Legislature(2005 - 2006)BUTROVICH 205

01/25/2005 08:30 AM JUDICIARY


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08:30:56 AM Start
08:33:31 AM Department of Law Overview: Robert Bundy Report
03:58:58 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 1:00 PM --
+ Overview of the Department of Law & the TELECONFERENCED
Attorney General
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE JUDICIARY STANDING COMMITTEE                                                                             
                        January 25, 2005                                                                                        
                           8:30 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Ralph Seekins, Chair                                                                                                    
Senator Charlie Huggins, Vice Chair                                                                                             
Senator Hollis French                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Gene Therriault                                                                                                         
Senator Gretchen Guess                                                                                                          
                                                                                                                                
OTHER MEMBERS PRESENT                                                                                                         
                                                                                                                                
Representative Lesil McGuire                                                                                                    
Representative Les Gara                                                                                                         
Representative Max Gruenberg                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
Department of Law Overview: Robert Bundy Report                                                                                 
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                              
Mr. Robert Bundy                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  RALPH   SEEKINS  called  the  Senate   Judiciary  Standing                                                             
Committee meeting  to order  at 8:30:56  AM. Senator  Huggins and                                                             
Chair Seekins were present. Chair  Seekins announced that a 10:30                                                               
press conference would be held  today in the Governor's Office at                                                               
which the Bundy  report will be presented. A  question and answer                                                               
period will be held afterward  with the press. He anticipates the                                                               
session  to be  complete by  12:30. Chair  Seekins announced  his                                                               
intention to  recess the Senate  Judiciary Committee  meeting and                                                               
ask Mr. Bundy to appear  before the committee when it reconvenes.                                                               
He will  attempt to get  copies of  the Bundy Report  for members                                                               
and  has invited  members of  the House  Judiciary Committee  and                                                               
other   legislators  to   attend.  Senator   French  joined   the                                                               
committee.  Finally,  Chair  Seekins  announced  he  has  granted                                                               
reprieve to DOL until tomorrow to give its review.                                                                              
                                                                                                                                
8:33:31 AM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS  recessed the committee until  the press conference                                                               
was finished.                                                                                                                   
                                                                                                                                
        ^Department of Law Overview: Robert Bundy Report                                                                    
1:07:44 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS  reconvened the  meeting. Senators  Huggins, French                                                               
and  Chair Seekins  were present.  Representatives McGuire,  Gara                                                               
and Gruenberg were  also attending. Although the  meeting was not                                                               
noticed  as joint  meeting, he  invited  the chair  of the  House                                                               
Judiciary  Committee   and  other  legislators   to  participate,                                                               
express opinions, or  ask questions, but he asked  that they give                                                               
way to committee members.                                                                                                       
                                                                                                                                
1:09:15 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS welcomed Mr. Robert Bundy.                                                                                        
                                                                                                                                
ROBERT BUNDY introduced himself.                                                                                                
                                                                                                                                
             THE FOLLOWING IS A VERBATIM TRANSCRIPT                                                                           
                                                                                                                                
CHAIR SEEKINS:  I understand, Mr.  Bundy, that you  were retained                                                               
by the  Governor to  look into the  allegations, which  were made                                                               
about the  conduct of  the Attorney General.  In general,  when I                                                               
ask you to tell us a little  about that - when the Governor first                                                               
approached you. Let's start there.                                                                                              
                                                                                                                                
MR. BUNDY:  Well, it was  shortly after the first  story appeared                                                               
in the Anchorage Daily News. I was  at home and I got a call from                                                               
Jim Clark and  he asked me if I  had read the paper and  I said I                                                               
had and  he wondered if  I would be  interested in taking  on the                                                               
investigation of whether  or not there had been  violation of any                                                               
ethics law  or other provision  related to that. I  thought about                                                               
it for  a few minutes and  probably against my better  judgment I                                                               
said that I  would, recognizing that I was probably  going to end                                                               
up  just about  where we  are now.  So, I  agreed to  do that.  I                                                               
frankly didn't realize there was going  to be as much involved as                                                               
there was, but  I agreed to do  it. So, we had to  do an official                                                               
state  contract  with  the  Office   of  the  Governor.  I  don't                                                               
represent the Governor; it's the  Office of the Governor, so it's                                                               
the  state. I,  then, had  to work  on the  conflict of  interest                                                               
clearing with my  firm. Finally did that and was  able to proceed                                                               
about a week later.                                                                                                             
                                                                                                                                
CHAIR SEEKINS: Did you meet with the Governor prior to...?                                                                      
                                                                                                                                
MR. BUNDY: He  called me right after Jim Clark  did the very next                                                               
day and asked me about this. Of  course, I told him that I needed                                                               
to  be assured  that I  was going  to get  the cooperation  and I                                                               
would provide  him my best  straightforward opinion and  he could                                                               
do what he pleased.                                                                                                             
                                                                                                                                
CHAIR SEEKINS: Did the Governor or  Mr. Clark ever express to you                                                               
whose idea  this independent investigation  was? Was it  his? Was                                                               
it the Attorney General's?                                                                                                      
                                                                                                                                
MR. BUNDY: I don't know whose it was.                                                                                           
                                                                                                                                
1:12:15 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: But your first contact was with Mr. Clark.                                                                       
                                                                                                                                
MR. BUNDY: Right.                                                                                                               
                                                                                                                                
CHAIR SEEKINS:  Did the  Governor or Mr.  Clark ever  indicate to                                                               
you the reason that they were considering you for the position?                                                                 
                                                                                                                                
MR. BUNDY: Yes, obviously, I'm not  of his political party. I was                                                               
a Democratic  appointee when  I did  have a  political job  as US                                                               
Attorney.  I  am  associated  with  organizations  that  are  not                                                               
friendly to  the Governor's agenda on  a number of issues.  So, I                                                               
suppose that he  thought, well, here is somebody  that nobody can                                                               
say is in my camp politically.                                                                                                  
                                                                                                                                
1:13:13 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  From your  perspective; let's take  a look  at it                                                               
this way. What made you feel  that you were uniquely qualified to                                                               
do this particular assignment?                                                                                                  
                                                                                                                                
MR.  BUNDY:  Well,  I  suppose  as much  as  anybody  else,  I've                                                               
conducted  investigations   for  both   the  state   and  federal                                                               
governments on white  collar matters. I'm a member  of the Ethics                                                               
Committee of  the Bar  Association. I  was chair  of the  Rule of                                                               
Professional Conduction  Committee of  the Bar  Association. I've                                                               
done a  lot of work with  regard to white collar,  both civil and                                                               
criminal issues.                                                                                                                
                                                                                                                                
CHAIR  SEEKINS: Did  you discuss  those  qualifications with  the                                                               
Governor?                                                                                                                       
                                                                                                                                
1:13:58 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  Yes, he asked  me about that and  I am sure  that Mr.                                                               
Clark already knew.                                                                                                             
                                                                                                                                
CHAIR  SEEKINS: Okay,  you say  that you  have been  a member  of                                                               
organizations that oppose the  Governor's political positions, so                                                               
I assume that you are not a Republican?                                                                                         
                                                                                                                                
MR. BUNDY: I am not.                                                                                                            
                                                                                                                                
1:14:16 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: Have  you ever had any  employment or professional                                                               
association  or affiliation  with  the Governor  or the  Attorney                                                               
General?                                                                                                                        
                                                                                                                                
MR. BUNDY:  I have  never had any  affiliation or  association at                                                               
all with the  Governor. After I got into this,  I discovered that                                                               
in 1987 or '86 when Mr. Renkes  was a law student, he clerked for                                                               
half of a  summer with a firm  that I worked for  then, Vogel and                                                               
Gates. But I never worked with him, so I didn't recall him.                                                                     
                                                                                                                                
CHAIR SEEKINS:  Let's talk about  employment background.  Can you                                                               
give   us  just   a  history   of  your   educational  employment                                                               
background? It doesn't have to be exhaustive.                                                                                   
                                                                                                                                
1:14:55 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  Okay, I graduated from  undergraduate, the University                                                               
of  Southern  California, went  to  UC  Berkeley Boalt  Hall  Law                                                               
School -  graduated in  '71, took and  passed the  California Bar                                                               
and then  got offered a  job in Alaska  and thought that  I would                                                               
come up here  for a year or  two - went to work  for Alaska Legal                                                               
Services, worked with  them until '74, lived in  Nome and Kaiana,                                                               
Alaska.  Then became  the DA  in Nome  from '75  - '78,  moved to                                                               
Anchorage - was  Chief Assistant DA in Anchorage,  worked for the                                                               
AG's office in  the Anti-trust Division and then  went with Vogel                                                               
and  Gates,  where  I  was   for  10  years  doing  mostly  civil                                                               
litigation  and then  became US  Attorney  in 1994  and was  that                                                               
until 2001 and have been in private practice since then.                                                                        
                                                                                                                                
CHAIR  SEEKINS:  You  said  the   US  Attorney's  position  is  a                                                               
political position?                                                                                                             
                                                                                                                                
MR. BUNDY: It's  nominated by the President and  confirmed by the                                                               
Senate. It's a Presidential appointment position.                                                                               
                                                                                                                                
CHAIR SEEKINS: Which President appointed you?                                                                                   
                                                                                                                                
MR. BUNDY: President Clinton.                                                                                                   
                                                                                                                                
1:16:24 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  Let's just  talk a  little bit  about -  I'm just                                                               
trying to determine  here for the benefit of all  our members and                                                               
for our  record exactly  where you  are in  terms of,  there have                                                               
been people  that said well, who  does he work for  and I've said                                                               
the same thing  you did. It appears  to me that he  works for the                                                               
people of the State  of Alaska. How do we know  that this man was                                                               
not a  crony of  the Governor's and  the Attorney  General's. So,                                                               
I'm  just trying  to  establish just  what  your relationship  is                                                               
there.                                                                                                                          
                                                                                                                                
MR.  BUNDY: Well,  my  contract is  with the  State  of Alaska  -                                                               
that's who I work  for - it's the Office of  the Governor. So, my                                                               
client is the  State of Alaska. I'd met the  Governor before when                                                               
I was  US Attorney,  because I had  to talk to  him from  time to                                                               
time, but  other than that  I never had  anything to do  with the                                                               
Governor.                                                                                                                       
                                                                                                                                
1:17:13 PM                                                                                                                    
                                                                                                                                
CHAIR  SEEKINS:  In  just reviewing  the  Alaska  Public  Offices                                                               
Commission  (APOC) filings  just  to see  if  we could  determine                                                               
ahead  of  time  what  political affiliation  you  might  be,  it                                                               
appears that you may have  contributed to the Governor's opponent                                                               
in the last election. Is that true?                                                                                             
                                                                                                                                
MR. BUNDY: Absolutely.                                                                                                          
                                                                                                                                
CHAIR  SEEKINS:  Any  other organizations  that  you  would  have                                                               
contributed there that may indicate where your philosophical...                                                                 
                                                                                                                                
MR. BUNDY: Well, I contribute  to the Alaska Conservation Voters,                                                               
I'm on the  Board of Trustees of  Alaska Conservation Foundation,                                                               
I'm on the  Board of Alaska Legal Services Corporation  and I'm a                                                               
Democrat and I contribute to Democrats.                                                                                         
                                                                                                                                
CHAIR SEEKINS:  I'm not going to  condemn you for that.  So, when                                                               
you  finally took  the  contract, or  when you  felt  you had  an                                                               
agreement with  the State  of Alaska,  what specifically  did you                                                               
feel your defined task was?                                                                                                     
                                                                                                                                
Let me interrupt for the  record that Representative Gara is with                                                               
us  and  Representative Coghill,  the  Majority  Leader, for  the                                                               
House. Of  course, I  have already said  that Chair  McGuire from                                                               
the House is with us. So, go ahead, sir.                                                                                        
                                                                                                                                
MR. BUNDY:  Well, it was to  look into the matter  of allegations                                                               
that the Attorney General had  through official action as a state                                                               
Attorney  General  had  used  his  position  to  benefit  himself                                                               
financially,  that he  violated the  Ethics Code.  That's what  I                                                               
understood having  read the  paper of what  the substance  of the                                                               
allegations are.                                                                                                                
                                                                                                                                
1:19:04 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: Now before you accepted  that task and at any time                                                               
thereafter, did  you have  any reason to  believe that  anyone in                                                               
the  administration  wanted you  to  produce  a report  that  was                                                               
based on  anything other  than the  facts of  the matter  and the                                                               
law?                                                                                                                            
                                                                                                                                
MR. BUNDY:  Well, that's certainly  what they told me  and that's                                                               
certainly what I asked them. And that's what I undertook to do.                                                                 
                                                                                                                                
CHAIR SEEKINS: In your opinion, you did just exactly that?                                                                      
                                                                                                                                
MR. BUNDE: I did do it the best I could.                                                                                        
                                                                                                                                
1:19:32 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  I was listening  to part of the  press conference                                                               
today where you mentioned that you  pursued this task in much the                                                               
same  manner  you  would  have  if you  were  acting  as  the  US                                                               
Attorney.                                                                                                                       
                                                                                                                                
MR. BUNDY: Well, I mean,  with some significant differences. But,                                                               
I tried to do how you  would do a typical investigation, which is                                                               
gather the appropriate documents,  organize them, review them and                                                               
then use what  you've learned from those to  interview people and                                                               
use the documents in the interview.                                                                                             
                                                                                                                                
1:20:05 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: Were you provided  with all the documents, all the                                                               
materials that you requested from the administration?                                                                           
                                                                                                                                
MR.  BUNDY: Pretty  much, with  the one  significant exception  -                                                               
that email account.                                                                                                             
                                                                                                                                
CHAIR SEEKINS: Could  you please encapsulate that for  us? I know                                                               
you've already done it at the press conference.                                                                                 
                                                                                                                                
MR. BUNDY: Well,  we requested, of course, a  number of documents                                                               
from the  Department of Law  - and  all of our  document requests                                                               
were electronic  documents. We'd  ask for  all the  emails. Well,                                                               
after  a  couple of  weeks  in,  we  learned  that there  were  a                                                               
significant  number of  emails that  were  not available  because                                                               
they had been  deleted. That occurred, I was told,  on October 1,                                                               
the day the story broke in the Daily News.                                                                                      
                                                                                                                                
So,  I got  on a  plane  and arranged  for a  court reporter  and                                                               
interviewed Drew McDougal who is  the Department of Law IT person                                                               
and asked them what happened. He  had filled out a slip that said                                                               
I was requested  to come to the Attorney General's  office and he                                                               
was having trouble  deleting things from his trash  basket in his                                                               
email account. So, apparently what  had happened was Mr. McDougal                                                               
was asked to come up to  the Attorney General's office, said that                                                               
he had a bunch  of emails in his trash thing  that had been there                                                               
for a long time  and wanted to delete them and  he couldn't do it                                                               
for some reason. Mr. McDougal  looked at the computer and figured                                                               
out why he couldn't and went ahead and deleted the emails.                                                                      
                                                                                                                                
CHAIR SEEKINS: So you had to reconstruct some of that?                                                                          
                                                                                                                                
MR. BUNDY: Right.  The emails - typically the  way the Department                                                               
of Law has their emails set up -  is that they will get any email                                                               
that comes  into the inbox  and stays there  for 30 days.  At the                                                               
end  of 30  days,  it  is automatically  deleted  into the  trash                                                               
receptacle part where you can retrieve  it for seven days. At the                                                               
end of seven  days it's deleted completely from  the system. Once                                                               
a week  the systems are  all backed up  with -  at that time  - a                                                               
computer  tape. And  that is  recycled  every 30  days. In  other                                                               
words, you  have 67 days maximum  of an email in  the system, but                                                               
when Mr.  Renkes took office  and his  computer was being  set up                                                               
and the  technicians were up there  explaining to him how  it all                                                               
worked  and what  could  happen and  this and  that,  he said  he                                                               
didn't  want  the automatic  deletion  feature  in his  computer.                                                               
Since he  was the boss, despite  what everybody else had,  he got                                                               
to have the no deletion feature.                                                                                                
                                                                                                                                
Well, that  meant that all  the emails  that he had  been getting                                                               
over  the  years  were  either  in his  email  or  in  his  trash                                                               
receptacle,   because  they   otherwise   didn't  delete.   Also,                                                               
apparently, the Department  of Law and maybe all the  state has a                                                               
setup  where with  your government  computer you  can arrange  to                                                               
have  your   personal  email  downloaded  onto   your  government                                                               
computer and  he had  chosen to do  that. So, he  had all  of his                                                               
personal and his  government emails on his account.  That was all                                                               
deleted unbeknownst,  from what Mr.  McDougal told me,  to either                                                               
himself or  apparently Mr. Renkes.  The IT people  didn't realize                                                               
this - was  that the backup system that they  were in the process                                                               
of  changing  -  it's  a complicated  story  about  software  and                                                               
whatnot -  was not  working. So,  none of  Renkes stuff  had been                                                               
backed up,  which would  have been still  in existence  had there                                                               
been a backup and I would  have gotten it. But, instead it wasn't                                                               
backed up and it was gone.                                                                                                      
                                                                                                                                
CHAIR SEEKINS:  Did you ever review  a draft of your  report with                                                               
anyone in  the administration  prior to  the final  edition? Were                                                               
you ever pressured by anyone  in the administration to hurry your                                                               
report, to get it out now for any reason?                                                                                       
                                                                                                                                
MR. BUNDY: Well, I mean every once  in a while I got a request of                                                               
how's it coming,  but never we need it now,  because I said, well                                                               
look,  some of  the  things that  caused  problems were  people's                                                               
schedules. I  had a  specific plan  about how I  was going  to go                                                               
about talking to people and I  wanted to keep some people towards                                                               
the end. When  that happens, they were off here  or off there and                                                               
I had  other commitments, too.  So, that  took some time.  I made                                                               
that clear from the  beginning that I was going to  have to do it                                                               
the way I  thought was appropriate and that's the  way it was and                                                               
they recognized that. Nobody ever criticized me.                                                                                
                                                                                                                                
1:24:33 PM                                                                                                                    
                                                                                                                                
CHAIR  SEEKINS: Did  you ever  detect  any foot  dragging or  any                                                               
deliberate  delay in  hopes  that you  would  file an  incomplete                                                               
report?                                                                                                                         
                                                                                                                                
MR. BUNDY: No.                                                                                                                  
                                                                                                                                
CHAIR SEEKINS: Questions on this  particular aspect of what we've                                                               
talked about so far? Members? Senator French.                                                                                   
                                                                                                                                
1:25:58 PM                                                                                                                    
                                                                                                                                
SENATOR HOLLIS FRENCH: Mr. Bundy hi, how are you today?                                                                         
                                                                                                                                
MR. BUNDY: Good.                                                                                                                
                                                                                                                                
SENATOR  FRENCH: About  the  emails, about  the  deletion of  the                                                               
mails. This  happened on the  very same  day that the  Daily News                                                               
story broke. Did  you determine whether the  Attorney General had                                                               
read that story before he ordered the deletion of the emails?                                                                   
                                                                                                                                
MR. BUNDY: I asked  him about that and he said that  he had not -                                                               
that  it happened  in the  morning and  he didn't  see the...but,                                                               
that's what he said.                                                                                                            
                                                                                                                                
SENATOR FRENCH: Did  that jibe with what  the computer technician                                                               
told you?                                                                                                                       
                                                                                                                                
MR. BUNDY: The computer technician  didn't tell me anything about                                                               
that. As I recall,  he said he went up there  in the morning, did                                                               
the thing, I mean  he didn't talk to him about  any of the issues                                                               
or anything. He just did the computer technician stuff.                                                                         
                                                                                                                                
1:26:41 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH: Do you know exactly  what time it was you went up                                                               
there?                                                                                                                          
                                                                                                                                
MR.  BUNDY: No,  it's  on a  document, I  think,  I can't  recall                                                               
exactly.                                                                                                                        
                                                                                                                                
SENATOR FRENCH:  And you  said it was  a significant  number that                                                               
were deleted? Any idea how many there were?                                                                                     
                                                                                                                                
MR. BUNDY: I have no idea, but there must have been thousands.                                                                  
                                                                                                                                
