response  to                                                               
another question from Chair Weyhrauch,  he said [the New York AG]                                                               
doesn't give  out notice to  all the  states' AGs, but  rather it                                                               
gives a heads up to  the North American Securities Administrative                                                               
Association.  He gave examples,  including trading off cases with                                                               
other  states and  working with  other states.   An  exception is                                                               
criminal cases, he said.                                                                                                        
                                                                                                                                
Number 1801                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH noted  that Alaska is far removed  from New York,                                                               
both in time  zone and distance.  He asked  Mr. Conner, "What are                                                               
the ...  practical impediments  or benefits to  ... a  state like                                                               
[Alaska's]  adopting  such  a  pervasive,  aggressive  securities                                                               
investigation scheme ... such as New York has?"                                                                                 
                                                                                                                                
MR. CONNER  opined that  the advantage  that New  York has  is in                                                               
having  the criminal  jurisdiction.   Criminal jurisdiction  is a                                                               
powerful  tool because  someone coming  in to  give testimony  or                                                               
produce documents never knows what  [the New York AG's office] is                                                               
going  to  do.     He  said,  "Our  policy  is   not  to  make  a                                                               
determination on,  ultimately, how  we're going to  proceed until                                                               
towards the  end of an  investigation, when  we have a  handle on                                                               
the facts."   He added that  he thinks it's that  criminal threat                                                               
and the  X party  order that  acts as  a deterrent  and certainly                                                               
"moves us to settlement quicker than we might normally move."                                                                   
                                                                                                                                
Number 1858                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  indicated that [the Alaska  AG's] staff                                                               
is small compared to that of New York's.                                                                                        
                                                                                                                                
MR. CONNER interjected that "most  people don't know that we only                                                               
have about  12 lawyers working  on these big Wall  Street cases."                                                               
In  response   to  a   question  from   Representative  Gruenberg                                                               
regarding the  legislature's role in the  current investigations,                                                               
Mr. Conner said that although  the New York State Legislature has                                                               
not  really  been  involved,  it  submits  different  bills  that                                                               
attempt  to  improve  it's  statutory scheme.    He  offered  his                                                               
understanding that  the other  elected official  in New  York who                                                               
has  been very  active is  the state  comptroller.   He explained                                                               
that the state  comptroller's office, which is  governs the state                                                               
pensions funds, has been active  in [encouraging] other states to                                                               
develop principles  that companies  must follow  if they  wish to                                                               
have the  state investments.   The aforementioned is  a different                                                               
way of  approaching the  problem, he commented.   In  response to                                                               
Representative  Gruenberg, he  explained  that the  comptroller's                                                               
office does  this by informal  policy rather than  by regulation.                                                               
Some of the comptrollers have  put out a statement of principles,                                                               
which are guidelines for investing the state's money.                                                                           
                                                                                                                                
Number 1975                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  noted  that  Alaska does  not  have  a                                                               
comptroller, but  has independent pension  boards and a  board of                                                               
trustees  for the  Alaska  permanent fund.    The guidelines  for                                                               
those boards  are statutorily  general.   However, Mr.  Conner is                                                               
discussing detailed guidelines, he opined.                                                                                      
                                                                                                                                
MR. CONNER clarified that they  are not that detailed because the                                                               
comptroller decides where  the investments go and  he/she has the                                                               
authority to  set conditions  regarding where  to put  the money.                                                               
He offered his understanding that  "the principles ... are only a                                                               
few  pages  long,  but  they  do  make  certain  requirements  of                                                               
companies."    He  added,  "Now,  whether  or  not  they're  more                                                               
detailed guidelines  and positions  in other documents  that have                                                               
not been made public - that I don't know."                                                                                      
                                                                                                                                
REPRESENTATIVE   GRUENBERG   asked   what  Alaska   can   do   to                                                               
participate.                                                                                                                    
                                                                                                                                
MR. CONNER  answered that one  of the  things that helps  is when                                                               
certain companies are located in the  state.  In that case, often                                                               
the state securities administrators  are more knowledgeable about                                                               
those  companies and  their activity.   Still,  because a  lot of                                                               
trading  goes  through New  York,  he  said, "we  generally  have                                                               
jurisdiction, somehow."   He suggested,  "I think one  thing that                                                               
could  be done  is for  other states  to contact  us to  see what                                                               
assistance we can  provide and help with, and  just generally get                                                               
whatever knowledge we have about the industries."                                                                               
                                                                                                                                
REPRESENTATIVE GRUENBERG  said, "We are developing,  with a small                                                               
group of other states ...,  a group that's very competitive state                                                               
to state in trust administration,  and we are constantly revising                                                               
our trust  laws to  be more  competitive."   He added  that "this                                                               
group" includes  bankers and estate  planning lawyers and  it can                                                               
move fairly  quickly; however, he offered  his understanding that                                                               
there is not any  oversight of the group at the  state level.  He                                                               
asked Mr. Conner if he has  had any indication of "anything going                                                               
on there."                                                                                                                      
                                                                                                                                
MR. CONNER  responded that he is  not really aware of  that whole                                                               
area, in terms  of trust administration.  He stated  that how New                                                               
York  really  works  is through  the  North  American  Securities                                                               
Administrative Association.                                                                                                     
                                                                                                                                
Number 2136                                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL  referred to Mr. Conner's  previous remark                                                               
about holding criminal penalty over  an investigation.  He stated                                                               
that one  of the things "we  are always looking for  here" is how                                                               
to  keep government  from being  intimidating, while  still being                                                               
able to produce  good results.  He asked Mr.  Conner to give some                                                               
idea of the accountability structure "there."                                                                                   
                                                                                                                                
MR. CONNER answered  that, in terms of  the accountability within                                                               
[the New York AG's office],  decisions regarding whether to bring                                                               
a criminal case or  not are made at the very  highest levels.  He                                                               
said there are many levels of  supervisory review.  He said, "The                                                               
accountability at the end of the  day - it's the attorney general                                                               
to the public.   And he has  that trust of the public,  and if he                                                               
misuses that  trust, then the  public has  a way of  dealing with                                                               
that during the next election."                                                                                                 
                                                                                                                                
MR. CONNER,  in response to  a request by  Representative Coghill                                                               
to explain the process by which  the New York attorney general is                                                               
selected, stated  that the AG is  a public official who  runs for                                                               
office at  the same  time as  the governor,  lieutenant governor,                                                               
and comptroller.   Each  political party  puts up  its candidate,                                                               
and  it's a  statewide  election separate  from the  presidential                                                               
election or the  election for the mayor of New  York.  In further                                                               
response to  Representative Coghill,  he confirmed that  has been                                                               
true since the beginning of New York's securities law.                                                                          
                                                                                                                                
CHAIR  WEYHRAUCH  noted that  the  House  State Affairs  Standing                                                               
Committee  is made  up  of representatives  from  all across  the                                                               
state,  with a  wide  variety  of viewpoints.    He welcomed  Mr.                                                               
Conner and his staff to come to Alaska some time.                                                                               
                                                                                                                                
Number 2237                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON asked Mr. Conner  if it is his opinion that                                                               
if  [New  York]  had  adopted  the  Uniform  Securities  Act,  it                                                               
wouldn't   have  been   able  to   proceed  in   "any  of   these                                                               
investigations."                                                                                                                
                                                                                                                                
MR. CONNER  answered that New  York's Martin Act gives  "us" more                                                               
power  than the  Uniform Securities  Act,  but he  added that  he                                                               
couldn't  say  whether  the Uniform  Securities  Act  would  have                                                               
"absolutely precluded us from doing what we're doing."                                                                          
                                                                                                                                
REPRESENTATIVE  SEATON noted  that  Mr. Conner  had  said that  a                                                               
person who's  guilty under "the  civil portion" is  simply barred                                                               
from  further  security action,  instead  of  having a  "variable                                                               
time."   He  asked Mr.  Conner, "Do  you think  that that's  been                                                               
important so that it's all or nothing?"                                                                                         
                                                                                                                                
MR. CONNER replied as follows:                                                                                                  
                                                                                                                                
     I think  that is  important, because whenever  one goes                                                                    
     into the judicial system,  quite honestly, every lawyer                                                                    
     thinks they  have the greatest  case in the  world, and                                                                    
     someone's  not going  to come  out happy.   So,  you're                                                                    
     always taking  a chance; even  though you  may evaluate                                                                    
     your case one  way, the courts can view  it a different                                                                    
     way.   So, I  think the  fact that  if you  pushed this                                                                    
     before a  judge, the possibility  that you're  going to                                                                    
     get permanently  barred from the industry,  and all the                                                                    
     implications that has, is a great deterrent.                                                                               
                                                                                                                                
     Of course, what  I didn't explain now, and  what I will                                                                    
     now, is that we, as  an agency and institution, ... can                                                                    
     consent on  our own to  a less than permanent  bar, but                                                                    
     if it's put to a judge, that judge is all or nothing.                                                                      
                                                                                                                                
Number 2329                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  recalled Mr. Conner's previous  comment that                                                               
due  process  rights  do  not kick  in  during  an  investigative                                                               
process.                                                                                                                        
                                                                                                                                
MR. CONNER  noted that, under  a U.S. Supreme Court  decision, an                                                               
investigation   is  viewed   differently  than   an  adjudicatory                                                               
proceeding.     When  something   is  being  adjudicated   and  a                                                               
determination is  being made  based upon  the facts  present, the                                                               
witnesses  have rights  to  lawyers, there  is  a regular  cross-                                                               
examination,  and  transcripts  are  provided.   However,  in  an                                                               
investigation, those particular rights don't apply.  He said:                                                                   
                                                                                                                                
     In  New York  ...  we generally  take  the position  an                                                                    
     attorney  may  be  present  during  testimony  for  the                                                                    
     purpose of advising  a witness as to his  or her rights                                                                    
     and privileges,  but it's not  a participatory  type of                                                                    
     session;  it's really  an investigation  for us  to try                                                                    
     and  determine what  the facts  are  through the  means                                                                    
     that  we think  are  best  available.   So,  that is  a                                                                    
     distinction.                                                                                                               
                                                                                                                                
REPRESENTATIVE HOLM asked  if Mr. Conner is  maintaining that the                                                               
Fifth  Amendment  rights  don't  apply  during  an  investigative                                                               
process.                                                                                                                        
                                                                                                                                
MR.  CONNER  specified  that the  Fifth  Amendment  rights  apply                                                               
during the  investigative process,  it's just  some of  the other                                                               
traditional things  - such as  [formal hearings in  which there's                                                               
cross] examination and a determination  made by the agency - that                                                               
don't apply in an investigation.                                                                                                
                                                                                                                                
TAPE 04-52, SIDE B                                                                                                            
Number 2375                                                                                                                     
                                                                                                                                
MR. CONNER said, "If we, at  the end of an investigation, believe                                                               
there's wrong doing,  we can't, on our own, do  anything; we have                                                               
to go to  the court system.  That's where  the due process rights                                                               
fully kick in,  and the courts will protect both  parties in that                                                               
situation."                                                                                                                     
                                                                                                                                
Number 2344                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG, with  respect  to  the provision  that                                                               
does  not give  the  judge the  authority to  issue  less than  a                                                               
permanent injunction, asked  if that has ever  been challenged on                                                               
a separation of powers basis.                                                                                                   
                                                                                                                                
MR. CONNER answered that he is  not aware of that.  He clarified,                                                               
"The New York  Court of Appeals, which is the  highest court, has                                                               
interpreted the  statute in  New York  as being  that way  - that                                                               
it's an  all or nothing statute  - but I don't  believe it's been                                                               
challenged on a separation of powers situation."                                                                                
                                                                                                                                
Number 2311                                                                                                                     
                                                                                                                                
REPRESENTATIVE  LYNN asked  if a  person  can be  forced to  talk                                                               
during an investigative case; he  asked what would happen if that                                                               
person said he/she didn't want to talk.                                                                                         
                                                                                                                                
MR. CONNER replied as follows:                                                                                                  
                                                                                                                                
     If  a person  doesn't want  to talk  to us,  we usually                                                                    
     have  issued a  subpoena already,  and our  options are                                                                    
     two:   One is to  go into the  civil part of  the state                                                                    
     supreme  court, which  is New  York's trial  court, and                                                                    
     seek a court order directing  the witness to appear and                                                                    
     to testify.   Obviously, during the  testimony they can                                                                    
     take the Fifth  Amendment.  The other route  we have is                                                                    
     we  can go  in  through the  criminal  system in  state                                                                    
     supreme  court and  seek  a misdemeanor  determination,                                                                    
     and, obviously,  with a  misdemeanor there  are certain                                                                    
     penalties  that the  judge can  impose on  the witness,                                                                    
     whether it's  incarceration, fines,  or whatever.   And                                                                    
     then,  under both  systems, we  do have  the powers  of                                                                    
     contempt that  the court can  use.  So, that's  how the                                                                    
     approach  would  go  if  a  witness  did  not  want  to                                                                    
     testify.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  if   committees  in  the  state                                                               
legislature in New York "do  any investigatory stuff like they do                                                               
in Congress," such as issue subpoenas, or put people under oath.                                                                
                                                                                                                                