1:27:02 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH:  Had Mr.  Renkes ever  asked for  that particular                                                               
service before that day?                                                                                                        
                                                                                                                                
MR. BUNDY: Not that I was ever able to determine.                                                                               
                                                                                                                                
SENATOR  FRENCH:  Did you  think  the  deletion of  those  emails                                                               
impeded your investigation in any way.                                                                                          
                                                                                                                                
MR. BUNDY:   Yes, I would have  liked to have had  them. We could                                                               
have seen what they all said.                                                                                                   
                                                                                                                                
1:27:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LESIL  MCGUIRE:  Were  you able,  Mr.  Bundy,  my                                                               
understanding was that you were able to replicate some of them?                                                                 
                                                                                                                                
MR. BUNDY:  Well, most  of the  emails that  I saw  were multiple                                                               
copies. These  emails were copied to  many people and so  most of                                                               
them  went   to  Ida  Yao,  Margie   Johnson,  Patricia  Eckhart,                                                               
sometimes John Venners, sometimes a  number of people. So, when I                                                               
got the documents  from the state, there were  thousands of these                                                               
emails and  most of them  were multiple  copies of the  same time                                                               
emails,  sometimes in  long strings  of emails  with replies  and                                                               
forwards and this stuff where an  email will print out as five or                                                               
six pages of 15  emails through it all. So, most  of the stuff of                                                               
the  communications that  I saw  were multiple  parties involved.                                                               
So, I imagined  that everyone that was copied to  him, as well as                                                               
both the  sender or the  recipient, I had  access to them.  I got                                                               
them  from the  other side.  I did  find, as  I recall,  I didn't                                                               
really  count them,  but I  did  find a  number that  I got  from                                                               
various  people to  him that  I did  not get  from him  obviously                                                               
because it had been deleted.                                                                                                    
                                                                                                                                
REPRESENTATIVE MCGUIRE:  Just back  to the  types of  emails that                                                               
you would  be looking  for - there's  the category  you describe,                                                               
which  would  be  contact  with   those  folks  that  might  have                                                               
knowledge  of the  KFX  Taiwan  contacts and  maybe  it would  be                                                               
emails  between  Mr. Renkes  and  his  broker  - these  types  of                                                               
things. I'd  like to hear any  answer about what types  of emails                                                               
you  were looking  for.  And secondly,  when  you conducted  your                                                               
interviews with these individuals, did they take an oath?                                                                       
                                                                                                                                
MR. BUNDY: Yes                                                                                                                  
                                                                                                                                
REPRESENTATIVE MCGUIRE: And  so, did you have  the opportunity to                                                               
walk through  questions about the  types of email  exchanges they                                                               
had had with Mr. Renkes?                                                                                                        
                                                                                                                                
MR. BUNDY: Well, yeah, I talked about  - you know - what I saw in                                                               
the things they provided me.                                                                                                    
                                                                                                                                
1:29:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MCGUIRE: And so, on  the question of what types of                                                               
emails, is  it largely  what I've described  or were  there other                                                               
categories?                                                                                                                     
                                                                                                                                
MR. BUNDY:  Well, I  mean, I  was looking  for anything  that had                                                               
anything to do  with either the Republic of  China discussions or                                                               
KFX, Kanturk-type things. That's what  I asked for from people. I                                                               
didn't  ask  for  every  email  they ever  sent  to  anybody  for                                                               
anything.  It all  had to  do with  these topics.  That's what  I                                                               
thought I  got. I've  got to  be clear about  this. There  was no                                                               
subpoena. I didn't  have subpoena power where  if somebody didn't                                                               
give me what I asked, where  they would somehow be in contempt of                                                               
a court or  a regulatory body. But, I felt  that people seemed to                                                               
cooperate. Certainly, the  state agencies lowered the  boom on me                                                               
in terms of volume of paper.                                                                                                    
                                                                                                                                
REPRESENTATIVE MCGUIRE: So, you were able to reconstruct?                                                                       
                                                                                                                                
MR.  BUNDY: Yeah,  the events  I thought  I was  able to  do that                                                               
fairly well.                                                                                                                    
                                                                                                                                
1:31:01 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  Did you feel  that you as completely  as possible                                                               
and substantively got all the  documents that you needed in order                                                               
to make your decision?                                                                                                          
                                                                                                                                
MR. BUNDY: Well, I thought so.  Yes, that's the conclusion I came                                                               
to  after thinking  about it  for quite  a while  and looking  at                                                               
these things.                                                                                                                   
                                                                                                                                
CHAIR SEEKINS: I heard this  morning that you reviewed some 6,000                                                               
documents?                                                                                                                      
                                                                                                                                
MR. BUNDY:  Well, I  think that's  what the  count was.  We date-                                                               
stamped everything  that we got, of  course. I think it  was over                                                               
6,000 or more documents that came in.                                                                                           
                                                                                                                                
CHAIR SEEKINS:  Those documents, now,  will they be  forwarded to                                                               
the personnel division?                                                                                                         
                                                                                                                                
MR. BUNDY: Only if they want them.                                                                                              
                                                                                                                                
1:31:38 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: Let the record  show that Representative Gruenberg                                                               
has joined us, also a member of the House Judiciary Committee.                                                                  
                                                                                                                                
SENATOR  CHARLIE HUGGINS:  Mr. Bundy,  it appears  we got  off on                                                               
talking  about emails.  When you  look  at the  totality of  your                                                               
report  and your  findings and  recommendations, but  essentially                                                               
the body  and what  it represents,  did you  see any  emails that                                                               
threw  up the  red flag  that  were generating  some interest  or                                                               
inconsistency when you look at what you look at overall?                                                                        
                                                                                                                                
MR. BUNDY: I don't know quite what  you mean. I tried to take all                                                               
of the information that I had and  put it into the context that I                                                               
had and  put it into  a context that  I thought gave  a realistic                                                               
explanation of  events. The relationship  of the  various parties                                                               
to  what was  going  on when  I  had an  email  that raised  some                                                               
questions  in mind  and I  had the  opportunity to  interview the                                                               
person, I'd ask them about it.                                                                                                  
                                                                                                                                
SENATOR  HUGGINS: So,  said another  way, is  it accurate  to say                                                               
that when  you looked at  emails and  all the other  evidence and                                                               
you questioned  your people that in  the totality of that  - that                                                               
your comfort  level that what is  here today that we  see in this                                                               
report, is accurate and stands on its own merit?                                                                                
                                                                                                                                
MR.  BUNDY: Well,  yeah,  with  the caveat  that  there are  some                                                               
things  I  don't have,  but  I  believed  that I  understood  the                                                               
relationships of the  parties and the course of  events that gave                                                               
rise to the Taiwan Alaska  Trade Agreement and the involvement of                                                               
Kanturk, KFX, and the Attorney  General with the documents I had.                                                               
I  would have  thought  it anomalous  - I  would  have been  very                                                               
surprised to have  - given everything else I knew  - that there's                                                               
an email  that said something different  from what I have  put in                                                               
this report.                                                                                                                    
                                                                                                                                
1:33:48 PM                                                                                                                    
                                                                                                                                
SENATOR HUGGINS: Did  you see any evidence of all  the things you                                                               
looked at in totality that Mr.  Renkes did anything that would be                                                               
inconsistent with  the normal  duties he  was assigned  with this                                                               
task?                                                                                                                           
                                                                                                                                
MR. BUNDY:  Well, in this  task, no  - this task  being something                                                               
that the attorney general typically  doesn't do - this task being                                                               
to act as a facilitator of this International Trade Agreement.                                                                  
                                                                                                                                
SENATOR HUGGINS: But,  in that respect, he was  assigned the task                                                               
by the Governor - is that correct?                                                                                              
                                                                                                                                
MR. BUNDY: Yes, that's what Margie Johnson says.                                                                                
                                                                                                                                
SENATOR HUGGINS:  And when  they ask if  the Governor  would have                                                               
changed that,  the Governor said  he would have done  roughly the                                                               
same thing again. Is that roughly accurate?                                                                                     
                                                                                                                                
MR. BUNDY: Yes.                                                                                                                 
                                                                                                                                
1:34:55 PM                                                                                                                    
                                                                                                                                
SENATOR HUGGINS:  So, he was  assigned the task and  he performed                                                               
the task  in your  estimation consistent  with anyone  that would                                                               
have had the task?                                                                                                              
                                                                                                                                
MR. BUNDY:  Well, perhaps,  I mean the  reason that  the Governor                                                               
chose him, it's my understanding,  is he had special expertise in                                                               
this  area  from  the  Senate Energy  Committee.  So,  I  suppose                                                               
anybody  with  his  background, I  presume,  would  have  behaved                                                               
pretty much the same.                                                                                                           
                                                                                                                                
REPRESENTATIVE LES  GARA: Thanks  Mr. Bundy.  I've also  got some                                                               
questions  about the  emails.  Just as  a  professional matter  I                                                               
understand the deletion  system over at the  Attorney General's -                                                               
the way  I understand  these deletion systems  is you  can delete                                                               
everything out  of your computer  every so often, maybe  every 30                                                               
days, the  mainframe then backs up  everything it can catch  - so                                                               
that  if I  get an  email yesterday,  I delete  it today,  if the                                                               
backup doesn't  happen for a  certain number of days,  it doesn't                                                               
end up on the backup tape. Is that how...?                                                                                      
                                                                                                                                
MR. BUNDY: The  way this worked - my understanding  - is that one                                                               
day in every  seven days the computer would back  up - the backup                                                               
system would back  up whatever was on the server  portion of your                                                               
computer. Then  that tape was kept  until it was recycled  for 30                                                               
days. So,  when you delete  something and  it goes to  your trash                                                               
and it stays  in trash for seven days, that  sometime during that                                                               
seven days  it will be backed  up to the backup  system, which at                                                               
that time was a tape system. Then  they only had so many of these                                                               
tapes. So  they would recycle them  every 30 days and  write over                                                               
them with new backup.                                                                                                           
                                                                                                                                
The reason that they did it  was so that if your computer crashed                                                               
some time during  that 30 days, you  could reconstruct everything                                                               
that was on your computer and you wouldn't lose your work.                                                                      
                                                                                                                                
1:36:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA:  So, let's  say if you  wanted to  delete an                                                               
email that you  didn't want somebody else to see,  if you deleted                                                               
it and there was no backup, let's  say it was one or two or three                                                               
days old and it  happened to be not one of  those every seven day                                                               
periods where  the backup  occurred, you could  delete it  out of                                                               
your email system  and out of your trash system.  It may not have                                                               
been picked up  by the backup tape  and then if it  was picked up                                                               
by the back up tape, you still  had the hope that within the next                                                               
30 days even the backup tape wouldn't be there. Is that...?                                                                     
                                                                                                                                
MR. BUNDY:  Well, as I  understand it  from McDougal that  one of                                                               
the problems  Renkes was having is  the computers were set  up so                                                               
that you  could not  manually empty your  trash basket.  It would                                                               
just automatically  empty every  seven days, typically.  So, they                                                               
disabled the  automatic emptying  every seven  days, but  did not                                                               
disable  the thing  that  didn't allow  the  setting that  didn't                                                               
allow you to delete from the trash basket manually.                                                                             
                                                                                                                                
REPRESENTATIVE GARA: Isn't that what  he called the computer tech                                                               
person in for  since he couldn't delete his emails?  So, with the                                                               
aid of  the computer technician,  he deletes all the  emails that                                                               
may have not been picked up by  a backup tape over the last seven                                                               
days.                                                                                                                           
                                                                                                                                
1:38:07 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  But he  didn't know  when it would  be backed  up. It                                                               
would have  been backed up.  Everything that was on  there either                                                               
would have been  backed up in the  inbox or in the  trash at some                                                               
time, if it had seven days. If  it had been there less than seven                                                               
days, then maybe you're right.                                                                                                  
                                                                                                                                
CHAIR SEEKINS: Let me focus that if  I can. I'm not asking you to                                                               
be an  expert. I  think I see  where this is  going, but  I'm not                                                               
positive.  In my  dealership, I  can  delete my  emails, but  the                                                               
server also keeps  a record of my emails for  a certain period of                                                               
time. Is that  what happens here - the central  server is keeping                                                               
a copy of these or is it coming off of the individual...?                                                                       
                                                                                                                                
1:38:50 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  What it  is is that,  as I understand  it, this  is a                                                               
network  system  - meaning  that  your  stuff is  generally  kept                                                               
except when  you specifically put it  on your own drive  - it can                                                               
be a C drive or whatever in your  computer. If you put it on your                                                               
network system, the server holds all  your emails - are held in a                                                               
centralized server,  every seven days,  whether that email  is in                                                               
your  inbox or  in the  trash receptacle,  every seven  days that                                                               
server for everybody is backed up on the same day.                                                                              
                                                                                                                                
CHAIR SEEKINS: And  there wasn't any way that  you could manually                                                               
dump the trash on your account out of the server?                                                                               
                                                                                                                                
MR. BUNDY: Right. That's the way they have it set up.                                                                           
                                                                                                                                
CHAIR SEEKINS: Thank you.                                                                                                       
                                                                                                                                
MR. BUNDY: My understanding.                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA:  But that's  what he  had the  technician do                                                               
for him, though,  right? It was dump the things  that were on the                                                               
server?                                                                                                                         
                                                                                                                                
1:39:45 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  Right. Because  he said look  at - why  is it  that I                                                               
thought I wasn't on the routine  with everybody else. Why can't I                                                               
dump my trash? The technician looked  at it and first he couldn't                                                               
figure it  out and then  he realized  that the settings  had been                                                               
set so that he couldn't do it.                                                                                                  
                                                                                                                                
CHAIR SEEKINS: You said there  was a document that requested this                                                               
visit from  the IT  guy. Was that  document to  your recollection                                                               
generated on October 1 or whatever that date was?                                                                               
                                                                                                                                
MR. BUNDY: I think that's right.  The guy goes back when they try                                                               
and keep track of  what they do every day. So,  he comes back and                                                               
says this was my request; this is  what I did and I don't know if                                                               
he generated it  immediately on coming back or later  in the day.                                                               
I have no idea.                                                                                                                 
                                                                                                                                
1:40:27 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  But if I'm going  over it - you  did say, though,                                                               
that Attorney General  Renkes said that request was  put in prior                                                               
to any knowledge of the Daily News report?                                                                                      
                                                                                                                                
MR. BUNDY: That's what he told me.                                                                                              
                                                                                                                                
REPRESENTATIVE GRUENBERG:  Thank you, Mr. Chair,  I apologize for                                                               
being a few  minutes late and then you may  have already answered                                                               
these questions.  Did you  look at any  other computers  that Mr.                                                               
Renkes may have had to see if there were any other emails?                                                                      
                                                                                                                                
MR. BUNDY:  I asked his counsel  to provide me with  printouts of                                                               
his  personal email  and  he  did. Obviously  I  didn't have  the                                                               
authority  to take  custody  of his  computer and  send  it to  a                                                               
forensic  computer person,  but  they said  that  these were  the                                                               
emails  that were  on his  personal computer,  and that's  what I                                                               
got.                                                                                                                            
                                                                                                                                
1:41:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG:  Did he  have correspondence  with Dale                                                               
Anderson  both  at his  personal  computer  and at  his  official                                                               
computer?                                                                                                                       
                                                                                                                                
MR.  BUNDY: I  just don't  remember what  particularly he  had in                                                               
terms of  Dale Anderson. He  didn't have much with  Dale Anderson                                                               
at all in terms of email.                                                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG: Oh, he didn't?                                                                                        
                                                                                                                                
MR. BUNDY: No.                                                                                                                  
                                                                                                                                
REPRESENTATIVE  GRUENBERG:  Did Mr.  Anderson  have  much on  his                                                               
computers?                                                                                                                      
                                                                                                                                
MR. BUNDY: Mr.  Anderson had virtually nothing - he  said that he                                                               
did not talk to Mr. Renkes very  much. Mr. Renkes was hard to get                                                               
hold of, didn't communicate with him much at all about...                                                                       
                                                                                                                                
1:42:0 PM                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG: You  said  this morning  in the  press                                                               
conference that he had told the Governor about his holdings.                                                                    
                                                                                                                                
CHAIR  SEEKINS: But,  we're  talking  particularly about  missing                                                               
emails at  the moment.  That's the  topic. We  don't want  to get                                                               
into the rest of it at this point. We're going to get to that.                                                                  
                                                                                                                                
REPRESENTATIVE  GRUENBERG: Mr.  Chairman, I'm  sorry. On  the day                                                               
that the  Daily News article  came out,  did he read  the article                                                               
and then order that the e-mails be deleted?                                                                                     
                                                                                                                                
MR. BUNDY:  He told me  that he had not  seen the article  at the                                                               
time the emails were deleted.                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG:  Was he  aware of  the article  when he                                                               
made that order?                                                                                                                
                                                                                                                                
MR. BUNDY: As I recall, he was not. I don't know.                                                                               
                                                                                                                                
REPRESENTATIVE GRUENBERG: Did you ask that?                                                                                     
                                                                                                                                
MR. BUNDY: I don't know.                                                                                                        
                                                                                                                                
REPRESENTATIVE GRUENBERG: Do you  remember whether you asked that                                                               
question?                                                                                                                       
                                                                                                                                
MR.  BUNDY:  I  couldn't  tell  you; I'd  have  to  look  at  the                                                               
transcript.                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG: Okay, you  did have transcripts made of                                                               
the depos[ition]?                                                                                                               
                                                                                                                                
MR. BUNDY: Yes sir.                                                                                                             
                                                                                                                                
REPRESENTATIVE GRUENBERG: Thank you.                                                                                            
                                                                                                                                
CHAIR SEEKINS: Thank you. Any other questions on this topic?                                                                    
                                                                                                                                
1:43:07 PM                                                                                                                    
                                                                                                                                
SENATOR  FRENCH:   Just  in  general,   Mr.  Chairman,   are  the                                                               
depositions going to be available for our inspection?                                                                           
                                                                                                                                
MR. BUNDY:  I've got  'em in  my office.  I got  a letter  from a                                                               
lawyer representing  the Personnel  Board who  asked that.  So, I                                                               
directed my  staff to send it  to him. So,  as far as I  know, he                                                               
has them now.                                                                                                                   
                                                                                                                                
1:43:30 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  Thank you. Let's go  on. I know at  least at this                                                               
point, I'm satisfied  that you were not retained  by the Governor                                                               
to whitewash anything - that your  bona fides, I would say, would                                                               
indicate to  me that you would  provide - in fact  it would scare                                                               
me  a little  bit to  have  someone with  your affiliation  doing                                                               
that, because there  could be a possibility - but  I'm not afraid                                                               
of that. Let me put it that  way.  Because you could probably get                                                               
greater notoriety among  those who you associate  with by finding                                                               
that the Attorney General has  really done something heinous than                                                               
to find that he didn't. So,  it satisfies me that there have been                                                               
questions that I  have been asked since this began  as to who you                                                               
are and  whether there would be  a slant or bias  to your report.                                                               
I'm satisfied with that. Are there  any other questions on that -                                                               
on the qualifications  of Mr. Bundy to serve in  this position in                                                               
an independent manner?                                                                                                          
                                                                                                                                
1:44:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG:  Thank you, Mr. Chair.  Within the last                                                               
few days, in  the press, Mr. Bundy, you referred  to the Governor                                                               
as your client.                                                                                                                 
                                                                                                                                
MR. BUNDY: That was probably just sloppy speaking.                                                                              
                                                                                                                                
CHAIR  SEEKINS:  You  made  that  clear  earlier  that  you  were                                                               
retained by the Office of the Governor.                                                                                         
                                                                                                                                
MR. BUNDY: My contract is with the Office of the Governor.                                                                      
                                                                                                                                
1:45:08 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: And for the  record, we have Senator Gary Stevens,                                                               
majority leader  of the  Senate with  us, as  well. Let's  go on.                                                               
This is  a weighty report,  and I  listened to your  very careful                                                               
analysis  in your  press conference  today and  it certainly  was                                                               
detailed, and I don't want to  get into all of those details, but                                                               
in a  nutshell, could  you tell  us what  the conclusion  of your                                                               
report was?                                                                                                                     
                                                                                                                                