MR. CONNER  prefaced his  answer by  stating that  he is  not the                                                               
expert in that [issue].   Notwithstanding that, he proffered that                                                               
there  is some  investigatory work  that [the  legislature] does.                                                               
He said it certainly holds hearings and questions witnesses.                                                                    
                                                                                                                                
Number 2200                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM moved to adopt  the committee substitute (CS)                                                               
for HB  527, Version 23-LS1792\H,  Bannister, 3/30/04, as  a work                                                               
draft.   There  being  no  objection, Version  H  was before  the                                                               
committee.                                                                                                                      
                                                                                                                                
Number 2188                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  moved [to adopt]  Conceptual Amendment  1, which                                                               
read as follows [original punctuation provided]:                                                                                
                                                                                                                                
     The  division is  exempt from  AS  37.10,050(a).   Fees                                                                    
     collected by the  division shall be accounted  for in a                                                                    
     sub  account   used  to  implement  the   programs  and                                                                    
     activities  of   the  division   and  to   maintain  an                                                                    
     aggressive program  of investigation,  prosecution, and                                                                    
     all other actions necessary to  prevent harm to persons                                                                    
     by  violations of  AS  45.55 and  to  seek recovery  of                                                                    
     damages,  costs,  and  fees   for  those  harmed  by  a                                                                    
     violator, and  to cover  the costs  of the  division of                                                                    
     its programs, investigations, and proceedings.                                                                             
                                                                                                                                
CHAIR WEYHRAUCH  turned attention to  Version H.  He  pointed out                                                               
the  changes made  in Version  H, including  changing the  number                                                               
from 500 to  250 as well as the changes  in [Section 3] regarding                                                               
the penalties for single and multiple violations.                                                                               
                                                                                                                                
Number 2140                                                                                                                     
                                                                                                                                
VINCE  USERA, Senior  Securities Examiner,  Division of  Banking,                                                               
Securities  & Corporations,  Department of  Community &  Economic                                                               
Development (DCED), noted  that most of the  fines [the division]                                                               
levies are in  the smaller range and are meant  to be corrective.                                                               
He  related scenarios  in which  the [division]  has had  to find                                                               
people [who have moved] out of  state and obtain a judgment.  The                                                               
aforementioned takes a  lot of effort and if  [the division] were                                                               
to do that with every  perpetrator, $1 million would be difficult                                                               
to  collect.   "But it  would  be nice  to  be able  to assess  a                                                               
penalty where that is reasonable and warranted," he added.                                                                      
                                                                                                                                
CHAIR WEYHRAUCH noted  that changes were also  made regarding the                                                               
penalties in Section 4 of Version  H.  Section 5, he noted, would                                                               
provide the ability to collect  restitution, plus attorneys' fees                                                               
and  cost.   He  clarified that  if the  division  has to  employ                                                               
attorneys' fees or  use its own attorney general,  those fees and                                                               
costs  should not  be borne  by the  general public  "through its                                                               
treasury," but should be borne by the wrongdoers.                                                                               
                                                                                                                                
MR. USERA  said that's  correct.   He noted  that one  change was                                                               
made  where  restitution  must  be doubled  [page  3,  line  12].                                                               
However, that may be difficult to negotiate at times.                                                                           
                                                                                                                                
Number 2014                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  turned to Sections 6  and 7.  He  noted the last                                                               
sentence in Section  6, [subsection (f), on page  3, beginning on                                                               
line 11] which read as follows:                                                                                                 
                                                                                                                                
     The  amount  of  the  restitution paid  to  the  harmed                                                                    
     person must be  two times the amount of  loss caused to                                                                    
     the person by the violator.                                                                                                
                                                                                                                                
MR.  USERA stated  his preference  would  be to  change the  word                                                               
"must"  to "may".   He  explained,  "There are  some people  who,                                                               
through benign neglect,  do wrong.  We can get  them to pay back,                                                               
but they don't warrant being punished.   And this would put us in                                                               
a difficult situation there."                                                                                                   
                                                                                                                                
CHAIR WEYHRAUCH  noted that [subsection  (g)] in Section  6 would                                                               
also transfer the burden from the public to the perpetrator.                                                                    
                                                                                                                                
MR. USERA  responded that he  thinks the concept is  fine, though                                                               
he  added that  he's not  quite certain  how that  would work  in                                                               
terms of  the actual logistics.   He explained,  "Something's got                                                               
to go some place; it can't just come back into our coffers."                                                                    
                                                                                                                                
Number 1923                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH   returned  to  Conceptual  Amendment   1.    He                                                               
explained   that   it  would   exempt   the   division  from   AS                                                               
37.10.050(a),  [a statute]  which  limits the  fees  that may  be                                                               
collected.                                                                                                                      
                                                                                                                                
MR. USERA  said [AS 37.10.050(a)]  was enacted in 1990  and "sort                                                               
of  laid  dormant  for  a long  time,"  until  somebody  recently                                                               
rediscovered it.  The statute  says that fees cannot be collected                                                               
over  the  actual  cost  of  doing business.    He  reflected  as                                                               
follows:                                                                                                                        
                                                                                                                                
     Quite honestly,  that really limits  us.  We  don't use                                                                    
     all the  fees that  we receive, but  it costs  us about                                                                    
     $2.5  million  to do  our  business,  and we  bring  in                                                                    
     somewhere  in  the  range  of  $10-$12  million.    So,                                                                    
     there's  a  generous  contribution to  a  general  fund                                                                    
     there that would be taken  away from us if this statute                                                                    
     were to  be adhered to.   And  I think an  exemption is                                                                    
     warranted in this case, and  especially if you're going                                                                    
     to give  us back some  of our fines  so that we  can do                                                                    
     the job that we're empowered to do.                                                                                        
                                                                                                                                
CHAIR  WEYHRAUCH said  that  was the  point.   He  turned to  the                                                               
previous  comments   of  Mr.   Conner,  regarding   "$15  million                                                               
settlements, the  North American Securities, and  efforts on Wall                                                               
Street, and  money coming back -  distributed to the state."   He                                                               
asked Mr. Usera what Alaska's share of that has been.                                                                           
                                                                                                                                
MR.  USERA  answered that  Alaska's  total  share of  the  global                                                               
settlement was  about $4.6 million.   In response to  a follow-up                                                               
question from Chair Weyhrauch, he  confirmed that was receipts to                                                               
the general fund.                                                                                                               
                                                                                                                                
Number 1835                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG mentioned  the Takeover  Bid Disclosure                                                               
Act.  He told Mr. Usera that he  wants to update that Act, and he                                                               
asked  for Mr.  Usera's assistance  in doing  so.   He offered  a                                                               
brief history of the Act.                                                                                                       
                                                                                                                                
Number 1776                                                                                                                     
                                                                                                                                
MR.  USERA,  in  response  to   a  question  from  Representative                                                               
Gruenberg, stated that  in order to fix the Act  it would have to                                                               
be gutted.  He said there  wouldn't be much harm in repealing it.                                                               
He noted  that [the  Act] "came  in" in 1976  and has  never been                                                               
invoked, so  "it doesn't seem  to be of  any utility."   He noted                                                               
that Alaska is  not a hotbed of merger activity.   He noted there                                                               
is the federal Williams Act,  which requires certain disclosures.                                                               
He  added, "And  that's  where  ... our  Act  runs  afoul of  the                                                               
Williams Act and also runs afoul of the commerce clause."                                                                       
                                                                                                                                
Number 1740                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH asked the committee to return focus to HB 527.                                                                  
                                                                                                                                
Number 1729                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  asked if there  was any objection  to Conceptual                                                               
Amendment 1.  There being  no objection, [Conceptual] Amendment 1                                                               
was adopted.                                                                                                                    
                                                                                                                                
Number 1719                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  suggested  that Mr.  Usera's  previous                                                               
recommendation to change  the word "must" to  "may" be considered                                                               
by the committee.                                                                                                               
                                                                                                                                
Number 1690                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  [moved to  adopt Amendment 2  to Version  H], as                                                               
follows:                                                                                                                        
                                                                                                                                
     On page 3, line 12                                                                                                         
     Between "person" and "be"                                                                                                  
     Delete "must"                                                                                                              
     Insert "may"                                                                                                               
                                                                                                                                
CHAIR WEYHRAUCH  asked if there  was any objection  to [Amendment                                                               
2].  There being no objection, Amendment 2 was adopted.                                                                         
                                                                                                                                
Number 1679                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG turned to page  3, line 1, and suggested                                                               
[Amendment 3], to change the word  "or" to "and".  In response to                                                       
a  comment by  Mr.  Usera, he  noted that  the  [petition by  the                                                               
administrator] is discretionary, thus  using the word "and" would                                                           
allow either option.                                                                                                            
                                                                                                                                
Number 1637                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  asked if there  was any objection  to [Amendment                                                               
3].  There being none, [Amendment 3] was adopted.                                                                               
                                                                                                                                
Number 1628                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  turned  attention to  subsection  (g),                                                               
regarding "actual reasonable attorney  fees and actual reasonable                                                               
costs".   He  said he  thinks the  court should  have discretion,                                                               
because, for example, there may  be a case where it's appropriate                                                               
to award  less.  He suggested  [Amendment 4], to change  the word                                                               
"shall" to "may".                                                                                                               
                                                                                                                                
CHAIR WEYHRAUCH  asked if there  was any objection  to [Amendment                                                               
4].  There being none, [Amendment 4] was adopted.                                                                               
                                                                                                                                
Number 1594                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH,  in response  to  a  comment by  Representative                                                               
Gruenberg,  said  he  added  the  provision in  Section  7.    He                                                               
reiterated  that  Section  7  is   intended  to  "get  all  those                                                               
wrongdoers, no matter  where they are, if  they're doing business                                                               
in this state."                                                                                                                 
                                                                                                                                
REPRESENTATIVE  GRUENBERG  said,  "It   expands  the  concept  of                                                               
nexus."                                                                                                                         
                                                                                                                                
Number 1546                                                                                                                     
                                                                                                                                
WALTER JOHNS  shared his Native  Alaskan name with  the committee                                                               
and  revealed   that  he  is   a  shareholder  of   the  Sealaska                                                               
Corporation  and Goldbelt,  Inc, and  he lives  in Colorado.   He                                                               
stated that  he has  been involved  with corporations  since they                                                               
first started.   He admitted he  has not had time  yet to analyze                                                               
the proposed  legislation, but he  said he always  gets concerned                                                               
when the  state gets  involved with Native  companies.   He noted                                                               
that he has been involved  with five elections, "against Sealaska                                                               
Corporation on  ... three of  them."  He  noted that he  has also                                                               
worked  for  the Sealaska  Corporation  and  "during the  time  I                                                               
worked for them  we won the election process."   He stated, "I am                                                               
currently serving on a board  for one of our corporations through                                                               
the election process."                                                                                                          
                                                                                                                                
MR. JOHNS  stated his  concern that the  changes [proposed  in HB
527] could have a detrimental  effect on Native corporations.  He                                                               
said, "I  know that right  now there  are many ...  Native people                                                               
that are against discretionary voting,  because they really don't                                                               
understand  the application  and  how  you can  use  it for  your                                                               
benefit."   He offered an example.   He clarified that  his major                                                               
concern  is  not  actually  the  wording of  the  bill,  but  its                                                               
interpretation  and application.    He  offered another  example.                                                               
Mr.  Johns stated  his  opposition  to [HB  527]  and offered  to                                                               
answer questions from the committee.                                                                                            
                                                                                                                                
Number 1359                                                                                                                     
                                                                                                                                
REPRESENTATIVE   HOLM  asked   if   Mr.   Johns  considers   that                                                               
corporations in  Alaska are of equal  value to the state,  in the                                                               
sense that they fall under an umbrella of equal laws.                                                                           
                                                                                                                                
MR. JOHNS responded  that he guesses they do,  but reiterated his                                                               
concern is  in regard  to the  interpretation and  application of                                                               
law.                                                                                                                            
                                                                                                                                
REPRESENTATIVE  HOLM asked  Mr.  Johns  if he  is  aware of  "the                                                               
number of  cases that we've  heard of people that  have indicated                                                               
that they weren't  given due process in the  corporate (indisc. -                                                               
overlapping voices)."                                                                                                           
                                                                                                                                
MR. JOHNS  answered yes.   He stated, "I  can tell you  right now                                                               
that 30  percent of the  people, no matter  what you do,  will be                                                               
against a corporation."  He offered an example.                                                                                 
                                                                                                                                
REPRESENTATIVE HOLM  offered his belief that  "our responsibility                                                               
is to  make sure it's  an even playing  field for all  the people                                                               
who are members of corporations."                                                                                               
                                                                                                                                
MR. JOHNS  questioned what  the additional cost  would be  to the                                                               
corporation in the process of making [the playing field] level.                                                                 
                                                                                                                                
REPRESENTATIVE HOLM  suggested, "It may be  immaterial whether or                                                               
not  you  appreciate what  the  state  is  trying  to do,  if  we                                                               
believe, as  the legislature, that as  a policy it's in  the best                                                               
interest of  all the people of  Alaska to have the  same rules to                                                               
live by."                                                                                                                       
                                                                                                                                
MR.  JOHNS responded,  "As far  as I  can see,  we have  the same                                                               
rules."  He reiterated that he  has both run and won elections by                                                               
using the existing laws.   He concluded, "If it's equally applied                                                               
to all  the corporations and  not just Native  corporations, that                                                               
would be one thing, too."                                                                                                       
                                                                                                                                