1:45:39 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: I  know you can read for yourself  the summary. When I                                                               
came into  the matter,  because of  a number  of things  that had                                                               
been published  in various areas,  not only in the  Alaska press,                                                               
but  in the  Wall  Street  Journal and  in  various websites  and                                                               
whatnot. I  thought that  there might  be some  significant issue                                                               
about whether  Mr. Renkes had used  his position in the  state to                                                               
manipulate things to his own  financial advantage or had used the                                                               
information that he had to  manipulate his own stock trading. And                                                               
so  that was,  of course,  one of  those things  that I  was very                                                               
concerned about  at the beginning.  After having  interviewed the                                                               
people involved in this process,  I became satisfied that I don't                                                               
believe that what he did in  this case was motivated by an intent                                                               
to enrich himself  personally. I believe that  he knew, obviously                                                               
he  had the  KFx stock,  and that  KFx company  might potentially                                                               
benefit  from this  Republic of  China/Alaska trade  agreement. I                                                               
also became satisfied,  of course, that he  used state facilities                                                               
and time,  and took  official action  that was  in the  matter in                                                               
which KFx  might have  some potential benefit,  all of  which are                                                               
things that are forbidden by the Code of Ethics.                                                                                
                                                                                                                                
The Code  of Ethics has  a sort of  a 'safe harbor'  provision to                                                               
account for the difficulty in  balancing a person's public duties                                                               
with their  personal life that  recognized in the Code  of Ethics                                                               
and that says that it's not  a violation if the person's interest                                                               
if the matter  is insignificant, or is one held  by a large class                                                               
of people.  Now, that caused  me to look  at, 'well what  was his                                                               
interest  in the  matter.' And  what was  the matter.  The matter                                                               
was,   he   was   directed   and    did   participate   in   this                                                               
Alaska/Taiwanese  exchange, that  they were  trying  to get  some                                                               
kind of a trade agreement.                                                                                                      
                                                                                                                                
1:48:43 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: That  trade agreement, the idea for  that whole thing,                                                               
was  not  his. It  originated  with  Governor Murkowski  and  the                                                               
President of the  Republic of China with  whom Governor Murkowski                                                               
had  a  long-standing  relationship.  The idea  was  to  try  and                                                               
develop Alaska  resources in  this way  and this  was one  of the                                                               
ways that he  was going to do  it. So his interest  in the matter                                                               
was that  the State  of Alaska would  conclude an  agreement with                                                               
the  Republic of  China that  would allow  then a  company called                                                               
Kanturk Partners  to invest money in  developing and establishing                                                               
a  coal  mine and  associated  facilities  that they  would  then                                                               
license  this  KFx  K-fuels  process   to  process  the  coal  to                                                               
specifications that  would meet the requirements  of the Republic                                                               
of China customers.  This was a chain of events.                                                                                
                                                                                                                                
Unlike many ethics issues that you  see in these kinds of things,                                                               
you don't - it's usually, 'Is  the state going to have a contract                                                               
with  this company,  is the  state  going to  grant this  company                                                               
money, is  the state going to  take some action that  is going to                                                               
have a  direct benefit with the  company?' Most of the  time when                                                               
you're looking  at the ethics  opinions of this state  or others,                                                               
that's what  you see. This  was a  little more removed  from that                                                               
when I  began to  look carefully  at the  Ethics Act  and decided                                                               
what it  is the Ethics Act  said. And so when  I identified, well                                                               
the  matter  was  a  Republic  of  China's,  and  this  is  after                                                               
virtually all of  the factual investigation had been  done, I sat                                                               
down and said, 'All right, so what's what here?'                                                                                
                                                                                                                                
I  began  to   look  at  that  carefully  and   said,  'Well  how                                                               
significant  within  the  meaning  of this  Ethics  Act  was  his                                                               
financial interest  in the matter  of the deal between  the State                                                               
of Alaska  and the  Republic of  China?' I  came to  a conclusion                                                               
that  it  wasn't   very  significant  at  all,   because  it  was                                                               
speculative, long range,  and extremely indirect.   And I thought                                                               
from my own time, when I was  a public officer, I had a portfolio                                                               
of  things managed  by a  financial manager,  and I  had to  do a                                                               
disclosure when they set all this  stuff out and I made decisions                                                               
about some fairly large companies,  and I don't know, frankly, if                                                               
maybe some  of those companies,  if I  didn't have some  stock in                                                               
some of those companies. And  I thought, 'That's why there's this                                                               
insignificance.'                                                                                                                
                                                                                                                                
1:51:23 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: Now,  where does this fall, where does  Renkes fall on                                                               
the continuum  with KFx to somebody  else that might just  have a                                                               
few shares of  stock in something among  their various retirement                                                               
holdings? And  I began  to look  at that, and  I looked  at other                                                               
states, how  do other states look  at this? Some say  if you hold                                                               
more  than a  specific dollar  amount in  any company,  you can't                                                               
participate  in  a state  decision  involving  that company.  And                                                               
those amounts  range from $5,000  to $100,000 dollars  from state                                                               
to state.  Now, our Ethics  Act doesn't say anything  about that.                                                               
Other states  look at it  as a  percentage of ownership.  You can                                                               
not participate  as a, it's  a conflict  of interest for  a state                                                               
official, to participate in the  state business with a company in                                                               
which you own more than a  percentage of a stock, and those range                                                               
from 1  percent to 5 percent.  Now Renkes owned .02  of 1 percent                                                               
of  KFx. So  he  was  far below  where  other  states could  have                                                               
allowed him to  take action. The value of his  stock changed over                                                               
the  course of  the  time from,  I  don't know,  the  low in  the                                                               
$70,000s  and  the high  in  the  $120,000s  dollars. So  he  was                                                               
clearly significant under the states  that have quantities except                                                               
for a few times for a few  states. I think Oregon is $100,000. So                                                               
there you  are but there's nothing  in the Ethics Act  that said,                                                               
'What are you supposed to look  at to decide, what is significant                                                               
and insignificant?'                                                                                                             
                                                                                                                                
1:53:15 PM                                                                                                                    
                                                                                                                                
MR.  BUNDY:  So  there  [were]   no  regulations  passed  by  the                                                               
Department  Of  Law to  tell  us  what's significant  and  what's                                                               
insignificant. And the only other  source was the Alaska Attorney                                                               
General  ethics opinions,  which, and  we'll get  to that  later,                                                               
when you're  confronted with an  ethics dilemma,  you're supposed                                                               
to get an  ethics opinion to decide whether  it's appropriate for                                                               
you  to  act or  not.  The  ethics  opinions  and the  issues  of                                                               
ownership of  quantums of stock -  and there was only  one that I                                                               
found  that  talked about  quantums  -  and  that was  an  ethics                                                               
opinion  involving a  Permanent  Fund trustee.  A Permanent  Fund                                                               
trustee's  children owned  shares  in a  Native Corporation.  The                                                               
Permanent  Fund was  going  to  buy a  building  that the  Native                                                               
Corporation  was  a  general  managing   partner  of  the  owner,                                                               
although had  a small interest, but  had an $8.1 million  deed of                                                               
trust  that  was going  to  be  paid  off  if the  (indisc)  went                                                               
through.  The  ethics  opinion  didn't  say  anything  about  how                                                               
significant  that  was  to the  Native  Corporation's  assets  or                                                               
bottom  line or  prospects for  dividends, or  anything else.  It                                                               
simply said that since the children  owned less than 1 percent of                                                               
the  shares  of the  Native  Corporation  that the  interest  was                                                               
diminimus and  the trustee could  participate in the  decision to                                                               
purchase the building.                                                                                                          
                                                                                                                                
1:54:49 PM                                                                                                                    
                                                                                                                                
MR.  BUNDY: And  that  opinion,  in my  view,  could  be read  to                                                               
establish  a  bright line,  if  somebody  were an  Alaska  public                                                               
official and  looking for  guidance, that  the guidance  would be                                                               
that  if  you  owned  less  than 1  percent,  regardless  of  how                                                               
important the transaction was to  your company, regardless of how                                                               
important it  was to your  own personal portfolio, 1  percent was                                                               
the line  that they  decided to  draw and that  was it.  I didn't                                                               
read it quite that  much of a bright line, I read  it to say that                                                               
the opinion  simply didn't  tell us  about that,  but it  did say                                                               
that  they  had  considered  the   facts  and  decided  that  the                                                               
transaction was of diminimus value.                                                                                             
                                                                                                                                
So I thought,  well okay, so how  do we figure that  out? I began                                                               
to look at,  well alright, so what is the  value of this Republic                                                               
of China transaction to the value  of Renkes stock, both in terms                                                               
of  how  much stock  did  he  have  in  the company,  what's  the                                                               
likelihood that there's going to be  a big change in the value of                                                               
the stock,  of his interest  in the stock,  as a result  of this?                                                               
And  what's the  value to  the company,  which would  result from                                                               
this?                                                                                                                           
                                                                                                                                
1:56:08 PM                                                                                                                    
                                                                                                                                
MR.  BUNDY: When  I looked  at KFx,  I determined  that KFx,  the                                                               
Alaska play for KFx, was like  an afterthought. That KFx now, not                                                               
Kanturk, but  KFx was  principally interested  in trying  to sell                                                               
Powder River Basin coal in Wyoming  and process it and sell it to                                                               
power companies on  the East Coast. And that was  where they were                                                               
putting their  money and that's  what they were doing.  That they                                                               
did not  put any of  their own money  into anything having  to do                                                               
with  this Alaska  play, other  than to  send a  couple of  their                                                               
technicians  up to  talk to  the Taiwanese  about how  this would                                                               
work.  And  they did,  they  actually  didn't host,  because  the                                                               
Taiwanese insisted on paying their  own way, but they facilitated                                                               
the Taiwanese  to visit their  plant in  Wyoming to look  and see                                                               
how this stuff was going.                                                                                                       
                                                                                                                                
Other than  that, KFx didn't  really put any resources  into this                                                               
thing.  Their resources  were concentrated  in Wyoming  trying to                                                               
get  that  coal  together.  Kanturk were  the  people  that  were                                                               
putting  resources into  it. Kanturk  is this  investment-banking                                                               
group.  I  think investment  bank  implies  a large  building  or                                                               
something. This  isn't that. It's  some very  wealthy individuals                                                               
that  have an  idea that  they're going  to pool  their money  to                                                               
invest in Asia/America  business projects and it  so happens that                                                               
they had just  included John Venners, who is one  of the founders                                                               
of KFx  but who retained  little interest in  KFx, to be  a small                                                               
partner of  Kanturk's because  he had  experience in  this energy                                                               
business.                                                                                                                       
                                                                                                                                
1:58:06 PM                                                                                                                    
                                                                                                                                
MR.  BUNDY: They  decided they  were going  to look  to China  to                                                               
develop some business and they  were starting a prospect of using                                                               
this KFx.  Kanturk was  going to  start something  using licensed                                                               
KFx  technology to  develop  mainland  China sub-bituminous  coal                                                               
into  useable coal.  Then  Renkes called  them  and said,  'We're                                                               
trying to  set something up.  Would you be interested  in talking                                                               
to the  Chinese about this?'  Governor Murkowski  invited Venners                                                               
to meet  him down in  Florida at  a Governors convention  of some                                                               
kind and Venners  allowed as how that Kanturk  was interested and                                                               
he  would  try  and  talk  to his  partners  about  whether  they                                                               
couldn't  put something  together.  And  that's my  understanding                                                               
about how this thing came about.                                                                                                
                                                                                                                                
1:58:48 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: And so, at  this point, in your conclusion, saying                                                               
that Kanturk was the major player,  KFx, if I understood you this                                                               
morning correctly, that their interest  was in buying a licensing                                                               
agreement with  KFx to be able  to process the water  out of this                                                               
coal prior to being shipped to the Republic of China.                                                                           
                                                                                                                                
1:59:11 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: KFx's  interest was going to be  a licensing agreement                                                               
where they  would license the technology  to Kanturk to use  in a                                                               
processing plant that Kanturk was going to build.                                                                               
                                                                                                                                
CHAIR SEEKINS: Kanturk would operate that plant?                                                                                
                                                                                                                                
MR. BUNDY:  Right. Part of  the licensing agreement was  that KFx                                                               
had to provide  them with technical assistance in  doing that, in                                                               
using the technology.                                                                                                           
                                                                                                                                
CHAIR  SEEKINS: Right.  And their  ongoing reward  for KFx  would                                                               
have been  some kind of ongoing  payment based on the  use of the                                                               
technology?                                                                                                                     
                                                                                                                                
MR.  BUNDY:  Two things,  one  was  an  upfront agreement  for  a                                                               
payment  for the  licensing fee,  50 percent.  Fifty percent  was                                                               
going to be  paid when the processing plant went  online and then                                                               
there was  going to be a  5 percent, I believe,  carried interest                                                               
on the project afterwards.                                                                                                      
                                                                                                                                
1:59:57 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  The partners  in Kanturk, was  Mr. Renkes  ever a                                                               
partner?                                                                                                                        
                                                                                                                                
MR. BUNDY: No.                                                                                                                  
                                                                                                                                
CHAIR SEEKINS: Was he ever an employee?                                                                                         
                                                                                                                                
MR. BUNDY: No.                                                                                                                  
                                                                                                                                
CHAIR  SEEKINS:  Would  you characterize  these  people  as  wise                                                               
investors, experienced in  the area of investment  and perhaps in                                                               
speculation of....                                                                                                              
                                                                                                                                
MR. BUNDY: That  I can't tell you.   All I know is  that they are                                                               
extremely wealthy individuals  who are involved in  both Asia and                                                               
in the United States.                                                                                                           
                                                                                                                                
CHAIR SEEKINS: And  once again, can you recall who  some of those                                                               
people were, for us?                                                                                                            
                                                                                                                                
2:00:38 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  Mr. Chang - whose  first name I can't  remember - who                                                               
is a  chairman of  the Taiwan  Chamber of Commerce  - had  been a                                                               
senator   in  the   Taiwanese   Legislature   and  had   personal                                                               
connections  with  President  Chen  -  although  he  was  in  the                                                               
opposite party. There was a  guy named, I believe, Gerald Cassidy                                                               
who's a  principle in  Cassidy and Associates,  which is  a large                                                               
prominent  lobbying organization  in  Washington  D.C. There's  a                                                               
person named  Rocky Robinson who  owned, I don't know,  scores of                                                               
car dealerships in the East somewhere and others.                                                                               
                                                                                                                                
CHAIR  SEEKINS:  There's  been   some  allegation  that  the  Lt.                                                               
Governor was a business partner at KFx.                                                                                         
                                                                                                                                
MR. BUNDY: Lt. Governor?                                                                                                        
                                                                                                                                
CHAIR  SEEKINS:  I mean  the  Attorney  General, I'm  sorry.  The                                                               
Attorney General was a business partner at KFx.                                                                                 
                                                                                                                                
2:01:41 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: No.                                                                                                                  
                                                                                                                                
CHAIR SEEKINS: Did you ever find that?                                                                                          
                                                                                                                                
MR. BUNDY:  He had stock.  And he  was on the  technical advisory                                                               
board of KFx. Technical advisory  board is an uncompensated group                                                               
- and I've run into this  in other organizations - that generally                                                               
sort of start up companies will  put together people and ask them                                                               
to advise them about technical  matters with the idea that 'Maybe                                                               
we'll  get some  stock  in it  someday.'  The technical  advisory                                                               
committee  or  board  met  once   in  2000  or  there  about  and                                                               
apparently has never met again. That's what everybody tells me.                                                                 
                                                                                                                                
CHAIR SEEKINS:  So it  would not be  correct to  portray Attorney                                                               
General Renkes as a long-time business partner at KFx.                                                                          
                                                                                                                                
MR. BUNDY: No.                                                                                                                  
                                                                                                                                
2:02:47 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  Thank you.  So if  I get  you correctly,  the Lt.                                                               
Governor  -  these  people  at Kanturk  were  speculating  as  to                                                               
whether the technology  would be actually available  and work. Do                                                               
you know  whether there  was any communication  with them  or any                                                               
due diligence  with them  in conversations  between them  and the                                                               
people at KFx to see at what stage their technology is?                                                                         
                                                                                                                                
MR. BUNDY: Oh  yes, they obviously knew each other  quite well. I                                                               
mean John  Venners, who  is a small  interest holder  in Kanturk,                                                               
was one  of the founders of  KFx and had been.  And also, Venners                                                               
and Associates,  I think is the  name of his company  or his firm                                                               
in Washington  D.C., lobbies  on behalf  of KFx.  KFx has  a real                                                               
interest in  federal legislation because  in order to  make their                                                               
process economical,  it's very  helpful to  have tax  credits for                                                               
processed coal and there were  existing tax credits and there are                                                               
new tax  credits under the  euphemistically called  Jobs Creation                                                               
Act of 2004.                                                                                                                    
                                                                                                                                
2:04:07 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  As a stockholder  in KFx, when  approximately did                                                               
the Attorney General purchase his first shares in KFx?                                                                          
                                                                                                                                
MR. BUNDY: 2000.                                                                                                                
                                                                                                                                
CHAIR SEEKINS: And he divested them in...                                                                                       
                                                                                                                                
MR. BUNDY: October of 2004.                                                                                                     
                                                                                                                                
CHAIR  SEEKINS:  I  think  earlier   this  morning  you  said  he                                                               
purchased them for about $2 a  share. What did they sell for when                                                               
he divested himself of them?                                                                                                    
                                                                                                                                
MR. BUNDY: I think they sold for around $7.                                                                                     
                                                                                                                                
CHAIR SEEKINS: Over four years,  more than doubled in price. Yes,                                                               
tripled actually.                                                                                                               
                                                                                                                                
MR. BUNDY: Yes, more than tripled.                                                                                              
                                                                                                                                
CHAIR SEEKINS: Not a bad investment.                                                                                            
                                                                                                                                
MR. BUNDY: There's not?                                                                                                         
                                                                                                                                
CHAIR SEEKINS: I've not had many  stocks that tripled in price in                                                               
that timeframe  so a wise investor  would say, 'Hey, you  did a -                                                               
you hit a homerun on these.'                                                                                                    
                                                                                                                                
There have  been some allegations  as to the purchasing  of these                                                               
shares in the interim period of time.                                                                                           
                                                                                                                                
2:05:02 PM                                                                                                                    
                                                                                                                                
CHAIR  SEEKINS:  Allegations have  been  made  that the  attorney                                                               
general went on a buying spree,  so to speak, of KFx stock. Could                                                               
you comment on that from your investigation?                                                                                    
                                                                                                                                
MR.  BUNDY: Well,  first of  all the  shares that  were purchased                                                               
from - the 12,000 shares he  purchased in 2000, just stayed in an                                                               
account  - one  account -  his  retirement IRA  sub account.  The                                                               
other  shares were  purchased  by his  broker/financial/whatever-                                                               
you-deem-him,  Mr.  Anderson  in  the Solomon  Smith  Barney  GPM                                                               
account. Under the terms of the  GPM account, the client does not                                                               
decide  what  securities  will  be  purchased.  Only  the  broker                                                               
decides.  The client  can give  input  to say  there are  certain                                                               
kinds of things  I don't want because I find  them offensive - to                                                               
note, tobacco  for instance  something like that.  But as  to the                                                               
day-to-day decisions  about which securities to  purchase, that's                                                               
up to the broker and that's in the agreement.                                                                                   
                                                                                                                                
Mr. Anderson  says that he  never heard  of KFx until  Mr. Renkes                                                               
came to him in  late October to retain him - and  he was going to                                                               
take over the  IRA SEP account from the Washington  D.C. broker -                                                               
and saw that there was KFx  stock. Now Solomon Smith Barney won't                                                               
let you  hold securities in  your accounts with them  unless they                                                               
pass certain muster. And so some  of the stuff Renkes had did and                                                               
some of it  didn't. KFx passed muster  so he was able  to keep it                                                               
in the Solomon  Smith Barney account - the Asset  One Account for                                                               
his IRA account.  But, Anderson said that he had  to look at this                                                               
and  check it  out. And  he did  his own  independent research  -                                                               
which Solomon  Smith Barney has  facilities for them to  do that.                                                               
He decided  that it  was interesting; he  had a  good explanation                                                               
about why  it was  good in my  view. And there  was a  portion of                                                               
Renkes' portfolio that  was set aside by Anderson the  way he had                                                               
it set  up for things that  were both speculative and  the energy                                                               
field - either or I'm not sure exactly  how it was set up. And he                                                               
thought this  might be  a good  thing to  buy. So  he did  and he                                                               
purchased - I don't recall - 1,100 shares, something like that.                                                                 
                                                                                                                                
2:07:44 PM                                                                                                                    
                                                                                                                                
MR.  BUNDY: Over  a  space of  - he  was  purchasing up  equities                                                               
because he  had this big pile  of cash that Mr.  Renkes had given                                                               
him when he  sold his house in  Virginia. He sold -  it must have                                                               
been a  pretty nice house  - and  bought another house  in Juneau                                                               
and had $750,000 left over. So  that was what he went to Anderson                                                               
with. He  kept it  in the  bank for  about a  year and  didn't do                                                               
anything with it  at all. And then he went  to Anderson and said,                                                               
'Look, I  need to start  an investment program.' He  checked with                                                               
Anderson and  said, 'Okay, I'll take  the money that's in  my IRA                                                               
account now back  in.' - which he  put a bunch of  stuff from his                                                               
federal service in. If I'm going on too long, just tell me.                                                                     
                                                                                                                                
CHAIR SEEKINS: It's all right; go on.                                                                                           
                                                                                                                                
MR.  BUNDY: From  his federal  service  in -  the Thrift  Savings                                                               
Account as they  call it - and  rolled it over into  this IRA and                                                               
then, while  he was  in private  practice he  could invest  up to                                                               
$25,000 a  year in a tax  deferred IRA. One year,  the year 2000,                                                               
he took  his $25,000 that he  could have and he  bought KFx stock                                                               
with it and  it was held in  that brokerage account in  his IRA -                                                               
tax deferred.  Anyway, he moved  that to Solomon Smith  Barney in                                                               
Juneau, but he put  that in one account - an  Asset One Account -                                                               
that he could have control over and could trade.                                                                                
                                                                                                                                
He took  the balance,  which was  the proceeds  from his  house -                                                               
$750,000 - but  I think about $100,000 into a  special, what they                                                               
call, scholars  fund for  his kids' college.  Then took  the rest                                                               
and put it in this guided  management account. Renkes said he did                                                               
that because he didn't have the  background or ability or time to                                                               
devote to  paying attention  to making  investments in  the stock                                                               
market and he  felt like he was losing out  because his money was                                                               
sitting in  the bank account  and other people were  making money                                                               
in equities.                                                                                                                    
                                                                                                                                
2:09:58 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  So he gave  that to  Anderson to invest  and Anderson                                                               
had all  this cash  and was  buying up a  certain portion  of the                                                               
portfolio in  equities and he  had an  array of equities  that he                                                               
had  identified: Some  very  safe, but  with  slow growth,  small                                                               
returns;  some more  speculative with  the possibility  of faster                                                               
gains and  through looking at this  from the asset one  account -                                                               
KFx - he though that KFx  might fit into this other. Particularly                                                               
since  the  overall portfolio  price  of  the  stock was  so  low                                                               
because he'd  bought most of it  at $2 and  by then it was  up to                                                               
$7.50 almost  $8. So he thought,  well I could purchase  this now                                                               
and my research shows it on an  up trend. I can purchase this now                                                               
and it will average out at  a very good dollar investment for the                                                               
whole Renkes' portfolio and I'll look  like a hero if it goes up.                                                               
If goes down, then he still hasn't  lost much on the KFx. This is                                                               
how Anderson explained it to me.                                                                                                
                                                                                                                                
So he decided to buy in - buy  this stock and he bought it and he                                                               
held it. He bought  it at the time when KFx  or Kanturk had never                                                               
even  been mentioned  in any  discussions about  the Republic  of                                                               
China.                                                                                                                          
                                                                                                                                
The  only  thing that  had  happened  when  he bought  the  first                                                               
majority of this  stock was that the Governor had  gone to Taiwan                                                               
and talked to the President and  I don't even think the President                                                               
of  Taiwan  had  visited  Alaska  yet.  But  there  had  been  no                                                               
discussion at  all or anything having  to do with KFx  or Kanturk                                                               
or  anything  like that.  That's  when  Anderson bought  the  KFx                                                               
stock. Anderson then sold all 1,100  shares over a period of time                                                               
at a profit.  KFx was going up  during this period of  time. At a                                                               
time  when  KFx was  starting  to  be  mentioned when  the  March                                                               
delegation of Taiwanese  were coming - or had come.  He'd sold it                                                               
over a period  of time and there was actual  discussion of KFx or                                                               
Kanturk in some potential possible  development deal. So, he sold                                                               
it at  just the  time [that]  if you were  trying to  use insider                                                               
information you would have been buying.                                                                                         
                                                                                                                                
2:12:51 PM                                                                                                                    
                                                                                                                                
And then  when the  Taiwanese went back  - this is  how I  saw it                                                               
anyway -  when the Taiwanese went  back after March and  were not                                                               
very  enthusiastic about  Alaska  coal because  of the  technical                                                               
issues, the word  began to come back in that  regard. That's when                                                               
Mr. Anderson chose  to buy some more KFx stock.  And he bought, I                                                               
think, 500 more shares.                                                                                                         
                                                                                                                                
He bought 1,100,  sold all 1,100 then later bought  500 more, but                                                               
bought that  at a much  higher price. He'd  sold it -  1,100. KFx                                                               
went up,  he bought some  more and KFx went  down and so  when he                                                               
finally  sold it,  he'd lost  a couple  thousand dollars  on this                                                               
several hundred shares.                                                                                                         
                                                                                                                                
CHAIR SEEKINS:  If he was  getting inside information,  it wasn't                                                               
very good inside information.                                                                                                   
                                                                                                                                
MR. BUNDY:  It doesn't  make any  sense to me  that that  was the                                                               
result of inside information.                                                                                                   
                                                                                                                                
CHAIR SEEKINS:  Was there  any activity in  the IRA  account with                                                               
the KFx stock?                                                                                                                  
                                                                                                                                
MR. BUNDY: No.                                                                                                                  
                                                                                                                                
2:13:41 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  So the only  activity with  KFx stock was  in the                                                               
GPM account  and was  there any  indication of  instructions from                                                               
the Attorney General  when to buy or sell or  put any pressure on                                                               
Mr. Anderson?                                                                                                                   
                                                                                                                                
MR. BUNDY: Both of them said there  was none and I didn't see any                                                               
evidence of it.                                                                                                                 
                                                                                                                                
CHAIR SEEKINS: Any indication of  Anderson's knowledge of the KFx                                                               
involvement in the pending ROC (Republic of China) deal?                                                                        
                                                                                                                                
MR. BUNDY:  Anderson says  he didn't know  anything about  it and                                                               
from the timing of his purchases, I would have to credit him.                                                                   
                                                                                                                                
CHAIR  SEEKINS: Is  there any  indication  that Attorney  General                                                               
Renkes  was acting  as a  day trader  here in  KFx stock?  He was                                                               
buying 100  shares in  the morning,  watching it  that afternoon,                                                               
seeing if he  made a profit or not. Profit  taking - nothing like                                                               
that.                                                                                                                           
                                                                                                                                
2:14:31 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: No.                                                                                                                  
                                                                                                                                
CHAIR SEEKINS: Other questions on  these topics. Members? Senator                                                               
French.                                                                                                                         
                                                                                                                                
SENATOR FRENCH: On that topic.  Did you interview anybody besides                                                               
Mr. Anderson at Smith Barney?                                                                                                   
                                                                                                                                
MR. BUNDY: No, I didn't.                                                                                                        
                                                                                                                                
SENATOR FRENCH: Did you take a  look at the phone records between                                                               
the  Attorney General's  phone records  and Mr.  Anderson's phone                                                               
records?                                                                                                                        
                                                                                                                                
MR. BUNDY:  I saw  the Attorney  General's phone  records and   -                                                               
such as  they were, there  aren't any. I  mean there are  no long                                                               
distance calls, so there wouldn't be  any. But in terms of 'While                                                               
You Were Out' messages and -  I don't remember whether there were                                                               
any or  not, there  were a  few in there,  but Mr.  Anderson said                                                               
that he had  - he was supposed to do  quarterly reviews with each                                                               
one of his clients and he had trouble getting Renkes to respond.                                                                
                                                                                                                                
SENATOR FRENCH:  When I said phone  records I mean did  you go to                                                               
the phone company and try to subpoena the phone records?                                                                        
                                                                                                                                
MR. BUNDY: I don't have any subpoena power.                                                                                     
                                                                                                                                
SENATOR FRENCH: Did you ask them?                                                                                               
                                                                                                                                
MR. BUNDY: No, I didn't think there was any use in that.                                                                        
                                                                                                                                
SENATOR  FRENCH: Mr.  Renkes  could have  signed  a consent  that                                                               
would have  given you  his phone records  and Mr.  Anderson could                                                               
have signed a consent [form]. Did you ask for that?                                                                             
                                                                                                                                
MR. BUNDY: No, I didn't.                                                                                                        
                                                                                                                                
CHAIR SEEKINS: Other members? Representative Gara.                                                                              
                                                                                                                                
REPRESENTATIVE GARA: Certainly  your analysis of the  law and the                                                               
Ethics Act is  one plausible interpretation of  the act. Assuming                                                               
your interpretation  is correct, that  under the prong  that says                                                               
you had a  finding that Mr. Renkes used  state facilities knowing                                                               
that use  could benefit his  interests. So that's the  prong that                                                               
says  even if  regardless of  what your  intentions are,  if your                                                               
action  as a  state  employee  is such  that  you  know it  could                                                               
benefit your interests then the  question is, is it a significant                                                               
interest?                                                                                                                       
                                                                                                                                
And  your finding  was  since it  wasn't  a significant  interest                                                               
there was no violation of that prong.                                                                                           
                                                                                                                                
MR.  BUNDY: No,  no there's  a  slight -  this is  where it  gets                                                               
difficult because it's not if  your interest is significant; it's                                                               
if your financial interest in  the matter is significant. That is                                                               
if  what   happens  in   this  matter  could   give  you   a  not                                                               
insignificant  interest benefit  in a  not insignificant  manner,                                                               
your interest. So it's the  participation. It's the matter that's                                                               
the focus of the statute, not  how much interest you have in some                                                               
company.                                                                                                                        
                                                                                                                                
REPRESENTATIVE GARA: Thank  you for clarifying that.  What I want                                                               
to  try  and determine  is  whether  or  not  we should  all  get                                                               
together and consider amendments to the law.                                                                                    
                                                                                                                                
MR. BUNDY: Absolutely.                                                                                                          
                                                                                                                                
2:17:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA:   And  I'm thinking of  this as  an example.                                                               
You know in this case, Mr.  Renkes' ownership of KFx stock, while                                                               
$100,000 worth was  .02 percent of KFx's  total outstanding stock                                                               
and given  the conduct that you  found, you determined it  was an                                                               
insignificant interest  in the matter  that was involved  in this                                                               
activity. And what I'm thinking  of is then, under this analysis,                                                               
it would seem to me that  if somebody owned .02 percent of, let's                                                               
say, Conoco-Phillips stock, and I  did some calculations and it's                                                               
about $15 million - it seems  to me that this state, for example,                                                               
is negotiating between many potential  gas pipeline builders. One                                                               
of them is  Conoco. There are others.  It seems to me  we run the                                                               
risk  of saying  that  we have  an ethics  law  that would  allow                                                               
somebody who we  couldn't prove was trying  to benefit themselves                                                               
intentionally, that  probably we can't  prove. It seems to  be we                                                               
have  a law  that  would allow  somebody to  own  .02 percent  of                                                               
Conoco-Phillips outstanding stock, maybe  $15 million, that would                                                               
allow them  to be  involved in  policy-making as  to who  ends up                                                               
getting the  lucrative contract to  build a gas pipeline  in this                                                               
state and that that arguably  wouldn't violate the Ethics Act the                                                               
way it  is written  right now  because one  of the  factors, your                                                               
best analysis is,  is that the courts will look  at as a relevant                                                               
factor what the  percentage is that somebody owns  of a company's                                                               
outstanding  shares.  That  analysis, rather  than  the  absolute                                                               
amount of stock the person owns.  Do we run the risk that conduct                                                               
like that might fall under the Ethics  Act as well, and if we do,                                                               
would you say that we should  take another look at how our Ethics                                                               
Act is written?                                                                                                                 
                                                                                                                                
MR. BUNDY:  First of all,  I think  you're right, that  given the                                                               
way  it's written  now,  that is  a  plausible interpretation.  I                                                               
would take  that a little farther  and say, 'You have  to analyze                                                               
it farther  but none-the-less,  that attorney  general's advisory                                                               
opinion can be read that way  and I think that that's wrong.' And                                                               
I think  that, in my  opinion, and what  I told the  Governor was                                                               
that something  should be  done about that.  And that  the ethics                                                               
law either ought  to be, the Legislature ought to  take it up and                                                               
change it and provide guidelines,  a specific bright line so that                                                               
everybody will know what is going  on and get rid of that problem                                                               
so that public  officers can figure out what  they're supposed to                                                               
do. People that advise them  can figure out what they're supposed                                                               
to do. And the public knows what  the deal is. Or there should be                                                               
at  least  the Department  of  Law  regulations implementing  the                                                               
current  Ethics  Act  that  set   those  standards,  because  the                                                               
Department of Law has the authority to make those regulations.                                                                  
                                                                                                                                
CHAIR SEEKINS:  I certainly agree  that we have the  authority to                                                               
be able to  do that, and whenever we can  clarify and make things                                                               
less ambiguous that we should. So  I will take that under advice,                                                               
that's good advice in my opinion.                                                                                               
                                                                                                                                
2:20:29 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: Can I give you another example?                                                                                      
                                                                                                                                
CHAIR SEEKINS: Sure, go ahead.                                                                                                  
                                                                                                                                
MR. BUNDY: Your legislative body  Ethics Act says that you're not                                                               
prohibited from  acting on  a matter  in which  a large  group of                                                               
people are similarly situated in, and  then it goes on to say, in                                                               
a  profession, trade  or occupation.  Now,  the Executive  Branch                                                               
Ethics  Act, however,  just  says, 'A  large  group of  similarly                                                               
situated  people,'  which could  be  shareholders  in a  publicly                                                               
traded company. And I looked at  that and that was an interesting                                                               
call, because  it's a direct  contrast to the  Legislative Ethics                                                               
Provision, passed  by the  Legislature. And so  I think  that you                                                               
need to  take a  closer look  at a number  of provisions  here to                                                               
make  sure  that what  Representative  Gara  was concerned  about                                                               
won't happen.                                                                                                                   
                                                                                                                                
2:21:32 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  Now, in that  regard, I refer  you to page  63 of                                                               
your report.  Your conclusion was  that the attorney  general did                                                               
violate  39.52.210(a). Looks  to me  now, if  I see  the footnote                                                               
that you  set out, what  the remedy,  or the punishment  would be                                                               
from  the  Personnel department,  if  they  also found  the  same                                                               
thing. Is that correct?                                                                                                         
                                                                                                                                
MR. BUNDY: Yes.                                                                                                                 
                                                                                                                                
CHAIR SEEKINS:  Just for the  record, could you go  through those                                                               
for us?                                                                                                                         
                                                                                                                                
MR. BUNDY:  If the Personnel  Board determines a  public employee                                                               
has  violated this  chapter it  (1) shall  order the  employee to                                                               
stop engaging  in any official  action related to  the violation,                                                               
(2)  May  order  divestiture,  establishment of  a  blind  trust,                                                               
restitution,  or  forfeiture,  and  (3) may  recommend  that  the                                                               
employee's agency take disciplinary action, including dismissal.                                                                
                                                                                                                                
CHAIR  SEEKINS:  And  the  person   there  that  would  take  any                                                               
disciplinary action would be the Governor in this case?                                                                         
                                                                                                                                
MR. BUNDY: Yes he's the only one.                                                                                               
                                                                                                                                
CHAIR SEEKINS:  The only  one allowed  to take  that disciplinary                                                               
action. Do you believe, at  this point, that the Attorney General                                                               
is engaging in any official action related to this violation?                                                                   
                                                                                                                                
MR. BUNDY: Well, it's my understanding that he's not.                                                                           
                                                                                                                                
2:22:51 PM                                                                                                                    
                                                                                                                                
CHAIR  SEEKINS: Or  that,  has  he divested  himself  of all  the                                                               
offending shares, so to speak?                                                                                                  
                                                                                                                                
MR. BUNDY: Yes he did.                                                                                                          
                                                                                                                                
CHAIR SEEKINS: Did he make any profit on that?                                                                                  
                                                                                                                                
Mr. Bundy: I set it out somewhere  in here, I think at the end of                                                               
the factual  - he made  profit, of  course, on the  12,000 shares                                                               
because when he sold it, it was  about $7.70, I think. So he made                                                               
that, but  he lost a  couple thousand  dollars on the  900 shares                                                               
that  Mr.  Anderson  had  bought  for  him.  And  so  I  think  I                                                               
determined he made overall about $56,000 profit on the matter.                                                                  
                                                                                                                                
CHAIR SEEKINS: Do you know what he did with that money?                                                                         
                                                                                                                                
MR. BUNDY:  I'm told, and  it's been  represented to me,  that he                                                               
gave it to various charities.                                                                                                   
                                                                                                                                
2:23:50 PM                                                                                                                    
                                                                                                                                
CHAIR  SEEKINS:  So  at  this  point then,  the  Governor  has  a                                                               
decision that he's  going to make. I don't  recall the Governor's                                                               
comments this  morning too  clearly, I think  he indicated  to me                                                               
that  he   was  asking  Representative  Croft   to  withdraw  the                                                               
complaint, or  he was  going to, if  I remember  correctly. Other                                                               
questions on this topic? Senator Huggins.                                                                                       
                                                                                                                                
SENATOR HUGGINS: Mr. Bundy, when you  set out in this sequence of                                                               
our discussion, you  said that, 'When you read in  the media that                                                               
you came  to a conclusion that  there was a high  potential that,                                                               
in this case,  Mr. Renkes could have manipulated  this system for                                                               
his own  financial advantage,  did you  see any  indications that                                                               
that took place?'                                                                                                               
                                                                                                                                
MR. BUNDY:  Honestly, I did not.                                                                                                
                                                                                                                                
SENATOR HUGGINS:  And for  what it's  worth, I  like to  read the                                                               
paper also,  and particularly the  piece on his  investments. The                                                               
conclusion I  came to after  reading the media accounts  was, 'Oh                                                               
my  goodness, it's  gotta be  insider trading.'  as I  read those                                                               
articles.                                                                                                                       
                                                                                                                                
2:25:08 PM                                                                                                                    
                                                                                                                                
SENATOR HUGGINS:  But as  I recall today,  when you  talked about                                                               
his investment advisor who was Mr.  Anderson, who in fact did the                                                               
investment for  him, that if  you looked at when  the investments                                                               
happened during the  timeframe in question, that  Mr. Anderson in                                                               
fact, did just  the opposite of that, if  you're insider trading,                                                               
is that correct?                                                                                                                
                                                                                                                                
MR. BUNDY:  The only  thing I can  say is that  I didn't  see any                                                               
evidence that his trades were influenced  by what was going on in                                                               
the State of Alaska.                                                                                                            
                                                                                                                                
SENATOR  FRENCH: I  want  to talk  for just  a  second about  the                                                               
violation  of 39.52.210.  The failure  to seek  an opinion  about                                                               
whether  or not  what  the  attorney general  was  doing was  all                                                               
right. That's a violation of the Ethics Act, is it not?                                                                         
                                                                                                                                
MR. BUNDY: Not the Code of Ethics, but the Ethics Act.                                                                          
                                                                                                                                
SENATOR FRENCH: Correct.                                                                                                        
                                                                                                                                
2:26:05 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH:  In your view, when  did that duty arise  for the                                                               
attorney general  to go  to the  Governor and  ask him,  'Is this                                                               
okay if I keep doing this?'                                                                                                     
                                                                                                                                