REPRESENTATIVE   HOLM  clarified   that  that   is  what   he  is                                                               
suggesting.                                                                                                                     
                                                                                                                                
Number 1161                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON  asked Mr. Johns  to clarify what  he means                                                               
by discretionary voting.                                                                                                        
                                                                                                                                
MR.  JOHNS answered  that "through  the  election process  people                                                               
can,  under  proxy,  find  discretionary  voting,  and  then  the                                                               
corporation  can use  that to  vote and  distribute the  votes of                                                               
candidates."    He  reiterated   that  those  who  speak  against                                                               
discretionary voting  are those who  do not  know how to  use it.                                                               
He  added, "But  it's the  best tool  that you  could have  for a                                                               
dissident, if they know how to use that tool."                                                                                  
                                                                                                                                
REPRESENTATIVE  SEATON  noted  the  change from  500  to  250  in                                                               
Section 1 and asked Mr. Johns if he objects to that provision.                                                                  
                                                                                                                                
MR. JOHNS answered no.  He  indicated that his concern is for the                                                               
Native corporations  that are struggling financially.   He noted,                                                               
for example,  that it cost Goldbelt,  Inc., approximately $50,000                                                               
to hold an election.  He concluded as follows:                                                                                  
                                                                                                                                
     If the  company's struggling financially, a  handful of                                                                    
     people could come into the  state and say ..., "We want                                                                    
     this," and  then they  have to  go through  the process                                                                    
     and, you  know, maybe they can't  afford to distribute.                                                                    
     If you're  broke and don't  have money, what  [are] you                                                                    
     going to  do?   And then  what would the  state do?   I                                                                    
     mean, that's  my concern right  now, because  there are                                                                    
     some companies that are in that predicament today.                                                                         
                                                                                                                                
Number 1061                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH suggested  that it  may be  time to  look at  an                                                               
omnibus act, but,  with 41 days left in the  session, it wouldn't                                                               
be done this year.                                                                                                              
                                                                                                                                
Number 1038                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH closed public testimony.                                                                                        
                                                                                                                                
[HB 527 was heard and held.]                                                                                                    
                                                                                                                                
[A fictitious HB 690 was presented as an April Fool's joke.]                                                                    
                                                                                                                                
HB 459-PAPER TRAIL FOR ELECTRONIC VOTING MACHINE                                                                              
                                                                                                                                
Number 0962                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  announced that  the next  order of  business was                                                               
HOUSE BILL  NO. 459, "An  Act requiring an auditable  paper trail                                                               
for electronic  voting machines;  and providing for  an effective                                                               
date."                                                                                                                          
                                                                                                                                
Number 0950                                                                                                                     
                                                                                                                                
REPRESENTATIVE GARA,  Alaska State Legislature, as  sponsor of HB
459,  told   the  committee  that   last  night  he   spoke  with                                                               
representatives of  the Division  of Elections in  the lieutenant                                                               
governor's  office.   He  said their  concerns  are addressed  in                                                               
three amendments.                                                                                                               
                                                                                                                                
CHAIR  WEYHRAUCH  announced that  before  the  committee was  the                                                               
committee  substitute  (CS)  for HB  459,  [Version  23-LS1686\Q,                                                               
Kurtz, 3/29/04.]                                                                                                                
                                                                                                                                
REPRESENTATIVE GARA turned to Conceptual  Amendment 1, which read                                                               
as follows [original punctuation provided]:                                                                                     
                                                                                                                                
     Insert at p.2 line 9:                                                                                                      
                                                                                                                                
     "(15)   No  more   than  one   machine  that   produces                                                                    
     electronically  generated  ballots  may be  used  at  a                                                                    
     precinct,  except that  the Division  may utilize  more                                                                    
     than  one   machine  in  places  where   it  determines                                                                    
     additional  machines  are  needed  to  accommodate  the                                                                    
     needs   of   persons    with   disabilities,   physical                                                                    
     limitations or visual impairments."                                                                                        
                                                                                                                                
REPRESENTATIVE GARA stated that one  of the concerns has been how                                                               
wide  spread the  [touch  screen voting]  machines  are going  to                                                               
become.  He said the  lieutenant governor's office explained that                                                               
it has no  intention of using more than one  of these machines in                                                               
any  precinct.   He  said Conceptual  Amendment  1 confirms  that                                                               
intention.   He proffered that one  exception might be to  have a                                                               
special  polling  place for  people  with  visual impairments  in                                                               
Anchorage.                                                                                                                      
                                                                                                                                
Number 0890                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH  moved to  adopt  Conceptual  Amendment 1  [text                                                               
provided  previously].    There being  no  objection,  Conceptual                                                               
Amendment 1 was adopted.                                                                                                        
                                                                                                                                
Number 0857                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH  moved  to  adopt Amendment  2,  which  read  as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     Delete page 2 lines 14-17.                                                                                                 
                                                                                                                                
     Insert at page 2 line 14 as follows:                                                                                       
                                                                                                                                
     "(b) Any  software for such  equipment shall  be tested                                                                    
     and certified pursuant to AS 15.20.900."                                                                                   
                                                                                                                                
REPRESENTATIVE GARA  explained that the director  of the Division                                                               
of Elections  was scared  that she  would be  given certification                                                               
duties that  she wouldn't be  able to  undertake.  He  noted that                                                               
the current law, AS 15.20.900,  provides that election equipment,                                                               
including software and computer  equipment, needs to be certified                                                               
and tested before  every election.  He  explained that [Amendment                                                               
2]  emphasizes that  that rule  applies  to the  software of  the                                                               
Direct Recording  Electronic voting machines (DREs)  and provides                                                               
a new subsection (b).                                                                                                           
                                                                                                                                
Number 0800                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH asked if there  was any objection to Amendment 2.                                                               
There being none, Amendment 2 was adopted.                                                                                      
                                                                                                                                
Number 0785                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH  moved  to  adopt Amendment  3,  which  read  as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     Delete page 2 lines 4-8.                                                                                                   
                                                                                                                                
     Insert at page 2 line 3 after "only" as follows:                                                                           
                                                                                                                                
     "by a voter who requests use of a voting machine that                                                                      
     produces such ballots."                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA noted that Amendment  3 is the only amendment                                                               
that involves a  policy call by the committee.   He said the bill                                                               
is written to limit the use  of DRE machines as much as possible,                                                               
until "the evidence helps us  develop a better comfort level with                                                               
them."  Currently,  the bill states that if someone  needs to use                                                               
[a touch screen machine] he/she just  needs to ask.  The Division                                                               
of Elections responded  that if someone with  a visual impairment                                                               
is made  to say he/she  needs to use  the machine, that  would be                                                               
unfair,  because it  would highlight  the  handicap.   Therefore,                                                               
Amendment 3 would change the language  so that the voter only has                                                               
to request  the use of the  machine [without proving the  need to                                                               
do so].   He pointed out that  this may allow the  machines to be                                                               
used a little more frequently.                                                                                                  
                                                                                                                                