Mr. Bundy: In my view, it  was probably March or before when KFx,                                                               
when  Kanturk  said, 'We  would  be  interested in  pursuing  and                                                               
coming to Alaska and talking  to the Taiwanese about our process,                                                               
and what we might have to offer.'  I think at that point it might                                                               
have been  wise to  say, 'Either  sell my KFx  stock or  tell the                                                               
Governor  that  I  have  stock  in KFx.'  I  think  it  would  be                                                               
appropriate to get  an ethics determination before  I proceed any                                                               
further and involving them in this business.                                                                                    
                                                                                                                                
2:26:56 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH:  I think you also  said that Mr. Renkes  did take                                                               
official action, and then that might have benefited KFx.                                                                        
                                                                                                                                
MR. BUNDY: Yes                                                                                                                  
                                                                                                                                
SENATOR FRENCH: So if I stood  up and said, 'The Attorney General                                                               
took official action  that might have benefited  KFx,' that would                                                               
be a correct statement.                                                                                                         
                                                                                                                                
MR. BUNDY: Yes.                                                                                                                 
                                                                                                                                
SENATOR FRENCH:  And if somebody stood  up and said, 'He  did not                                                               
take any  official action  that might  have benefited  KFx,' that                                                               
would be false.                                                                                                                 
                                                                                                                                
MR. BUNDY: I would disagree with that.                                                                                          
                                                                                                                                
SENATOR FRENCH:  The attorney  general, in  his statement  to the                                                               
press in October,  said he did not take any  official action that                                                               
might have benefited KFx.                                                                                                       
                                                                                                                                
MR. BUNDY: No, that he believed,  he said that he didn't. When he                                                               
was asked to sign the  MOU (memorandum of understanding), because                                                               
the  Taiwanese  were  concerned they  didn't  have  anybody  with                                                               
sufficient stature  to sign with  Governor Murkowski, and  so the                                                               
Taiwanese floated the  idea that Mr. Renkes instead  would sign -                                                               
Mr. Renkes said,  'I won't, because of my  relationship with KFx,                                                               
I don't  think it would be  proper. I don't think  I've taken any                                                               
official  action up  to this  point, but  I think  this would  be                                                               
official action and so  I won't do it.' And that  to me said that                                                               
he recognized that there was an  Ethics Act issue, Code of Ethics                                                               
issue, and that's why I think he should have sought guidance.                                                                   
                                                                                                                                
2:28:16 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH:  A couple  questions on  KFx. Your  report states                                                               
that KFx  was the only  coal - and I  don't think I've  ever come                                                               
across  this  word  before  in my  life  -  it's  'beneficiation'                                                               
process approaching  commercial viability. How confident  are you                                                               
in that statement?                                                                                                              
                                                                                                                                
MR.  BUNDY: Well,  I asked  Starky  Wilson, I  asked the  Venners                                                               
guys,  I  asked the  Kanturk  people,  I  looked  on the  web,  I                                                               
researched the tax  credit legislation that was all  the rage and                                                               
discovered that,  and of  course there  was this  Ascencio report                                                               
that was  one of  the early  on things, and  there's 55  of these                                                               
things that  are out  there, but  those are,  I was  satisfied at                                                               
least to  the extent that I  thought I needed to  be to determine                                                               
this, that  those were essentially  processes that  were designed                                                               
to  take advantage  of  the tax  credit  legislation rather  than                                                               
actually reduce moisture content. To  get into the details of the                                                               
technology  of  it is,  you  can't  just  take the  moisture  out                                                               
because as soon as  you expose it to the air  again, it will fill                                                               
up with  moisture. And  you've got  to change  the nature  of the                                                               
coal. Perhaps,  Senator, I'm going  much farther than  you wanted                                                               
to go on  this, but it was fascinating. I  kind of got interested                                                               
in this and this is a  different kind of process. The others were                                                               
called, designated I  think, in a lot of the  press as 'spray and                                                               
pray.' Which is,  they would spray it with a  substance that they                                                               
said changed  the chemical process  of it  and pray that  the IRS                                                               
allowed it  for tax credit  purposes and without  really changing                                                               
much in the coal at all.  They used things like latex and various                                                               
other things.                                                                                                                   
                                                                                                                                
2:30:28 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH: You've heard of Placer Dome mining?                                                                             
                                                                                                                                
MR. BUNDY: Yes                                                                                                                  
                                                                                                                                
SENATOR  FRENCH: And  there's a  Mr. Jim  Chavez that  worked for                                                               
Placer Dome  Mining. He  said that Placer  Dome was  talking with                                                               
another company,  not KFx that has  a proven process to  dry high                                                               
moisture coal.  He said KFx's  technology just doesn't  mesh with                                                               
what  we're  doing. Did  you  ever  learn  from Mr.  Chavez  what                                                               
company he was talking to?                                                                                                      
                                                                                                                                
MR. BUNDY: I  learned from, yeah, it's called  Black Hills Energy                                                               
and they're licensed with KFx. So  KFx is the center of the whole                                                               
thing.                                                                                                                          
                                                                                                                                
SENATOR FRENCH:  I guess I'm  stuck, and I  guess a lot  of folks                                                               
are  stuck in  this 'insignificant  issue'. That  seems like  the                                                               
heart  of  your  Code  of  Ethics  finding,  that  there  was  no                                                               
violation of  a Code of  Ethics finding. And partly  your opinion                                                               
relies on the old 1989  AG's opinion, Mr. Bothello's opinion, and                                                               
partly relies  on the actions  that you saw the  attorney general                                                               
take. The  old 1989 opinion points  out that you can  either have                                                               
$5000 worth  of the business  or 1 percent  of the stock.  And if                                                               
you  had anything  less than  that,  you were  not in  violation.                                                               
That's what the bylaws with the AG's opinion pointed to.                                                                        
                                                                                                                                
MR. BUNDY: Ok. Or?                                                                                                              
                                                                                                                                
SENATOR FRENCH:  Right. Either $5000  of a business or  1 percent                                                               
or less of a  stock - that was kind of where  they drew the line.                                                               
When  you, and  you  pointed out  that this  was  probably not  a                                                               
bright line,  a source of bright  line rule, I think  most people                                                               
looking at that  would sort of, look at that  in the alternative.                                                               
They might think, if you have  a stock, like a Native Corp stock,                                                               
hard to value,  not traded, you can't trade  a Native corporation                                                               
stock, you can't  buy it or sell it. There's  rules against that.                                                               
You sort of  have to go to the percentage  valuation, but there's                                                               
that  $5,000  number just  right  there  next to  it,  admittedly                                                               
talking about a business, did that....                                                                                          
                                                                                                                                
2:32:25 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  There is no  market for it.  It's hard to  value. How                                                               
would you value it?                                                                                                             
                                                                                                                                
SENATOR FRENCH: A business?                                                                                                     
                                                                                                                                
MR. BUNDY: Well, the value of the stock.                                                                                        
                                                                                                                                
SENATOR FRENCH:  Right, exactly. They  had to, by default,  go to                                                               
the percentage. In the old  opinion because they just didn't have                                                               
any  other way  to go.  In this  case you  got a  publicly traded                                                               
stock, you  can look to  the value, it's  not hard to  figure out                                                               
what the value  is, you can talk  about it quite a  bit. It seems                                                               
like $5000  is probably a number  that most people can  get their                                                               
minds  around.  They understand  the  difference  because, and  I                                                               
guess Representative  Gara started  to make  this point,  and the                                                               
point I'm trying to  make is that, if the rules  say you can only                                                               
have $5,000  worth of  a business  and 1  percent of  stock, that                                                               
could produce some wild results.                                                                                                
                                                                                                                                
MR. BUNDY:  Of course it can.  But see, the problem  is that some                                                               
other  states have  that. And  I'm not  sure that  the fabric  of                                                               
society has rent because of that.  But that wouldn't be my choice                                                               
of a standard, by a long  shot. But what we're talking about here                                                               
is a retrospective look at what  somebody else did given what the                                                               
state of the law was at the  time. And, as somebody that has done                                                               
that  for a  living  for a  lot of  years  and understanding  the                                                               
consequences of that, I actually approached it with caution.                                                                    
                                                                                                                                
CHAIR SEEKINS:  We're going to  take a  five-minute concentration                                                               
renewal break, so we're on recess.                                                                                              
                                                                                                                                
2:46:02 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH:  You mentioned in  your report, Mr. Bundy,  but I                                                               
just  want to  see if  I can  get a  tight answer  on this,  'Who                                                               
brought KFx to the attention of the state?'                                                                                     
                                                                                                                                
MR.  BUNDY:  The  relationship,  and I  use  that  word  loosely,                                                               
between  KFx and  it's principals,  and Mr.  Renkes and  Governor                                                               
Murkowski goes  back to, as  long ago as I  think as to  the late                                                               
'80s  or  early  90s.  I  think it  was  in  1990  that  Governor                                                               
Murkowski  actually visited  the  KFx, one  of  their first  test                                                               
places because  they were  one of  the leaders  in trying  to get                                                               
this tax  credit put through  so that  they could get  the spread                                                               
that  they  needed  between  the bituminous  coal  and  the  sub-                                                               
bituminous coal in Wyoming, that  they could get their processing                                                               
in there and  make it economical, they needed a  tax credit to do                                                               
that, and so because Governor  Murkowski was on the Senate energy                                                               
committee, and  Mr. Renkes  was, at  that time  one of  his newer                                                               
staffers, who  was assigned to that  topic, for want of  a better                                                               
word, that  they heard  a lot  about this and  in fact,  went out                                                               
there and saw  it with Senator somebody from  Wyoming and Simpson                                                               
or somebody  like that. They  went out and actually  visited this                                                               
plant, and as I recall,  Ted Venners had actually invited Senator                                                               
Murkowski. Ted Venners had some  kind of a charitable thing going                                                               
on and he  invited Governor Murkowski to appear  at this pheasant                                                               
shoot or something, they were  raising money for some charity and                                                               
he did. And John Venners...                                                                                                     
                                                                                                                                
SENATOR FRENCH: That was in 2000, wasn't it?                                                                                    
                                                                                                                                
2:48:30 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  It might have  been. I'm  not sure. And  John Venners                                                               
actually,  when  the Governor  was  in  Taiwan  in May  of  2004,                                                               
Governor had a breakfast meeting with  Mr. Kang  (ph), Mr. Chang,                                                               
and a  couple other high people  in the Republic of  China group,                                                               
and  Chang, being  the  Kanturk partners  guy.  John Venners  was                                                               
there  and at  that thing  was  the first  time this  idea of  an                                                               
agreement came  up. Mr.  Renkes wasn't  there. Venners  went back                                                               
and  drafted something  as an  outline  of what  an agreement,  a                                                               
letter  of  intent  agreement between  these  governments,  which                                                               
would  include  Kanturk,  in  it,  and  dropped  it  off  at  the                                                               
Governor's hotel  with a  'Dear Frank'  letter which,  I thought,                                                               
'Wow he  knew him well enough  to write him as  'Dear Frank', and                                                               
say 'Hope you have  a nice trip back and here's  what I think the                                                               
thing should look like,' and that  was really the genesis of this                                                               
agreement  that got  passed around  in Taiwan  for quite  a while                                                               
before the Taiwanese ever sent a draft back.                                                                                    
                                                                                                                                
So the  question of who  first had  the idea, Mr.  Renkes recalls                                                               
that the  Governor said, 'Well  look, call all these  people that                                                               
you  know  at  KFx,  Venners   guys,  and  find  out  if  they're                                                               
interested in  coming up here  and meeting with Taiwanese  to try                                                               
and show them that our coal can  be saleable for them.' And so he                                                               
did. Governor  Murkowski does not  remember that. He  doesn't say                                                               
it didn't happen,  he just doesn't know. But then  the next thing                                                               
that happened  was, I think  in late December, or  something like                                                               
that,  2003, Governor  Murkowski went  to a  Republican Governors                                                               
meeting in  Florida and  Venner said  that the  Governor's office                                                               
called him and asked him to  meet the Governor down there briefly                                                               
to  talk about,  because  Venners had  told  Renkes that  Kanturk                                                               
might  be  interested in  something  like  this. He'd  check  the                                                               
principals. And  so then Venners  went down and said,  'Yes, they                                                               
are interested  in trying  to put  something together  where they                                                               
would   develop   a   coal   mine   in   Alaska   under   certain                                                               
circumstances.' And  that is  my understanding  of the  series of                                                               
events. Now,  who came up  with the bright  idea to call  the KFx                                                               
guys, Mr. Renkes  says it was the Governor,  the Governor doesn't                                                               
remember.  My view is it could have been either one.                                                                            
                                                                                                                                
2:50:59 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH:  Did the close  relationship between  Kanturk and                                                               
KFx ever concern you, the idea  that many of the KFx stockholders                                                               
were also Kanturk principals?                                                                                                   
                                                                                                                                
MR. BUNDY:  Only in  the sense that  the companies  were related,                                                               
but  my understanding  of the  financials  of the  thing is  that                                                               
Kanturk and  the agreement  Kanturk had with  KFx is  Kanturk was                                                               
going to fund the project. They  were prepared to put in whatever                                                               
hundred million dollars that it was  going to require to do this.                                                               
But, of course, they  only foresaw it as being able  to use the -                                                               
the only way that they saw  it happening from their point of view                                                               
-  maybe  somebody  else  would have  seen  it  differently  but,                                                               
because they  knew KFx was  using the KFx technology,  which they                                                               
had invested in  because they thought it worked, it  was going to                                                               
work. Recently  KFx floated another  $48 million in  capital, and                                                               
got  it subscribed  to quickly  because they  seemed to  be doing                                                               
well on getting their technology together in Wyoming.                                                                           
                                                                                                                                
SENATOR  FRENCH:  Had  they ever  really  though,  commercialized                                                               
their process?                                                                                                                  
                                                                                                                                
MR. BUNDY: No.                                                                                                                  
                                                                                                                                
2:52:38 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH: That's something that  troubles me about this. It                                                               
seems like  at one point -  I know you've seen  these documents -                                                               
but  at one  point  the  attorney general  says  in a  memorandum                                                               
directly to the Governor, 'We  are confident that Beluga coal can                                                               
be  processed by  KFx to  meet or  exceed Thai  power's technical                                                               
specifications.' And I guess that  statement concerns me because,                                                               
having never  commercialized its  process, you wonder  where that                                                               
confidence comes from.                                                                                                          
                                                                                                                                
MR. BUNDY: Presumably it came from  KFx. When I talked to them, I                                                               
went to  their office and  I looked around and  as near as  I can                                                               
tell, it's the  real deal. I mean there are  engineers working on                                                               
things and there is  all this stuff going on - and  you can go to                                                               
their  website and  see what  they're building  in Wyoming.  But,                                                               
they  had   put  together  a  commercial   enterprise  with  this                                                               
Thermaltech Company,  and if you  read one  side of the  blogs in                                                               
the financial  pages, they'll  say, 'This was  a phony  deal.' If                                                               
you read another  report from the financial  analyst, they'll say                                                               
that Thermaltech didn't  work because that company  lost money in                                                               
other  enterprises  and  didn't  have the  money.  KFx  had  just                                                               
licensed  it, so  to speak,  to Thermaltech.  It's a  complicated                                                               
series  of events  but apparently  somebody thinks  that the  KFx                                                               
stuff is  going to work because  they're putting an awful  lot of                                                               
money into it.                                                                                                                  
                                                                                                                                
2:54:07 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: Thank you Mr.  Bundy. Obviously $40 [million] some                                                               
- what did you say, $48 million?                                                                                                
                                                                                                                                
MR. BUNDY: That's my recollection.                                                                                              
                                                                                                                                
CHAIR SEEKINS: ...in  venture capital felt that KFx  was close to                                                               
being viable or  they wouldn't have put the money  in there. But,                                                               
I think  - I had a  conversation with one of  the representatives                                                               
from the Wyoming  house that lives in Gillette,  Wyoming, who was                                                               
pretty  sure  that  they  were  getting close  to  some  kind  of                                                               
commercial viability  as well and I  thought that was kind  of an                                                               
interesting conversation  that I had  in Colorado Springs  at the                                                               
legislative  academy, and  looking  into it,  I  found that  even                                                               
though they have  not come up with  a huge - that  they aren't in                                                               
the business of  drying coal yet. Obviously  somebody thinks that                                                               
they're getting close to it.                                                                                                    
                                                                                                                                
So let  me go back  to some of the  other questions having  to do                                                               
directly with Mr. Renkes' actions  other than trying to speculate                                                               
as to the viability of the  product. We, and maybe I'm just going                                                               
back over this again,  but I just want to make  very sure for the                                                               
record,  we have  been  told  that the  KFx  stock  was the  most                                                               
actively  traded stock  in Attorney  General Renkes'  account. So                                                               
since the only  one that had been traded in  was the GPM account,                                                               
I'm assuming that's  what that statement meant. And  we were told                                                               
that he bought or sold KFx eleven  times in the past year. And he                                                               
was doing  nothing but buying  after March of  '04 and in  May he                                                               
actually bought  twice in the same  day. So I'm assuming  that we                                                               
wouldn't, from what your information  shows is that the buyer was                                                               
not the attorney general, but was Mr. Anderson, is that correct?                                                                
                                                                                                                                
MR. BUNDY: Yes.                                                                                                                 
                                                                                                                                
CHAIR  SEEKINS:  So the  Attorney  General  wasn't sitting  there                                                               
saying, 'Gee,  if this  coal deal  goes through,  I could  make a                                                               
bundle on this.' Is that a fair statement?                                                                                      
                                                                                                                                
MR. BUNDY: Yes, I mean, that  was my conclusion. I could not look                                                               
at the pattern  of trades and conclude that they  were the result                                                               
of direction from Mr. Renkes.                                                                                                   
                                                                                                                                
CHAIR SEEKINS: Other questions from members? Senator Huggins?                                                                   
                                                                                                                                
2:57:02 PM                                                                                                                    
                                                                                                                                
SENATOR HUGGINS:  As I look  in 2004 and  as I read  your report,                                                               
one  of  the  things  that  was happening  with  the  trading  of                                                               
delegations coming back  and forth between the  Republic of China                                                               
and Alaska  was one of the  objectives was to have  another visit                                                               
to  Alaska sometime  in September  of '04  with the  objective of                                                               
having the MOU. And I think most  of us that have been around the                                                               
Asians understand  that would be  a significant milestone  as far                                                               
as moving  the MOU - would  be a significant milestone  as far as                                                               
moving  the   business  enterprise  forward.  I   think  that  is                                                               
relatively accurate - the MOU?                                                                                                  
                                                                                                                                
MR. BUNDY: I think so. I  mean it's clear that the Taiwanese were                                                               
interested in an agreement of some  kind. And it seems to me that                                                               
a  moving animus  was  the  President of  China.  That he  wanted                                                               
something done. And if it was going  to be in coal, great; and if                                                               
it was  going to  be in  something else,  it was  going to  be in                                                               
something else. He  wanted something done and so  his people were                                                               
getting  pushed from  the  top down.  There  was some  resistance                                                               
from,  my view,  from the  technical people  who had  to actually                                                               
burn coal. But they were being pushed on from the top.                                                                          
                                                                                                                                
SENATOR HUGGINS: So  the Republic of China, some  people there in                                                               
the hierarchy, appeared to have  some enthusiasm about getting on                                                               
with this.                                                                                                                      
                                                                                                                                
MR. BUNDY: Yes, absolutely.                                                                                                     
                                                                                                                                
SENATOR HUGGINS:  Which leads  us to  the part  that I  saw, that                                                               
might  potentially  have  some   significance  in  just  that  it                                                               
indicates that Ms. Yao, who is  one of the intermediaries, one of                                                               
the high-level intermediary in this  case, was communicating with                                                               
Attorney  General  Renkes. And  your  report  says, 'Despite  Ms.                                                               
Yao's repeated urging, little progress  was made by Mr. Renkes in                                                               
drafting the  letter.' And  the letter is  to get  the delegation                                                               
here, which would get the MOU,  which, I guess if you interpreted                                                               
this, my interpretation is that  it didn't appear that Mr. Renkes                                                               
saw any  haste, quite frankly,  was going quite slower  than Mrs.                                                               
Yao  wanted, maybe  the Chinese  wanted, in  the process,  and it                                                               
wasn't  about  making  money, it  wasn't  about  doing  something                                                               
because, 'we  got to do it  quickly because my buddies  will gain                                                               
or any of that sort of thing.  Is that...?                                                                                      
                                                                                                                                
2:59:22 PM                                                                                                                    
                                                                                                                                
MR. BUNDY:  Well, if  you read  Mrs. Yao's  e-mails, you  can see                                                               
that  she is  kind  of  an unusual  person,  is  very active  and                                                               
aggressive, and  she saw this as,  from I gather from  her emails                                                               
and from when  I interviewed her over the phone,  that she wanted                                                               
to get  on with this  and one of the  things is, and  Mr. Venners                                                               
was pushing on her too, to get  things done. So she was working a                                                               
lot  directly  with Mr.  Venners  completely  - with  Mr.  Renkes                                                               
completely  out of  that loop.  And  at one  time, the  Secretary                                                               
General who  became Senior  Advisor Kahn,  was clearly  trying to                                                               
get  things   moving  and  so   she  was  talking  to   them.  My                                                               
understanding is that  she would periodically check  in with them                                                               
or  sometimes  they would  call  her,  'Where's the  letter  from                                                               
Governor  Murkowski?' Or  she would  call them  and say,  'What's                                                               
going on, where's  the letter from Governor  Murkowski?' Then she                                                               
would send an  email saying, 'We're still waiting  for the letter                                                               
from Governor Murkowski.' That's what I meant to say on that.                                                                   
                                                                                                                                
SENATOR HUGGINS: But the bottom line  and the result was that, in                                                               
your words, despite  Mrs. Yao's repeated urging,  that she didn't                                                               
get any response out of Mr. Renkes in producing a letter.                                                                       
                                                                                                                                
MR. BUNDY: It took some time.                                                                                                   
                                                                                                                                
SENATOR HUGGINS: Right, right. Ok. Thank you.                                                                                   
                                                                                                                                
3:01:17 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: Representative Gara.                                                                                             
                                                                                                                                
REPRESENTATIVE GARA:  Mr. Bundy, a  lot of what's in  the reports                                                               
is a lot  of - and a  lot of what people have  been talking about                                                               
in the  press lately,  on both  sides is  to me  - almost  a side                                                               
issue. In  the end, to me,  if KFx is this  great technology, the                                                               
best technology out there and is  the only way to get this Alaska                                                               
coal  to market,  then I  think  it's much  more appropriate  for                                                               
people to  be promoting  KFx as the  way to do  this. If,  on the                                                               
other hand, KFx is not  the most appropriate technology and there                                                               
might be others  out there, yet KFx is being  promoted, then I've                                                               
got really big questions.                                                                                                       
                                                                                                                                
And  I'm wondering  if you  notice this,  because sometimes  when                                                               
people make inconsistent statements,  sometimes it means nothing,                                                               
and sometimes  it means something big  and it raises a  red flag.                                                               
In  the  beginning when  the  story  first  broke on  October  1,                                                               
according to  the Daily  News -  now, the  Daily News  could have                                                               
said it  wrong -  but according  to the  Daily News,  Renkes said                                                               
Taiwan  and KFx  had a  relationship that  predated him  becoming                                                               
attorney general. He did not  bring the two parties together, nor                                                               
did he encourage KFx to come  to Alaska. So the story breaks that                                                               
Greg Renkes  might have  some stock  dealings with  this company.                                                               
According to  the Daily  News, Mr. Renkes  says, 'I  didn't bring                                                               
these  parties together,  I didn't  bring KFx  to Alaska  on this                                                               
deal.'                                                                                                                          
                                                                                                                                
In your findings, you say, you  go on through page 12 through 14,                                                               
you say  that the state  is talking  with the Republic  of China,                                                               
and   then  you   say,  'During   this  time,   Mr.  Renkes   was                                                               
communicating with  John Venners, and Kanturk  Partners' managing                                                               
director,  David Fu.  Mr. Fu  was directed  and aided  by Kanturk                                                               
partners principal, Mr. Chang Pen  Sao, and drafting a letter for                                                               
signature by  Mr. Renkes, extolling  the virtues of  K-fuel which                                                               
Mr. Venners  and Mr. Fu  hoped that  Mr. Renkes would  forward to                                                               
Secretary General Kang. Did you  notice this or does this trouble                                                               
you at  all that  on October  1, the statement  by Mr.  Renkes is                                                               
saying, 'I  did not bring  KFx into this  deal." - and  then your                                                               
findings is that he actually seems  to have brought KFx into this                                                               
deal?                                                                                                                           
                                                                                                                                
3:03:41 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: My  understanding of what happened was  that Mr. Chang                                                               
is  a large  principal in  Kanturk  partners. He's  also a  major                                                               
force in Taiwan of one kind  or another - economic and political.                                                               
And I  don't want to  overstate that,  but he's President  of the                                                               
Taiwan Chamber of  Commerce, he's a former Senator.  I don't have                                                               
any  evidence that  I saw  in the  documents that  Mr. Chang  was                                                               
promoting  KFx  technology  to  the  Taiwanese  -  for  instance,                                                               
saying,  'Buy  Wyoming coal  because  we  can process  this  sub-                                                               
bituminous coal into  stuff that you can use so  you ought to buy                                                               
it from Wyoming  - the big giant mines in  Wyoming.' Whether that                                                               
was going on,  I have no idea.  I didn't see any  evidence of it;                                                               
put it that  way. In my view,  I am not aware, I  saw no evidence                                                               
that  anybody in  KFx  was trying  to work  the  Taiwan angle  to                                                               
purchase coal  from anywhere. I  just didn't see any  evidence of                                                               
it.                                                                                                                             
                                                                                                                                
REPRESENTATIVE GARA: Maybe I didn't  say that clearly and this is                                                               
the  part that  concerns me.  In your  memo, my  understanding of                                                               
your  memo is  that on  page 14,  you found  that Mr.  Renkes was                                                               
involved in bringing  the K-fuel process to the  attention of the                                                               
Taiwanese. That in drafting a  letter for signature by Mr. Renkes                                                               
extolling  the virtues  of K-fuel,  which Mr.  Renkes would  then                                                               
forward. So it seems to me...                                                                                                   
                                                                                                                                
MR. BUNDY: I believe that to be true.                                                                                           
                                                                                                                                
REPRESENTATIVE GARA:  Isn't that inconsistent, if  the Daily News                                                               
is correct, with Mr. Renkes' statement?                                                                                         
                                                                                                                                
CHAIR SEEKINS:  We're not going to  ask you to testify  as to the                                                               
veracity of the news story.                                                                                                     
                                                                                                                                
MR. BUNDY: Yes, it does sound inconsistent to me.                                                                               
                                                                                                                                
CHAIR  SEEKINS: I'm  not going  to use  that as  our standard  of                                                               
measure today.                                                                                                                  
                                                                                                                                
3:06:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA: Does  that raise  a red  flag to  you about                                                               
whether or not people have been truthful to you?                                                                                
                                                                                                                                
MR. BUNDY:  It does in  the sense that  what I discovered  when I                                                               
started  talking  to David  Fu,  who  is  Taiwanese, who  is  the                                                               
Managing  Director   of  Kanturk,   that  they   have  tremendous                                                               
contacts.  So it  might have  been that  Venners might  have even                                                               
told  Mr. Renkes  that, 'Yeah,  we're working  in China  already'                                                               
because he  was over there  trying to  do a mainland  China deal.                                                               
The  only  thing  I  can  say   is  that,  yes  that  does  sound                                                               
inconsistent,  yes I  would be  concerned if  I -  and I  did not                                                               
focus  on that  when I  talked to  Mr. Renkes  regrettably -  but                                                               
nonetheless  it doesn't  seem to  change the  basics of  what was                                                               
actually  going  on  and  whose  interests  were  actually  being                                                               
forwarded  by  Mr. Renkes  in  the  things  that  I saw  that  he                                                               
actually did.                                                                                                                   
                                                                                                                                
CHAIR SEEKINS: Thank you, any  further questions at the moment on                                                               
this subject? Representative Gruenberg.                                                                                         
                                                                                                                                
3:07:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG: Thank  you Mr. Chair. It  strikes me as                                                               
the  phrase that  the financial  interest in  the matter  must be                                                               
significant. Both the question of  what the financial interest in                                                               
the 'matter' is  and what the word 'significant'  means were very                                                               
key in your legal analysis of this issue, is that correct?                                                                      
                                                                                                                                
MR. BUNDY: Yes.                                                                                                                 
                                                                                                                                
REPRESENTATIVE   GRUENBERG:   And   if   the   Legislature   were                                                               
significant to include  - say - a dollar amount,  a percentage of                                                               
the persons overall  holdings and the percentage  of the interest                                                               
in the  industry or whatever it  was, the company itself,  any of                                                               
those  three,  if the  threshold  were  met. Would  that  provide                                                               
greatest protection to the public, do you think?                                                                                
                                                                                                                                
MR. BUNDY:  Well it sounds  like that  would cover the  map about                                                               
the kinds of  things you have to worry  about. Basically, doesn't                                                               
it come  down to 'Is  somebody who is  a public servant  going to                                                               
throw  a  decision one  way  or  the  other  based on  their  own                                                               
interest?'                                                                                                                      
                                                                                                                                
REPRESENTATIVE GRUENBERG: It would seem that way to me.                                                                         
                                                                                                                                
MR. BUNDY: And what the executive  branch Ethics Act tries to do,                                                               
in my  view, is try and  set up some general  guidelines for that                                                               
and hope  it works. It  seems to me  that what some  other states                                                               
have done  instead is do  what you have  suggested in one  way or                                                               
another.                                                                                                                        
                                                                                                                                
3:08:51 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: And if we're going to  avoid this kind of a problem in                                                               
the future  it seems to  me that  is probably something  that the                                                               
legislature  or the  Department  of Law,  through the  regulatory                                                               
process ought to seriously consider.                                                                                            
                                                                                                                                
REPRESENTATIVE   GRUENBERG:  That's   the   definition  of   what                                                               
'significant' would  be. But the term  'what the matter' is  - it                                                               
seems to me that rather than  saying the matter is the trade deal                                                               
with  China, the  real issue  is  the effect  upon the  ownership                                                               
interest in  the company.  It's like, if  we're dealing  with the                                                               
Challenger spacecraft  and there was an  allegation of wrongdoing                                                               
on the  part of  somebody, the question  wouldn't be  whether you                                                               
had an interest in the trip to  the moon or the space station, if                                                               
it was interest in Morton Thiokol,  that made the O-ring, or, the                                                               
question  is,  specifically,  your  interest  in  the  commercial                                                               
aspect of how this will affect  the price of the stock, the value                                                               
of the stock.                                                                                                                   
                                                                                                                                
MR. BUNDY: If  what you do - if you  do A or you do B  - decide A                                                               
or decide B  is going to make you money  in some significant way,                                                               
and  these things  usually come  up, from  what I've  seen, in  a                                                               
situation  which the  public officer  is  asked to  deal or  make                                                               
direct  decisions, promulgate  rules, do  whatever that  directly                                                               
affect some  interest, some company  to approve a lease,  issue a                                                               
grant, promulgate  a regulation  that is going  to have  a direct                                                               
effect on somebody.  And what this is not very  good at doing, is                                                               
dealing with  the indirect effects  of these kinds of  things and                                                               
trying  to say  'Well, what  is the  significance in  an indirect                                                               
way' and the only way that the  other states have been able to do                                                               
that is to say 'Well, if some  company is going to be involved in                                                               
this and  if you own a  certain dollar amount or  percentage, you                                                               
can't participate.'                                                                                                             
                                                                                                                                
REPRESENTATIVE GRUENBERG: So that would  be the definition of the                                                               
term of  the word 'matter.' In  your report, the area  that talks                                                               
in terms of an appearance of  an impropriety - that's around page                                                               
37 - 'The  Code of Ethics prohibits  specifically and exclusively                                                               
efforts on the  part of the public officer  directed to obtaining                                                               
a benefit.' That's  at the top of page 37.  'Unlike other ethical                                                               
rules  applicable  in  another  context,  such  as  the  Code  of                                                               
Judicial Conduct'  - canon 2  - 'The Ethics Act  doesn't prohibit                                                               
activity  that  creates  merely  an  appearance  of  impropriety.                                                               
Instead, to violate the Ethics  Act, the public officer must take                                                               
action that is actually improper  that is intended to benefit the                                                               
officers own  interest.' And  then you  cite the  regulation that                                                               
specifically says  that. Before  I get to  the legal  question, I                                                               
have a  factual question, 'Did  you check and see  whether either                                                               
the  Governor or  any of  his family  or Renkes'  family had  any                                                               
interest in KFx?'                                                                                                               
                                                                                                                                
MR. BUNDY: I think I asked the Governor and he said no.                                                                         
                                                                                                                                
3:12:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG:  Did you ask  Mr. Renkes if any  of his                                                               
family had any interest?                                                                                                        
                                                                                                                                
MR. BUNDY: No, I didn't. I just looked at what he had.                                                                          
                                                                                                                                
REPRESENTATIVE  GRUENBERG: Back  to the  legal question.  We have                                                               
such  a much  larger  executive branch  than  we've had  10-15-20                                                               
years  ago. And  now  we  have people  in  there  like these  new                                                               
administrative law judges, and we  have, and I guess the attorney                                                               
general is the  cabinet officer most closely  associated with the                                                               
judiciary and  the legal system.  Do you think people  in certain                                                               
positions, because as I was  mentioning, these new administrative                                                               
law  judges do  not have  to file  financial disclosures,  do you                                                               
believe that some people like  the attorney general specifically,                                                               
maybe some other officials, should  be required to avoid even the                                                               
appearance  of an  impropriety?  I'm talking  about amending  the                                                               
law.                                                                                                                            
                                                                                                                                
MR. BUNDY:  That is  certainly the  case for  judges as  you just                                                               
said. And  I would think  that an administrative law  judge ought                                                               
to follow at  least as applicable in  the administrative context,                                                               
the canons  of judicial conduct. I  realize there is no  law that                                                               
requires them to  do that right now, but it  sounds like a pretty                                                               
good idea to  me. As regards to high  level government officials,                                                               
that  is a  tough  call because  I don't  know  what exactly  the                                                               
debates were  on the executive  branch Ethics Act. But  on Ethics                                                               
Acts that's  always the tension  between what  am I giving  up to                                                               
become a  public servant verses what  the public ought to  have a                                                               
right to expect.  And the appearance of impropriety  can exist in                                                               
a lot of ways in which  no reasonable person, when they look into                                                               
the fact, would decide there  was any actual impropriety. The act                                                               
itself as  it stands now,  in a way, tries  to deal with  that by                                                               
saying 'Look, before you weigh  into anything that somebody might                                                               
think is  improper, you  must get  a third  party determination.'                                                               
That's what  I've said is  what the Attorney General  should have                                                               
done and didn't do. That, in  a way, is appearance of impropriety                                                               
standard.                                                                                                                       
                                                                                                                                
3:15:41 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  What is the  kick-off point here? When  I realize                                                               
that there could be an appearance?                                                                                              
                                                                                                                                
MR. BUNDY:  I've said that  it can't be  when you realize  it. It                                                               
has to  be when a  reasonable public officer would  have realized                                                               
it. Now, what does that mean?                                                                                                   
                                                                                                                                
CHAIR SEEKINS: That's tough.                                                                                                    
                                                                                                                                
MR. BUNDY: It  means probably when I own stock  in a company that                                                               
can benefit from something I do.                                                                                                
                                                                                                                                
CHAIR SEEKINS:  And I  think we'll  get into  how we're  going to                                                               
treat administrative  law judges  at another  time. But  I think,                                                               
let's  go on  with what  I have  in front  of us  today. Max,  go                                                               
ahead.                                                                                                                          
                                                                                                                                
3:16:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG: You  were the  federal counterpart  to                                                               
the attorney general  for a number of years. You  were the United                                                               
States Attorney for this state.                                                                                                 
                                                                                                                                
MR. BUNDY: Yes, for the District of Alaska.                                                                                     
                                                                                                                                
REPRESENTATIVE  Gruenberg:  Yes.  Are  US  Attorneys  held  to  a                                                               
standard of  conduct? Is there  some kind  of an ethical  code US                                                               
attorneys have to follow?                                                                                                       
                                                                                                                                
MR. BUNDY: There is.                                                                                                            
                                                                                                                                
REPRESENTATIVE GRUENBERG:  Would you  be willing to  provide that                                                               
to the members here?                                                                                                            
                                                                                                                                
MR. BUNDY: Sure.                                                                                                                
                                                                                                                                
CHAIR SEEKINS: Oh sure, but not today.                                                                                          
                                                                                                                                
3:16:53 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: I'm  just making that clear.  Other questions from                                                               
members on point here?                                                                                                          
                                                                                                                                
REPRESENTATIVE  GRUENBERG: I'll  ask one.  Are you  aware of  any                                                               
general standard of code conduct for attorneys general?                                                                         
                                                                                                                                
MR. BUNDY:  No. I didn't  think that  there was one.  Maybe there                                                               
is, I never looked at it.                                                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG:  I was  just wondering  if, what  is it                                                               
called, the National Conference of Attorneys General have?...                                                                   
                                                                                                                                
MR.  BUNDY:  National  Association  of  Attorneys  General,  they                                                               
might,  but I  doubt  it,  because I  think  that most  attorneys                                                               
general would be covered by their own state Ethics Act.                                                                         
                                                                                                                                
3:17:34 PM                                                                                                                    
                                                                                                                                
CHAIR  SEEKINS:  Mr.  Bundy, you  mentioned  the  Asencio  report                                                               
earlier. Could you help us out  by putting the appearance of that                                                               
report and the  context of it in juxtaposition to  when the first                                                               
report was made in the Anchorage Daily News?                                                                                    
                                                                                                                                
MR. BUNDY: As  I recall, Asencio picked up the  88C filing of KFx                                                               
that  it  had entered  into  a  letter  of intent  with  Kanturk.                                                               
Asencio  has a  reputation  over  the years  as  a short  seller,                                                               
meaning  that they'll  agree  to buy,  they'll  borrow stock  and                                                               
agree to  return it at  a certain price,  hope it goes  down, and                                                               
they can buy  it then and return it. They'll  borrow it, sell it,                                                               
agree to return it at a certain  time in the future and when that                                                               
time in  the future occurs, they're  hoping it goes down  so that                                                               
they  can then  buy  it  then and  replace  the  stock that  they                                                               
borrowed,  so to  speak.  Supposedly, Asencio  is  quite a  short                                                               
seller.  Anyway, it  was after  that  came out,  Asencio did  its                                                               
research  back in  the  SEC  filings of  KFx  and discovered  the                                                               
relationship between Kanturk and KFx  and put some information on                                                               
the  Internet which  was picked  up by  a Wall  Street journalist                                                               
columnist who  then wrote a column  who said 'Look at  this, this                                                               
looks bad.' That is my understanding.                                                                                           
                                                                                                                                
CHAIR SEEKINS:  You know how  close after the Asencio  report was                                                               
out there that the Daily News started reporting the matter?                                                                     
                                                                                                                                
MR. BUNDY: I think it was pretty close in time.                                                                                 
                                                                                                                                
CHAIR SEEKINS: Within a day or two maybe?                                                                                       
                                                                                                                                
MR. BUNDY: Could be.                                                                                                            
                                                                                                                                
3:19:52 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: I've been told that  it was very close and that it                                                               
was very close in context to  the Asencio report as well, but did                                                               
you ever have a chance to review those two?                                                                                     
                                                                                                                                
MR. BUNDY: I've certainly reviewed  the Daily News report and the                                                               
Asencio report was one of the first things I looked at.                                                                         
                                                                                                                                