Number 0723                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON, in  response  to a  request  made by  the                                                               
chair, objected to Amendment 3.                                                                                                 
                                                                                                                                
Number 0706                                                                                                                     
                                                                                                                                
LAURA  GLAISER, Director,  Division of  Elections, Office  of the                                                               
Lieutenant Governor,  stated that the division  bought 100 [touch                                                               
screen voting machines]  and since then, many  concerns have come                                                               
to  the  forefront.    She  mentioned  an  intent  to  "back  up"                                                               
implementation.  She  stated that the machines will  be placed in                                                               
the  regional supervisors'  offices.   She mentioned  a piece  of                                                               
legislation  that would  come before  the  legislature soon  that                                                               
would allow  the increase  of "early  voting," which  would allow                                                               
the  division to  "have  all  40 ballots  available."   With  the                                                               
machines in  the regional offices,  anyone who needs to  use them                                                               
could go  vote at a regional  office.  However, the  staff in the                                                               
division,  as well  as  the lieutenant  governor's  office had  a                                                               
concern  about  segregating  a  group of  voters,  which  is  why                                                               
[Amendment 3] was  recommended.  She clarified  that the division                                                               
is not going  to do voter outreach or "get  everybody all excited                                                               
to  use the  machine,"  but if  the machine  is  in the  regional                                                               
office and somebody  wants to use it, they will  be allowed to do                                                               
so.   She said the  division will do  the outreach to  the people                                                               
that need to use it.                                                                                                            
                                                                                                                                
Number 0584                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  surmised that  people may just  want to                                                               
try out the machines.                                                                                                           
                                                                                                                                
MS.  GLAISER,  in  response to  a  question  from  Representative                                                               
Gruenberg, confirmed that  the division doesn't want to  be "in a                                                               
place of blocking someone" who  really wants to use the machines.                                                               
She told  the committee that  [the touch screen  voting machines]                                                               
won't  be in  polling places  for  the 2004  elections, with  the                                                               
exception of  "Access Alaska," and  if there is a  [request] from                                                               
the Alaska Pioneers' Home.                                                                                                      
                                                                                                                                
Number 0502                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM asked if the  division would make it known to                                                               
everyone that the machines are available.                                                                                       
                                                                                                                                
Number 0480                                                                                                                     
                                                                                                                                
MS.  GLAISER said  the  division  had intended  to  do  so.   She                                                               
mentioned the concern  [first discussed at a  prior hearing] that                                                               
not  many people  use the  machines, and  she admitted  she is  a                                                               
little confused  "at what  direction is before  me."   She stated                                                               
that  she has  to be  true to  what she  promised the  lieutenant                                                               
governor, which is to ensure  that his promise to Sandy Sanderson                                                               
and Lynn  Koral, [made  through] the  Frank Haas  legislation, is                                                               
honored.  That means that the  machines have to be made available                                                               
to  the blind,  vision  impaired,  and disabled.    She said  the                                                               
division  will limit  its usage  if that's  what the  legislature                                                               
decides.   Conversely, she  stated that  if the  machine is  in a                                                               
regional office, she is not going to block its use.                                                                             
                                                                                                                                
Number 0407                                                                                                                     
                                                                                                                                
MS.  GLAISER, in  response to  a question  from Chair  Weyhrauch,                                                               
reiterated that the [touch screen  voting] machines are currently                                                               
located in  each of  the regional  offices throughout  the state.                                                               
In response to  a comment made by Chair  Weyhrauch, she confirmed                                                               
that it is  the intent of the division to  introduce the machines                                                               
to  the  legislators.    She commented  that  the  division  just                                                               
recently finished its final training.                                                                                           
                                                                                                                                
Number 0321                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  suggested that  in letting  voters know                                                               
that the  machines are  available, the  division should  also let                                                               
them know  that there  is no  paper trail  and the  machines have                                                               
been known to malfunction.                                                                                                      
                                                                                                                                
MS.  GLAISER suggested  that signage  could  be used  to let  the                                                               
voters know  which method  of voting provides  a paper  trail and                                                               
which does not.                                                                                                                 
                                                                                                                                
Number 0277                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  suggested that  the signage also  be in                                                               
Braille.                                                                                                                        
                                                                                                                                
REPRESENTATIVE GRUENBERG turned back  to Amendment 3, which would                                                               
delete subsection (a).  He  questioned whether the division would                                                               
want to keep subsection (b) in the bill.                                                                                        
                                                                                                                                
MS.  GLAISER said  that  discussion  was held  last  night.   She                                                               
reminded  Representative  Gruenberg  that the  major  default  in                                                               
every precinct will  be a paper ballot;  therefore, that language                                                               
may not be necessary.                                                                                                           
                                                                                                                                
Number 0180                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH suggested,  in regard  to Amendment  3, that  on                                                               
page  2, line  3,  after the  word "ballots",  the  phrase "by  a                                                               
voter" be added.                                                                                                                
                                                                                                                                
REPRESENTATIVE GARA  responded that it  would read the  same with                                                               
or  without that  language.   He  pointed out  that [Amendment  3                                                               
would  take  subparagraphs (A)  and  (B)  out, leaving  only  one                                                               
sentence, so that addition wouldn't really be necessary.                                                                        
                                                                                                                                
Number 0109                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON said, "This  goes somewhere towards solving                                                               
one of my concerns," which he said  is that if there are only two                                                               
people  using  the machine,  because  of  restrictions placed  on                                                               
others, then the identity of the two people will be exposed.                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  suggested deleting "but only"  [on page 2,                                                               
line 3].                                                                                                                        
                                                                                                                                
CHAIR  WEYHRAUCH asked  if there  was any  further discussion  on                                                               
Amendment 3.                                                                                                                    
                                                                                                                                
Number 0040                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  suggested  that  the  committee  amend                                                               
Amendment 3 to also delete on line 3, the phrase ", but only".                                                                  
                                                                                                                                
CHAIR WEYHRAUCH  asked if there  was objection [to  the amendment                                                               
to Amendment 3].  Without objection it was so ordered.                                                                          
                                                                                                                                
Number 0029                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON removed his  previously stated objection to                                                               
Amendment 3.                                                                                                                    
                                                                                                                                
Number 0015                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH   asked  if  there  was   further  objection  to                                                               
Amendment  3, as  amended.   There  being none,  Amendment 3,  as                                                               
amended, was adopted.                                                                                                           
                                                                                                                                