CHAIR SEEKINS: When we look  at the entities involved again, just                                                               
let me  see if I understand  correctly. There is KFx,  which is a                                                               
publicly  traded company,  and  they are  the  developers of  the                                                               
technology. They are not in the  coal business. So they are not a                                                               
coal company  of any  kind. They  are not trying  to buy  or sell                                                               
coal; they are just trying  to process it and take sub-bituminous                                                               
coal and convert it into the same BTU rating as bituminous coal.                                                                
                                                                                                                                
MR. BUNDY: That's not exactly right  because I think they do have                                                               
holdings in a  mine in Wyoming. They may have  some interest in a                                                               
mine in Wyoming.                                                                                                                
                                                                                                                                
CHAIR SEEKINS: But  they were not the company that  was trying to                                                               
develop the Beluga coalfields.                                                                                                  
                                                                                                                                
MR. BUNDY: They didn't own the Beluga coal. No.                                                                                 
                                                                                                                                
3:20:54 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  Who was the  company that was actually  trying to                                                               
buy and sell the coal then and process it in the meantime?                                                                      
                                                                                                                                
MR. BUNDY: The idea  was going to be Kanturk was  going to be the                                                               
entity that was going  to cut a deal with the  owners of the coal                                                               
- be it Placer  Dome or Bass Hunt Interests -  and then they were                                                               
going to  buy the coal,  process it  at Chuitna Beluga,  and then                                                               
sell it.  They were going  to be  the sellers to  the potentially                                                               
the Taiwanese.  They were  also looking at  the Japanese  and the                                                               
Koreans and other...                                                                                                            
                                                                                                                                
CHAIR SEEKINS: Did you also call them an investment bank?                                                                       
                                                                                                                                
MR. BUNDY: That's what they call themselves.                                                                                    
                                                                                                                                
CHAIR SEEKINS:  They call  themselves that.  But in  effect, they                                                               
were acting as buyers and sellers of coal.                                                                                      
                                                                                                                                
MR. BUNDY: That's what they proposed to do.                                                                                     
                                                                                                                                
CHAIR  SEEKINS:  And they  entered  into  agreement with  KFx  to                                                               
license the technology  to be able to process the  coal and if it                                                               
worked, they'd have a saleable product.                                                                                         
                                                                                                                                
MR. BUNDY: Right.                                                                                                               
                                                                                                                                
CHAIR SEEKINS: Okay.                                                                                                            
                                                                                                                                
3:22:03 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  And that memorandum of  understanding with Taiwan                                                               
was 'We'll buy  this coal, but only if it  meets this standard on                                                               
the spot market for two years or something.'                                                                                    
                                                                                                                                
MR. BUNDY: Well, it had to meet  their standards and it had to be                                                               
at a competitive price.                                                                                                         
                                                                                                                                
CHAIR SEEKINS: Right. So does Kanturk still exist?                                                                              
                                                                                                                                
MR. BUNDY: Yes.                                                                                                                 
                                                                                                                                
CHAIR SEEKINS: Are they still working on this project?                                                                          
                                                                                                                                
MR. BUNDY: Yes.                                                                                                                 
                                                                                                                                
CHAIR SEEKINS:  Has anybody  indicated that  they don't  have the                                                               
financial where-with-all to be able to do it?                                                                                   
                                                                                                                                
MR. BUNDY: They claim to have it.                                                                                               
                                                                                                                                
3:22:40 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  So you'd  think, pretty  good company  still? You                                                               
wouldn't say this is a bank that just stinks, would you?                                                                        
                                                                                                                                
MR. BUNDY: I wouldn't, although, with  a caveat that they are not                                                               
a publicly  traded company  so they don't  file reports,  but the                                                               
principals seem to be people of some substance.                                                                                 
                                                                                                                                
CHAIR  SEEKINS:  So, then  it  would  appear  if  you were  in  a                                                               
position where  you were  trying to do  some kind  of evaluation,                                                               
based on  what you know  today, as to whether  or not this  was a                                                               
proposal  that  the State  of  Alaska  should pursue,  trying  to                                                               
market this coal, with using what  you may believe to be close to                                                               
commercial viable technology to be able  to do so, if you were in                                                               
the Executive  office of the  State of  Alaska, would you  try to                                                               
pursue that goal?                                                                                                               
                                                                                                                                
MR. BUNDY:  If I  were in  the executive office  of the  State of                                                               
Alaska, probably a lot of  things would be done differently. But,                                                               
I came to the conclusion, which I  think - I didn't write it down                                                               
here  - but  it informs  what I  said, that  had Mr.  Renkes been                                                               
involved or not involved, that  the process would have turned out                                                               
the same.                                                                                                                       
                                                                                                                                
3:24:05 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: Would  Mr. Renkes, would you have said  that if he                                                               
knew that  this technology was out  there, if he didn't  bring it                                                               
into the  mix, if he did,  would that have been  negligent on his                                                               
part?                                                                                                                           
                                                                                                                                
MR. BUNDY:  I don't  know about that,  but certainly  it wouldn't                                                               
have been consistent with what  he knew the Governor wanted done,                                                               
which was try and figure out a way to develop this coal.                                                                        
                                                                                                                                
CHAIR SEEKINS:  So his boss said  'Look, I know you.  I know your                                                               
involvement, you've been  with me for years, you were  with me on                                                               
the energy committee in the US  Senate, I know of your ability to                                                               
be able  to negotiate things,  and I'm  putting you in  charge of                                                               
trying  to get  this deal  done  so we  can sell  Alaska coal  to                                                               
Taiwan.'                                                                                                                        
                                                                                                                                
MR. BUNDY: Well,  I'm not sure that those words  were said, but I                                                               
got the  strong indication  from the  Governor, from  Mr. Renkes,                                                               
and from  Margie Johnson,  that that's what  they believed  to be                                                               
the case.                                                                                                                       
                                                                                                                                
3:25:01 PM                                                                                                                    
                                                                                                                                
CHAIR  SEEKINS:   And  I'm  totally  paraphrasing.   I  hope  you                                                               
understand  that too.  I'm  not  trying to  make  any quotes  out                                                               
there. So  would you think, then,  that it would be  wise for the                                                               
attorney  general, knowing  what  you know  today,  to say  'Hey,                                                               
danger here.  Danger. This is  a snake  oil deal here,  keep away                                                               
from it.'                                                                                                                       
                                                                                                                                
MR. BUNDY:  From the  State of  Alaska's point  of view,  I don't                                                               
see,  if you  assume that  the  goal you  want to  achieve is  to                                                               
develop  that resource  over there  with an  open pit  coal mine,                                                               
that this  deal with the  Republic of  China, with the  idea that                                                               
the  Republic  isn't  going  to   buy  it  probably  unless  it's                                                               
processed, the State of Alaska,  there's no downside to the State                                                               
of Alaska on that. If you assume  that that's the way you want to                                                               
go.                                                                                                                             
                                                                                                                                
CHAIR  SEEKINS:  What financial  commitment  would  the State  of                                                               
Alaska have had in this deal if it came together?                                                                               
                                                                                                                                
MR. BUNDY:  They didn't have any  other than the time  and effort                                                               
of state employees  and keeping all these people  talking to each                                                               
other.                                                                                                                          
                                                                                                                                
3:26:19 PM                                                                                                                    
                                                                                                                                
CHAIR  SEEKINS: So  other  than trying  to  promote the  eventual                                                               
conclusion of  a sale  of a  coal to a  willing buyer,  the state                                                               
didn't have any money at risk?                                                                                                  
                                                                                                                                
MR. BUNDY: I don't think so.                                                                                                    
                                                                                                                                
SENATOR FRENCH: On that point Mr....                                                                                            
                                                                                                                                
CHAIR SEEKINS: Go ahead Senator French.                                                                                         
                                                                                                                                
SENATOR FRENCH:  The MOU pledged the  state to not only  help the                                                               
permit processing, but also with infrastructure development.                                                                    
                                                                                                                                
MR. BUNDY: Right. And that was  one of the things that Mr. Renkes                                                               
pointed out,  that he made sure  of putting into this  that, this                                                               
would not be in  any way subject to all of the  laws in place, at                                                               
the time, that it was  a non-binding agreement. That nobody could                                                               
be sued for not performing and  that the original Kang draft said                                                               
'We want  you to do  all of these  things." And the  Renkes draft                                                               
that came back  said that we would  do this so long  as they were                                                               
consistent with the  laws of the state and of  the United States.                                                               
In other words,  whatever processes that needed to  go through to                                                               
get this done,  they would have to be gone  through. There was no                                                               
shortcuts here.  So, it was  a statement  of intent -  that we'll                                                               
try and help.                                                                                                                   
                                                                                                                                
CHAIR SEEKINS:  And that  pretty much is  standard fare  if we're                                                               
opening the Pogo mine, if  we're opening someplace else, that the                                                               
state  would  say  'In  order   to  develop  this  very  valuable                                                               
resource, we  do understand that  we do have  some responsibility                                                               
to  help develop  infrastructure to  do  that in  the future  but                                                               
you're not  committed to it. We  aren't putting any money  on the                                                               
line, we aren't signing any blank checks.'                                                                                      
                                                                                                                                
MR. BUNDY: There were no blank  checks signed, it was simply that                                                               
'We want this to  happen and we'll try and do  from our side what                                                               
we can to make  it happen if you guys do on  your side. Have your                                                               
people buy the coal. We think it's a good thing.'                                                                               
                                                                                                                                
CHAIR SEEKINS:  And the administration  cannot allocate  funds to                                                               
build infrastructure. That would be a legislative function.                                                                     
                                                                                                                                
MR. BUNDY: I suppose it would.                                                                                                  
                                                                                                                                
CHAIR SEEKINS: Thank  you. Other questions on  this these points?                                                               
Representative Gara, did you have your question?                                                                                
                                                                                                                                
3:28:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA:  Here's  something  that  has  also  always                                                               
concerned me  about this deal, and  I don't know if  I'm right or                                                               
wrong, and it goes back to  if KFx really was the best technology                                                               
then more power  to everybody, great, and if it  wasn't, then why                                                               
wasn't anybody else ever brought  in. And so, during your review,                                                               
tell me what you found. My  understanding is, and this has always                                                               
raised  a question  for me,  that the  Governor and  the attorney                                                               
general went straight to KFx. They  were like 'We're going to get                                                               
the Taiwanese delegation in touch  with KFx. That's the product.'                                                               
And  in  those  early  negotiations, my  understanding  is,  they                                                               
didn't bring the  coal industry in, they didn't  bring anybody in                                                               
from the  coal companies to  say 'Which  product do you  think is                                                               
best?'  They just  went straight  to KFx.  And I  always wondered                                                               
whether  that  short-circuited the  whole  review  process as  to                                                               
whether or  not there might have  been a better company  than KFx                                                               
in the minds of  the coal company. Did it ever  strike you as odd                                                               
that the coal owners weren't involved?                                                                                          
                                                                                                                                
MR.  BUNDY: It  did. And  it  struck me  as odd  for a  different                                                               
reason. I  think the  coal companies  weren't convinced  that any                                                               
technology was appropriate.  They didn't want to  get involved in                                                               
trying  to beneficiate  their coal  at all.  They just  wanted to                                                               
sell  it  to  somebody  -  the people  that  actually  owned  the                                                               
resource, the leaseholders.  But it was equally clear  to me that                                                               
Taiwan  was going  to  be  dragged kicking  and  screaming -  the                                                               
technical people -  into this thing. And this was  a promotion to                                                               
try and get a deal for Alaska coal,  and I think a lot of it was,                                                               
'KFx says they've got this thing,  nobody else says that they can                                                               
do this for us. Let's push it  and get it rolling. It sounds like                                                               
a great deal. We can have an MOU and it'll look good.'                                                                          
                                                                                                                                
CHAIR SEEKINS: Questions at this point?                                                                                         
                                                                                                                                
3:31:16 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  Let me just get  into the complexity of  the case                                                               
that  you had  to look  at here.  I mean  I'm impressed  with the                                                               
amount of work and research that  you did. Did you do this mostly                                                               
by yourself or did you have other people help you?                                                                              
                                                                                                                                
MR. BUNDY:  I had a paralegal  who handled the documents  and set                                                               
up interviews and this and that  - so court reporters and things.                                                               
I had her looking  on the Net all the time  for the latest action                                                               
on all  of these blogs that  exist in the financial  world that I                                                               
had no  idea of  before. I  had an associate,  a second  or third                                                               
year  associate, lawyer  work on  some of  the background  on the                                                               
ethics acts in other places and  whatnot. And finally at the very                                                               
end, I called  out the troops. I asked a  Jonna Lindamuth to work                                                               
with me, who's  a young partner in  our office, and I  have a lot                                                               
of  respect for  her legal  skills so  she and  I worked  on this                                                               
final report together.                                                                                                          
                                                                                                                                
CHAIR SEEKINS: In  doing it - f  you were to take a  scale one to                                                               
ten  and say  one is  simple routine  case. Ten  is an  extremely                                                               
complicated case -  lots of research, lots of  inter-tie, lots of                                                               
stuff  that was  very mind  bending. Where  would you  place this                                                               
case in terms of that effort?                                                                                                   
                                                                                                                                
MR. BUNDY: Well, in terms  of just sheer numbers of transactions,                                                               
this  isn't the  end  of  world. In  terms  of  shadings of  what                                                               
happened in  the relationships among people  and people's motives                                                               
for saying what  they said and doing what they  did and trying to                                                               
get  to what  the  actual  facts and  motivations  were, this  is                                                               
difficult.  If  I were  a  prosecutor,  I  would start  out  very                                                               
enthusiastic as an investigator of  this case thinking that I had                                                               
a good  case. And  as I  investigated it  farther and  farther, I                                                               
would become less enthusiastic until,  finally, as I concluded, I                                                               
wouldn't bring the case.                                                                                                        
                                                                                                                                
CHAIR  SEEKINS:  I   wanted  to  bring  to   your  attention  one                                                               
memorandum that  I'm sure that  you have.  It was dated  June 14,                                                               
2004, to the  Governor from Attorney General Renkes.  I wonder if                                                               
your staff could give that to Mr. Bundy?                                                                                        
                                                                                                                                
MR. BUNDY: What's this again?                                                                                                   
                                                                                                                                
CHAIR SEEKINS: It's  a memorandum that was probably  part of your                                                               
body of  research. I  just wanted  you to  take a  look at  it as                                                               
follow up.                                                                                                                      
                                                                                                                                
MR. BUNDY: Okay.                                                                                                                
                                                                                                                                
CHAIR SEEKINS: In  looking at that memorandum,  would the content                                                               
of that memorandum  lead you to believe that there  was a cut and                                                               
dried case against the Attorney  General for conflict of interest                                                               
of violation of ethics laws?                                                                                                    
                                                                                                                                
3:34:40 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: Well, not in itself no.  I mean the crux of the matter                                                               
was whether  or not in  promoting or participating in  this trade                                                               
agreement trying  to work  out a sale  of processed  coal whether                                                               
his own  share holding in  KFx were  involved. One of  the things                                                               
that -  I did receive a  brief from Mr. Renkes'  attorney and one                                                               
of the arguments  that they made was that, well,  he never really                                                               
tried to benefit KFx. In fact,  what he did was restrain what KFx                                                               
was trying  to do or  Kanturk was trying to  do to get  the state                                                               
further involved.  My conclusion  was that  it didn't  matter. If                                                               
you're a state official and if  you have a significant interest -                                                               
potential  financial  interest  in  the matter  -  you  shouldn't                                                               
participate.                                                                                                                    
                                                                                                                                
3:35:31 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS: Senator French, go ahead.                                                                                        
                                                                                                                                
SENATOR  FRENCH: On  that memorandum,  since you  brought it  up,                                                               
while  you  have  it  in  front of  you,  there're  a  couple  of                                                               
sentences  I'd like  to  ask  you about.  At  the  end of  second                                                               
paragraph the Attorney General writes,  'It is important that Mr.                                                               
Kang's departure  from this  position does  not cause  the Alaska                                                               
Taiwan  coal  development project  to  lose  momentum.' And  then                                                               
under  the request  paragraph he  says, in  order to  advance the                                                               
Alaska Taiwan  coal development,  we need  a commitment  etc. And                                                               
then  he  goes  on  to  say later  in  that  paragraph,  'We  are                                                               
confident that  Beluga coal can  be processed  by KFx to  meet or                                                               
exceed  Thai power's  technical specifications.'  Now this  is an                                                               
official action, is it not?                                                                                                     
                                                                                                                                
MR. BUNDY: Yes, it's a briefing memo for the Governor.                                                                          
                                                                                                                                
SENATOR FRENCH: It's  an official action and if  you just changed                                                               
one fact, the size of his investment.  If he had say 1 percent of                                                               
KFx stock,  you would find  this to  be him violating  the Ethics                                                               
Act?                                                                                                                            
                                                                                                                                
MR. BUNDY: Well, it would be a different issue.                                                                                 
                                                                                                                                
SENATOR  FRENCH: It  would be  a totally  different issue  and in                                                               
your  memo -  in  your conclusion  you state  that  it's a  close                                                               
question.                                                                                                                       
                                                                                                                                
MR. BUNDY: If he would have  had one percent, he would have owned                                                               
many thousands of shares.                                                                                                       
                                                                                                                                
SENATOR  FRENCH: Right,  right and  in your  analysis it  was the                                                               
fact that his  investment was insignificant that led  you to your                                                               
conclusion.                                                                                                                     
                                                                                                                                
MR. BUNDY: Yes.                                                                                                                 
                                                                                                                                
SENATOR FRENCH: But if you change  that fact, then you change the                                                               
result of your opinion of this memorandum.                                                                                      
                                                                                                                                
MR. BUNDY: Well, yes I think that's fair.                                                                                       
                                                                                                                                
CHAIR SEEKINS:  I guess there.  Does this memorandum  alone prove                                                               
beyond a reasonable doubt that  the attorney general violated the                                                               
state Ethics Act?                                                                                                               
                                                                                                                                
MR. BUNDY: Well no, it doesn't prove anything.                                                                                  
                                                                                                                                
CHAIR SEEKINS:  Thank you. Other  questions? I want to  make sure                                                               
that the members have opportunity here. Representative Gara.                                                                    
                                                                                                                                
3:37:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA: Mr.  Chair, I  haven't seen  that memo  and                                                               
maybe I'm  misheard something, but  is that Mr. Renkes  saying to                                                               
the Governor  that he's  confident that  the KFx  technology will                                                               
work? And  if that's the case,  in your evaluation of  this whole                                                               
process,  is it  your understanding  that very  few people  share                                                               
that confidence in KFx other than Mr. Renkes? Or do you think...                                                                
                                                                                                                                
MR. BUNDY: Oh,  no, no. What I'm saying is  that the coal company                                                               
people had  not really been  all that excited about  developing a                                                               
mine based upon  process technology. They thought  - they weren't                                                               
sure, they didn't  know, but the KFx and the  Kanturk people were                                                               
sure of  this and had  invested a  tremendous amount of  money in                                                               
that  process  because  they  believed   it  was  economical  and                                                               
technologically  sound.  That was  one  of  the things  that  was                                                               
striking is  about how much  money these people have  invested in                                                               
this process that they're building in Wyoming.                                                                                  
                                                                                                                                
CHAIR  SEEKINS:  And  venture capitalists  were  willing  to  put                                                               
another $48 million in just not too long ago.                                                                                   
                                                                                                                                
MR. BUNDY:  Right, I  mean they  - and they  obviously had  - the                                                               
Venners' guys  themselves had obviously  invested a lot  of their                                                               
own money in this thing over the years.                                                                                         
                                                                                                                                
CHAIR  SEEKINS: So  there's somewhere  people with  money believe                                                               
that this technology's going to prove out.                                                                                      
                                                                                                                                
MR.  BUNDY: Yes  and they've  got technical  stuff this  thick. I                                                               
mean they  have lots  of engineers  working for  them and  all of                                                               
that.                                                                                                                           
                                                                                                                                
CHAIR   SEEKINS:  Questions,   other  questions.   Representative                                                               
McGuire.                                                                                                                        
                                                                                                                                