TAPE 04-53, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GARA indicated  that  the intent  of  HB 459  has                                                               
always been  that a  person would  get to  use the  [touch screen                                                               
voting] machine by request.                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH  turned  to   the  transitional  provisions  and                                                               
ballots cast in 2004.  He asked, "Are those all good still?"                                                                    
                                                                                                                                
Number 0088                                                                                                                     
                                                                                                                                
MS.  GLAISER mentioned  "the funding  source"  and using  federal                                                               
funds.  She informed the  committee that federal funds do require                                                               
a 5  percent match;  therefore, there will  be a  limited general                                                               
fund expense on anything that's  related to the Help America Vote                                                               
Act (HAVA).                                                                                                                     
                                                                                                                                
Number 0161                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  turned to  [subsection (b)] on  page 3.                                                               
He opined  that language "could  be potentially read  to prohibit                                                               
the use  of any  state money,  even as a  match."   He questioned                                                               
whether  a few  words  should  be added  to  say, "including  any                                                               
required state match."                                                                                                          
                                                                                                                                
REPRESENTATIVE  GARA  replied  that  he  doesn't  think  that  is                                                               
necessary.    He  suggested that  where  the  language  currently                                                               
reads,  "federal  funds",  the  committee  could  choose  to  add                                                               
"including federal matching funds".                                                                                             
                                                                                                                                
REPRESENTATIVE GRUENBERG said he would like to do that.                                                                         
                                                                                                                                
Number 0215                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH clarified  that [Conceptual]  Amendment 4  would                                                               
read as follows:                                                                                                                
                                                                                                                                
     On page 3, line 3                                                                                                          
     After "federal funds"                                                                                                      
     Insert ", including federal matching funds,"                                                                               
                                                                                                                                
CHAIR WEYHRAUCH asked  if there was any  objection [to Conceptual                                                               
Amendment 4].   There being  no objection,  [Conceptual Amendment                                                               
4] was adopted.                                                                                                                 
                                                                                                                                
Number 0281                                                                                                                     
                                                                                                                                
SANDRA ZIRNHELD,  testifying on  behalf of herself,  prefaced her                                                               
testimony by  informing the committee  that she doesn't  have the                                                               
current Version  Q in  front of her.   Notwithstanding  that, she                                                               
voiced a  major concern  by reading  an Associated  Press article                                                               
from November 2002, as follows:                                                                                                 
                                                                                                                                
     A Scurry County - I  believe that's in Texas - election                                                                    
     error reversed the outcomes  in two commissioner races.                                                                    
     A  defective  computer  chip in  the  county's  optical                                                                    
     scanner misread  ballots Tuesday night  and incorrectly                                                                    
     tallied   a   landslide    victory   for   Republicans.                                                                    
     Democrats actually  won by wide margins.   "The problem                                                                    
     was discovered  when poll workers became  suspicious of                                                                    
     the  markings of  the vote,"  Scurry County  clerk Joan                                                                    
     Bunch said.   "A new computer chip was  flown to Snyder                                                                    
     from  Dallas," she  said.   By  Wednesday morning,  the                                                                    
     votes had  been counted twice  by hand, and  once again                                                                    
     by scanner with the replacement chip.                                                                                      
                                                                                                                                
MS.  ZIRNHELD  said she  has  read  countless newspaper  articles                                                               
regarding elections  that have been  compromised through  the use                                                               
of leading brands of touch  screen voting machines.  However, she                                                               
said this is  the first article that she has  read that documents                                                               
the glitch with  optical scanner tallying systems.   She said she                                                               
thinks this  is important  for the committee  to know  about, for                                                               
two reasons:   First, she turned  to the fact that  the state has                                                               
purchased 100 Diebold machines in  order to be in compliance with                                                               
HAVA.   She  stated  that in  a conversation  last  week with  an                                                               
employee of the Division of  Elections, she learned that the [the                                                               
state's] optical scanning system  uses the same tallying software                                                               
as the touch  screen voting machine.  She said  [the touch screen                                                               
voting  machine] has  been studied  by leading  computer security                                                               
researchers at Johns Hopkins  [University] and Rice [University],                                                               
who found that  the security feature on the  machine is extremely                                                               
lax.   She indicated that  the same touch screen  voting machines                                                               
have  been  implicated  in countless  re-election  mishaps  since                                                               
2002.  Currently,  she said, the state Division  of Elections has                                                               
no check  in place for  the tallying  system used by  its optical                                                               
scanners.    She  offered her  understanding  that  the  division                                                               
sometimes reruns  the ballots  and checks  the second  tally with                                                               
the  first,  but  she  said   that  would  not  catch  systematic                                                               
malfunction.   She opined that  HB 459 needs to  include language                                                               
inserted  that "would  mandate the  prized, post-election  manual                                                               
recount in  some subset of  precinct with votes cast  equaling at                                                               
least 0.5 percent  of votes cast statewide."   She explained that                                                               
the  manual tallies  can  then be  compared  with the  electronic                                                               
tallies  to   verify  that  the  entire   system  is  functioning                                                               
correctly.  She  added that she thinks this  should encompass all                                                               
systems, whether touch screen or optical scanning.                                                                              
                                                                                                                                
Number 0506                                                                                                                     
                                                                                                                                
MS.  ZIRNHELD expressed  that, as  a  citizen of  the state,  she                                                               
wants  to have  confidence  that the  entire  election system  is                                                               
functioning  correctly.   She  noted  that  Alaska receives  high                                                               
marks [for its  voting process], and she said  she can understand                                                               
that,  since  both the  legislature  and  the division  take  the                                                               
matter so  seriously.  "But  I think  my suggestion is  needed to                                                               
ensure that  we're not simply  happily voting with a  false sense                                                               
of security in our tallying software," she said.                                                                                
                                                                                                                                
Number 0527                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH closed public testimony.                                                                                        
                                                                                                                                
Number 0536                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON  asked Ms.  Glaiser if  the division  has a                                                               
"dummy  pack" that  it knows  ahead of  time has  "50 percent  on                                                               
every ballot" that it can run  through the scanner to verify that                                                               
the scanner [records] that 50  percent, or does the division just                                                               
double-check ballots,  without knowing the distribution,  to make                                                               
certain they have the same results.                                                                                             
                                                                                                                                
MS.  GLAISER explained  that the  division runs  a sample  ballot                                                               
through [the scanner]  to ensure that it has the  marks it ought.                                                               
This test  is done  in the  director's office,  she said.   After                                                               
being tested  by the review board,  the memory cards are  sent to                                                               
the regional AccuVote boards that run  the same test again.  Then                                                               
the  machines are  sealed and  delivered  to the  precinct.   She                                                               
concluded, "So, I  think our chances to find  something like that                                                               
happening in [an] Alaska election are minimal, at best."                                                                        
                                                                                                                                