3:39:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   McGUIRE:  A   little  bit   different  line   of                                                               
questioning but this  is - out of  all of this, this  is the part                                                               
that we'll  be left with  as policy makers.  Is the part  of your                                                               
opinion that  does say that  Mr. Renkes should have  requested an                                                               
opinion   regarding   his   involvement,  the   ethics   of   his                                                               
involvement, in writing?  And my concern and  I'm referencing the                                                               
special order  that Senator French  had offered on the  floor and                                                               
one of the interesting parts that  you got into was the fact that                                                               
disclosure  isn't a  defense of  conflict of  interest, and  that                                                               
it's simply  not enough that  the attorney general  disclosed his                                                               
investment and  went forward. But  what's interesting is  that at                                                               
the end, what  we're left with is,  in point of fact,  that if he                                                               
had done  that properly, there  wouldn't have been  any violation                                                               
of the Ethics Code.                                                                                                             
                                                                                                                                
MR. BUNDY:  It's more than  that. It's not just  disclosure; it's                                                               
disclosure and determination. I've got  an interest here that you                                                               
need to know about.  Here's what it is. This is  how I believe it                                                               
relates  to this  matter. That's  why I  think that  there is  an                                                               
issue. I need somebody else  to determine this and typically when                                                               
that happens  for almost all  state employees  is it goes  to the                                                               
Attorney General's  office and an assistant  Attorney General who                                                               
is assigned  to these  things writes an  ethics opinion  and says                                                               
either  you can  go  forward  or you  shouldn't  go forward.  And                                                               
that's what didn't happen here.                                                                                                 
                                                                                                                                
3:40:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MCGUIRE:  And then  just looking  at it  though in                                                               
terms of  the practical side,  how would this have  really played                                                               
out?  I think  you've alluded  to it  earlier, but  clearly there                                                               
were  conversations that  went on  between the  Governor and  the                                                               
attorney  general  regarding his  expertise,  the  fact that  the                                                               
Governor wanted  him to  participate because  of his  past energy                                                               
committee experience  and knowledge  of the process.  All parties                                                               
seemed  aware  so had  the  attorney  general gone  through  that                                                               
formal  process and  had it  written out,  would the  result have                                                               
been any different?                                                                                                             
                                                                                                                                
MR. BUNDY: Well,  I'm not sure for a couple  reasons. Number one,                                                               
the result  would have been  different at least in  this respect,                                                               
there  would have  been  a  record of  the  consideration of  the                                                               
matter before  it was  taken so  that the  public could  see that                                                               
process.  Second,   my  guess  is  that,   confronted  with  this                                                               
difficult question  in the  Ethics Act,  would the  Governor have                                                               
just made  the decision? My guess  is, and I don't  know, that he                                                               
may well have said I'm going  to send this to outside counsel for                                                               
an opinion  to make  sure that the  public is  satisfied. Because                                                               
typically for everybody else, it's  the attorney general who does                                                               
the  opinion, but  that  can't happen  here. So  it  would be  to                                                               
outside counsel and then you  would have a process of disclosure,                                                               
consideration, and  resolution. And that would  be transparent to                                                               
the public.                                                                                                                     
                                                                                                                                
REPRESENTATIVE MCGUIRE: In  wrapping up, I just  think that's the                                                               
part that  you will  be left  with to wrestle  with to  make sure                                                               
those guidelines  are laid out clearly  in a way that  people can                                                               
understand.  It becomes  a little  bit  circular in  that if  the                                                               
ultimate decision that you've made  was made in Mr. Renkes' mind,                                                               
that he  knew that he had  an interest, but he  didn't believe it                                                               
to  be significant,  at what  point does  that duty  arise to  go                                                               
ahead and identify  a potential conflict of interest?  You see my                                                               
point. There is a bit of circularity.                                                                                           
                                                                                                                                
MR. BUNDY: I know that's a  difficult one. The only thing I could                                                               
come  up  with  was  an objective,  reasonable,  public  official                                                               
standard.  In this  case, that's  not  really applicable  because                                                               
it's clear  that Mr. Renkes  identified this as an  ethical issue                                                               
himself.  Not on  the  terms  of significance,  but  in terms  of                                                               
official  action. He  didn't believe  he had  taken any  official                                                               
action so  he thought about  it and just  resolved it in  one way                                                               
that I think was wrong.                                                                                                         
                                                                                                                                
CHAIR SEEKINS: Representative Gruenberg.                                                                                        
                                                                                                                                
3:43:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG: Thank you Mr.  Chair. I'm going back to                                                               
what  I see  as a  core issue  here, which  is the  appearance of                                                               
impropriety and your report relies  upon this regulation cited in                                                               
footnote 7, on page 37, of  your report. It's 9 AAC 52.010, which                                                               
states 'An appearance  of impropriety does not  establish that an                                                               
ethical violation  exists.' However,  the text  of the  act talks                                                               
several times - and I'm  referring for example to AS 39.52.110(a)                                                               
-  the first  sentence  - 'The  Legislature  reaffirms that  each                                                               
public officer  holds office as  a public trust.' And  looking up                                                               
above -  39.52.110(a)(3) - 'Holding  public office  or employment                                                               
is a  public trust.' - and  that as one safeguard  of that trust,                                                               
the  people  require public  officers  to  adhere  to a  code  of                                                               
ethics.                                                                                                                         
                                                                                                                                
I'm wondering  from the  plain text  of the  act itself,  how did                                                               
people reach the conclusion that it is  not a violation to - in a                                                               
situation involving particularly a  high placed public official -                                                               
have a significant appearance of an impropriety?                                                                                
                                                                                                                                
(Senator Green and Representative Anderson both arrive)                                                                         
                                                                                                                                
MR. BUNDY: Well  I think from the - I  can't answer that question                                                               
about what they thought when they passed this regulation.                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG:  Well what  I'm wondering from  a legal                                                               
sense  Mr. Chair  is whether,  in  fact, that  regulation may  be                                                               
improper and a violation of the  act itself. Because as you know,                                                               
a regulation  can be  struck down if  it violates  the underlying                                                               
legislation. I'm wondering if that goes too far.                                                                                
                                                                                                                                
MR.  BUNDY:  It  might.  When   you  look  at  what  the  overall                                                               
statements of the  Act are, and then look at  what their specific                                                               
prohibitions  are  though,  it  seems to  be  at  least  arguably                                                               
consistent and entitled  to what we call  chevron deference under                                                               
the  agency   administering  the   act  is  given   deference  in                                                               
construing it.                                                                                                                  
                                                                                                                                
REPRESENTATIVE GRUENBERG: But that, Mr.  Chair, under the laws of                                                               
this state  is a sliding  scale depending upon whether  the court                                                             
retains expertise  in this area. And  I would be hard  pressed to                                                               
say the  judges in courts  of law do not  retain a high  level of                                                               
expertise in determining what's ethical.                                                                                        
                                                                                                                                
3:46:49 PM                                                                                                                    
                                                                                                                                
CHAIR SEEKINS:  I will bet, Representative  Gruenberg, that we'll                                                               
get into this discussion as time goes forward in this session.                                                                  
                                                                                                                                
MR. BUNDY:  The Governor has asked  me this afternoon to  come up                                                               
with something  consistent with my recommendation  on legislation                                                               
or regulation.                                                                                                                  
                                                                                                                                
CHAIR  SEEKINS:  That's good.  I  appreciate  that. I  appreciate                                                               
you're being here and spending  this time with us this afternoon.                                                               
I know  it's been long and  somewhat repetitive, but I'd  like to                                                               
ask  you just  an opinion  question at  the moment.  I heard  the                                                               
Governor say that he was  asking Representative Croft to withdraw                                                               
his complaint with the personnel  board. Would you make that same                                                               
recommendation based on the facts and the law?                                                                                  
                                                                                                                                
MR. BUNDY: I just have to  say Representative Croft has the right                                                               
to make the complaint and that should be his decision.                                                                          
                                                                                                                                
CHAIR SEEKINS: That's good. Representative McGuire.                                                                             
                                                                                                                                
REPRESENTATIVE MCGUIRE: Along the same  lines. Is it clear to you                                                               
in any of your  research of the Ethics Code or  any of the ethics                                                               
opinions -  it sounds as  though there weren't  many - as  to the                                                               
penalties that are laid out for  the personnel board? In terms of                                                               
breaching the Ethics Act itself,  which aspects of the Ethics Act                                                               
are more serious than  others? And I'm sorry to ask  it in such a                                                               
complicated way, but  on the most serious question  of whether or                                                               
not  the attorney  general  violated his  duties  by engaging  in                                                               
conduct that benefited him personally,  you ruled against it. But                                                               
on  the  second  question  where  you asked  if  he  should  have                                                               
informed the Governor  of that conflict you said yes.  So in some                                                               
sense  he did  break  the Ethics  Code  - not  as  to the  larger                                                               
question, but  as to the  lower question.  Do you have  any sense                                                               
from any  of your ethics reading  as to whether or  not penalties                                                               
should be lesser in that case or more?                                                                                          
                                                                                                                                
MR. BUNDY: Well  in the case of the Ethics  Act, it's no-harm-no-                                                               
foul because of  that statute. But obviously it seems  to me that                                                               
a violation  of a  procedural requirement  that did  not actually                                                               
result in a  violation of the Ethics Act is  less serious than an                                                               
actual violation of  the Ethics Act. I'm not  saying that failure                                                               
to  abide by  the procedural  requirements couldn't  have avoided                                                               
all of this stuff that we've gone through here. But, none-the-                                                                  
less, I  think most people would  agree that it's not  as serious                                                               
as a substantive violation of the Code of Ethics.                                                                               
                                                                                                                                
REPRESENTATIVE   MCGUIRE:  So   for   example   the  penalty   of                                                               
impeachment.                                                                                                                    
                                                                                                                                
3:50:01 PM                                                                                                                    
                                                                                                                                
MR. BUNDY: I don't know  anything about what grounds the attorney                                                               
general might be impeached on. I  couldn't - that's far beyond my                                                               
ability to opine.                                                                                                               
                                                                                                                                
REPRESENTATIVE  MCGUIRE:  But  the  impeachment  is  one  of  the                                                               
penalties  that  is set  out  as  far  as the  Personnel  board's                                                               
recommendations that can be made.                                                                                               
                                                                                                                                
MR. BUNDY: Well, the attorney general,  I think, only can be - he                                                               
serves at the pleasure of the  Governor so the Governor could - I                                                               
don't know that impeachment even  applies. I just assumed that if                                                               
the  Governor wanted  to fire  any of  his commissioners  that he                                                               
could do  it in the drop  of a hat. And  if he wanted to  talk to                                                               
them, he could talk to them and  if he wanted to woodshed them he                                                               
could  woodshed  and if  he  wanted  to  admonish them  he  could                                                               
admonish them. He's the boss.                                                                                                   
                                                                                                                                
REPRESENTATIVE MCGUIRE: In wrapping up,  do you think that firing                                                               
the  Attorney General  for  violating a  procedural  duty he  had                                                               
under the Ethics Act would, in your opinion, be severe?                                                                         
                                                                                                                                
MR. BUNDY: Well yes, it's the most severe penalty.                                                                              
                                                                                                                                
CHAIR  SEEKINS: If  I'm correct,  you said  as a  prosecutor, you                                                               
would have been enthusiastic. Your  enthusiasm waning at the end,                                                               
you wouldn't have pursued it, is that...?                                                                                       
                                                                                                                                
MR. BUNDY: That's how I feel.                                                                                                   
                                                                                                                                
CHAIR SEEKINS: That gives me a  good indication as to - you know,                                                               
you as a  student of the law,  and as a prosecutor in  the past -                                                               
saying  how serious  that  offense might  be  - procedurally,  in                                                               
fact, but not substantive.                                                                                                      
                                                                                                                                
MR. BUNDY:  And my  comments about the  prosecution were  for the                                                               
substantive offense not procedural.                                                                                             
                                                                                                                                
CHAIR  SEEKINS:  And our  biggest  problem  is  we don't  have  a                                                               
definition  for significance  or  substantive in  our statute  so                                                               
that's where our problem comes in.                                                                                              
                                                                                                                                
MR. BUNDY: That needs to be done.                                                                                               
                                                                                                                                
CHAIR SEEKINS:  If we choose to  address that to be  able to help                                                               
avoid these kinds of proceedings  in the future. Other questions?                                                               
I'd   like  the   record  to,   first  of   all,  indicate   that                                                               
Representative  Anderson  is  here;   Senator  Green  is  in  the                                                               
audience.                                                                                                                       
                                                                                                                                
Representative Gruenberg.                                                                                                       
                                                                                                                                
3:51:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG:  Thank you Mr. Chair.  There's a direct                                                               
analogy,  is there  not, between  the  duty to  disclose in  this                                                               
setting  and  the  duty  of  lawyer to  disclose  a  conflict  of                                                               
interest?  There  are some  cases  on  that  in this  state.  For                                                               
example,  a case  called Cummings  v. Sea  Lion Corporation.  The                                                               
corporate attorney had a duty  to the corporation to disclose the                                                               
fact that he stood to profit  from the success of the corporation                                                               
with  which another  corporation  became a  limited partner.  And                                                               
there can be very serious allegations  - I'm sorry - very serious                                                               
consequences to  the attorney when the  attorney - and the  AG of                                                               
course is  an attorney  - where the  attorney fails  to disclose.                                                               
One of  which is they're disqualified  and the whole firm  may be                                                               
disqualified  from  a particular  litigation.  And  there can  be                                                               
various ethical  actions - disciplinary  actions -  taken against                                                               
the attorney for failure to disclose. Isn't that true?                                                                          
                                                                                                                                
MR. BUNDY:  That's true. Disclosure  isn't the issue here  - it's                                                               
consultation. The  disclosure was made in  various public forums.                                                               
Typically in a  conflict situation, a lawyer has  to disclose the                                                               
conflict and consult with the client about it.                                                                                  
                                                                                                                                
REPRESENTATIVE GRUENBERG:  But isn't  it true  that there  was an                                                               
oral   disclosure,  but   an  oral   disclosure  is   ineffective                                                               
disclosure because it has to be in writing? Isn't that the case?                                                                
                                                                                                                                
MR. BUNDY: Well,  I mean, the disclosure of the  ownership of the                                                               
stock was made many, many times in writing.                                                                                     
                                                                                                                                
3:53:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG: I was under  the impression that he had                                                               
told the Governor orally, but there was no written...                                                                           
                                                                                                                                
MR. BUNDY:  Well, I mean, in  terms of APOC reports,  in terms of                                                               
the Permanent Fund...                                                                                                           
                                                                                                                                
REPRESENTATIVE GRUENBERG:  I'm talking about a direct...                                                                        
                                                                                                                                
3:54:13 PM                                                                                                                    
                                                                                                                                
MR.  BUNDY:  ...A direct  disclosure  -  I  don't believe  -  the                                                               
Governor does not remember that happening.                                                                                      
                                                                                                                                
REPRESENTATIVE GRUENBERG:  And that's  the purpose for  a writing                                                               
is it not?                                                                                                                      
                                                                                                                                
MR. BUNDY: Exactly.                                                                                                             
                                                                                                                                
REPRESENTATIVE GRUENBERG: Thank you.                                                                                            
                                                                                                                                
CHAIR  SEEKINS:  Thank   you  Representative  Gruenberg.  Senator                                                               
Huggins.                                                                                                                        
                                                                                                                                
SENATOR HUGGINS: Thank  you Mr. Chair. Number one -  Mr. Bundy, I                                                               
would  like  to   thank  you  for  your  work  -   what  I  would                                                               
characterize  as  a   very  fair  and  quality   report.  And  my                                                               
counterparts here, I  would say thank you for  not practicing too                                                               
much law  since I'm in  a minority here  not being a  lawyer with                                                               
our Chair.  To that extent  though, has there been  anything that                                                               
you would think that would further  clarify, shed light on, or is                                                               
mandatory for  you to say that  for one reason or  another hasn't                                                               
come out today thus far?                                                                                                        
                                                                                                                                
MR. BUNDY: I can't remember everything  I've said today so I just                                                               
don't know what it would be. It's just about worn me out.                                                                       
                                                                                                                                
CHAIR SEEKINS: Well I  tell you. I guess I can't  be too harsh on                                                               
the  Governor for  having forgotten  conversations. I  swear he's                                                               
forgotten a couple  of ours between him and me,  and my wife says                                                               
that I'm guilty of  the same thing with her all  the time, that I                                                               
forgot what  I said. And  she's nodding her  head in the  back of                                                               
the room.  But I  think, in summary  I guess, if  I had  been the                                                               
Governor, and  I'm not, if  were Governor Murkowski and  I wanted                                                               
to get this coal deal done, and  I understand what I do in my own                                                               
private  business when  I  do that  - I  get  the most  qualified                                                               
person in my business to be  able to handle the subject matter at                                                               
hand whether it's the parts  manager, the service manager, or the                                                               
sales manager.  The guy  with the  experience is  the guy  that I                                                               
want in the lead and at the point.                                                                                              
                                                                                                                                
CHAIR SEEKINS:  I think it  was good  policy for the  Governor to                                                               
say  'I  know you.  I  know  you're  involved,  and I  know  your                                                               
background.  I  trust  you.  Go  get this  thing  done.'  And  he                                                               
probably  would  have said  'Oh  by  the  way,  if you  have  any                                                               
conflicts because  of what you know  and who you know,  make sure                                                               
we discuss  those before  you go too  far here.'  That's probably                                                               
the difference between  business risk and political  risk. I know                                                               
that I  can tell my people  - this is  what I want done  and they                                                               
don't have  to tell me  whether or not  their son is  involved in                                                               
something  or  someone  else  in  their family  is.  And  on  the                                                               
political  side, we  have to  balance that  and sometimes  that's                                                               
difficult for us all because we  have an objective in mind and it                                                               
makes  it -  probably  every  one of  us  has violated  something                                                               
having to do with disclosure or  something that we've forgot - we                                                               
didn't remember  at the time -  we forgot a deadline  and we went                                                               
over  it. I  mean  we're  all probably  guilty  of  some kind  of                                                               
technical violation  of the code or  the law on a  regular basis.                                                               
The difference  between this one and  those are that we  may have                                                               
caught them  ourselves or sometimes  somebody else caught  us and                                                               
we got our hands slapped because we forgot. I've been there.                                                                    
                                                                                                                                
CHAIR SEEKINS:  I appreciate the  fact that the Governor  and the                                                               
administration is trying to develop  the natural resources of the                                                               
state to  help us  pay the bills  one way or  the other.  You put                                                               
jobs in there  for our children and for our  grandchildren and be                                                               
able to try and  be on the cutting edge of  technology as long as                                                               
it does work and we have  some commercial viability to it. And so                                                               
I  appreciate the  fact  that  he put  who  he  thought his  most                                                               
qualified person was on this project to try to carry it out.                                                                    
                                                                                                                                
CHAIR  SEEKINS: I  don't appreciate  the  fact that  there was  a                                                               
technical violation because  it's cost all of us a  great deal of                                                               
time and  effort and money.  So I'm not  happy about that.  I for                                                               
one am  not willing  to say that  this technical  violation would                                                               
even  bring me  to the  point  of discussing  impeachment of  the                                                               
attorney general for  this. I think the discipline  for this lies                                                               
in the  hands of the  Governor and we'll  all judge him  based on                                                               
how he  metes out  that discipline.  And I  would not  think that                                                               
it's up to this body to  determine what that discipline should be                                                               
so I'm willing to do that.                                                                                                      
                                                                                                                                
CHAIR SEEKINS: I  really do appreciate the time you  took on this                                                               
and I  know the time  frame - some of  our members were  a little                                                               
impatient. Some  thought you were not  going to get it  here till                                                               
Halloween and  we were willing  to wait and I  think that I  - by                                                               
taking a look  at the final product, I'm very  impressed how it's                                                               
put together.  I was able,  as a  non-attorney, to follow  it and                                                               
bring it through. It was meaty,  it was not wordy, I congratulate                                                               
you for your effort  and I want to thank you  as Chairman of this                                                               
committee for  being here  today and  testifying with  us. Anyone                                                               
else have a closing statement prior  to the time we let Mr. Bundy                                                               
go?                                                                                                                             
                                                                                                                                
CHAIR SEEKINS:  I do appreciate  very much your being  here. With                                                               
that, the Judiciary Committee is adjourned - 3:58:58 PM.                                                                      
                                                                                                                                

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