Number 0886                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG turned  to page 2, lines 27 and  28.  He                                                               
noted  that  language defines  optically  scanned  ballots in  AS                                                               
15.60.010.    He  said  he   doesn't  have  that  entire  statute                                                               
available  and asked  if "optical  scanning  machine" is  defined                                                               
elsewhere in that statute.                                                                                                      
                                                                                                                                
MS. GLAISER indicated that it is.                                                                                               
                                                                                                                                
Number 0709                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM moved to report  CSHB 459, as amended, out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal notes.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG,   returning  to   the  issue   of  the                                                               
definition of optical scanning machine,  stated, "It doesn't make                                                               
... any  sense to  define optically scanned  ballot if  you don't                                                               
define  optical  scanning machine."    He  indicated that  [after                                                               
looking at a copy given to  him by the committee aide] that Title                                                               
15 is general and "covers the whole thing."                                                                                     
                                                                                                                                
Number 0765                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GARA  indicated  that optically  scanned  ballots                                                               
could only  be used in  optical scanning machines;  therefore, he                                                               
said, "It's an amendment that I'm not sure gets us anywhere."                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG  suggested  that this  issue  could  be                                                               
considered  on the  House floor,  since the  House State  Affairs                                                               
Standing Committee is the last committee of referral for HB 459.                                                                
                                                                                                                                
Number 0832                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  reminded the committee of  the previously stated                                                               
motion.  He asked if there  was any objection.  There being none,                                                               
[CSHB  459  (STA)] was  reported  from  the House  State  Affairs                                                               
Standing Committee.                                                                                                             
                                                                                                                                
HB 460-ALLOWABLE ABSENCES AND PFDS                                                                                            
                                                                                                                                
Number 0879                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH turned  to the last order of  business, which was                                                               
HOUSE BILL NO. 460, "An Act  relating to absences to provide care                                                               
for  certain relatives  for purposes  of permanent  fund dividend                                                               
eligibility; and providing for an effective date."                                                                              
                                                                                                                                
Number 0900                                                                                                                     
                                                                                                                                
AURORA HAWK, Staff to Representative  Beth Kerttula, Alaska State                                                               
Legislature,  on  behalf  of  Representative  Kerttula,  sponsor,                                                               
presented HB 460.  She stated  that HB 460 would make it possible                                                               
for an  Alaskan to care  for a  critically ill or  injured family                                                               
member and not  lose his/her permanent fund dividend  (PFD).  She                                                               
noted  that,  currently,  Alaska statute  provides  an  allowable                                                               
absence for  a person who is  caring for a critically  ill family                                                               
member, only  if that family  member has  to travel out  of state                                                               
for treatment.   She  clarified, "This means  that if  your child                                                               
who is living out of state,  for instance, in college, is hurt or                                                               
becomes ill, you  will lose your dividend if you  are required to                                                               
spend a long period of time out  of state to care for them."  She                                                               
said when  a family member is  ill or injured, it  is a stressful                                                               
time, and  Alaskans should be able  to care for a  family member,                                                               
and not have to worry  about receiving their dividend, regardless                                                               
of  that family  member's residency  or where  they happen  to be                                                               
when they become ill.                                                                                                           
                                                                                                                                
MS.  HAWK noted  that  there  is an  amendment  in the  committee                                                               
packet,  but suggested  that  the committee  may  wish to  listen                                                               
first to public testimony.                                                                                                      
                                                                                                                                
Number 0978                                                                                                                     
                                                                                                                                
IRIS MANYA  PUNGOWIYI-REED testified  that she is  proud to  be a                                                               
long-time Alaskan.   She related having moved to  Alaska in 1970,                                                               
and  she shared  some  of her  history as  an  Alaskan living  in                                                               
various  parts of  the  state.   She  revealed  that her  current                                                               
husband's name is Ron Reed, and they own a home in Juneau.                                                                      
                                                                                                                                
MS. PUNGOWIYI-REED  said her niece,  a student of  the University                                                               
of Alaska, Southeast, sustained a  knee injury in September 2001,                                                               
while on an exchange student  program in Albuquerque, New Mexico,                                                               
and  needed  surgery.   Ms.  Reed  indicated  that she  [and  her                                                               
husband] traveled  to Albuquerque in  December to help  take care                                                               
of   the  niece's   son  while   the  niece   had  her   surgery.                                                               
Concurrently, her son Bryce, who  was living in Denver, Colorado,                                                               
at the  time, also came  to Albuquerque.   On December  13, 2001,                                                               
Ms. Reed  said, Bryce was involved  in an accident.   She related                                                               
the details of  that accident and the injuries  Bryce received as                                                               
a result.   Bryce was in critical condition at  the University of                                                               
New Mexico Hospital.                                                                                                            
                                                                                                                                
MS. PUNGOWIYI-REED stated  that as a result  of the complications                                                               
from  Bryce's  trauma,  he  is  non-verbal,  non-mobile,  is  fed                                                               
through a tube, and is 100  percent dependent upon others for his                                                               
care.  Ms.  Reed said she has explored the  possibility of caring                                                               
for Bryce in  Juneau, Alaska.  She said she  also inquired at the                                                               
VA [Department of Veterans Affairs]  office in Anchorage, Alaska,                                                               
because  her son  is eligible  to receive  "100 percent  service-                                                               
connected disability."   She said  she was told that  Bryce would                                                               
have to be  sent to Seattle, Washington.  She  stated that she is                                                               
not  comfortable "taking  that kind  of risk,"  and she  declared                                                               
that  she -  as his  mother,  next-of-kin, and  legal guardian  -                                                               
would not  abandon him to  return home.   She related  that there                                                               
has  been  emotional and  financial  stress  associated with  her                                                               
son's accident.  She offered examples.                                                                                          
                                                                                                                                
CHAIR WEYHRAUCH  requested that Ms. Reed  complete her testimony,                                                               
because committee members needed to  be present at the 10:00 a.m.                                                               
House floor  session.   He stated that  the committee  would come                                                               
back  to   the  issue.     He  said,   "It's  tough   when  these                                                               
circumstances happen to a family, and our hearts go out to you."                                                                
                                                                                                                                
MS. PUNGOWIYI-REED  stated that she is  currently prohibited from                                                               
getting her  PFD, and she  emphasized that  she has not  given up                                                               
her Alaska residency.                                                                                                           
                                                                                                                                
[HB 460 was heard and held.]                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
Number 1464                                                                                                                     
                                                                                                                                
There being no further business before the committee, the House                                                                 
State Affairs Standing Committee meeting was adjourned at 10:03                                                                 
a.m.                                                                                                                            

Document Name Date/Time Subjects