Legislature(2005 - 2006)BELTZ 211

03/14/2006 11:00 AM RULES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Testimony <Invitation Only> --
Moved CSHB 273(RLS) Out of Committee
Moved HCS SB 186(RLS) Out of Committee
Moved CSHB 489(RLS) Out of Committee
SB 186-EXECUTIVE BRANCH ETHICS                                                                                                
11:27:56 AM                                                                                                                   
CHAIR ROKEBERG  announced that the  next order of  business would                                                               
be  CS FOR  SENATE BILL  NO. 186(JUD),  "An Act  relating to  the                                                               
Alaska  Executive  Branch  Ethics   Act;  and  providing  for  an                                                               
effective date."                                                                                                                
The committee took an at-ease from 11:27 a.m. to 11:30 a.m.                                                                     
11:30:07 AM                                                                                                                   
SENATOR RALPH  SEEKINS, Alaska State  Legislature, sponsor  of SB
186,  explained  that most  people  have  never read  the  Alaska                                                               
Executive Branch Ethics Act, and  therefore there is a tremendous                                                               
misunderstanding  of what  it does.    He read  AS 39.52.010,  as                                                               
          (a) It is declared that                                                                                               
          (1) high moral and ethical standards among public                                                                     
     officers  in  the  executive branch  are  essential  to                                                                    
     assure  the  trust,  respect,  and  confidence  of  the                                                                    
     people of this state;                                                                                                      
          (2) a code of ethics for the guidance of public                                                                       
     officers will                                                                                                              
          (A) discourage those officers from acting upon                                                                        
     personal or  financial interests in the  performance of                                                                    
     their public responsibilities;                                                                                             
          (B) improve standards of public service; and                                                                          
          (C) promote and strengthen the faith and                                                                              
     confidence of the people of  this state in their public                                                                    
          (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;                                                                                                                 
          (4) a fair and open government requires that                                                                          
     executive branch  public officers conduct  the public's                                                                    
     business in  a manner  that preserves the  integrity of                                                                    
     the  governmental  process   and  avoids  conflicts  of                                                                    
          (5) in order for the rules governing conduct to                                                                       
     be  respected  both  during and  after  leaving  public                                                                    
     service,  the  code  of  ethics  must  be  administered                                                                    
     fairly without bias or favoritism;                                                                                         
          (6) no code of conduct, however comprehensive,                                                                        
     can anticipate  all situations in which  violations may                                                                    
     occur  nor   can  it   prescribe  behaviors   that  are                                                                    
     appropriate to  every situation; in addition,  laws and                                                                    
     regulations  regarding ethical  responsibilities cannot                                                                    
     legislate morality, eradicate  corruption, or eliminate                                                                    
     bad judgment; and                                                                                                          
          (7) compliance with a code of ethics is an                                                                            
     individual  responsibility;  thus  all  who  serve  the                                                                    
     state have  a solemn  responsibility to  avoid improper                                                                    
     conduct  and prevent  improper  behavior by  colleagues                                                                    
     and subordinates.                                                                                                          
SENATOR SEEKINS opined  that the ethics laws must  be very clear,                                                               
fair,   and   enforceable.     In   order   to   accomplish   the                                                               
aforementioned,  he   said  he   reviewed  various   state  laws,                                                               
municipal  codes, bar  association  codes,  judicial conduct,  et                                                               
cetera.   Senator Seekins said  that he discovered that  there is                                                               
no uniform  ethics code  model.  He  reminded the  committee that                                                               
during the  former Attorney General  Gregg Renkes  situation, Bob                                                               
Bundy, Attorney for  Dorsey & Whitney LLC, said  that he couldn't                                                               
find a  clear, bright line  as to  whether the investment  of Mr.                                                               
Renkes constituted  a violation.   Therefore, part of  the charge                                                               
with this legislation was to establish  a clear, bright line.  In                                                               
so  doing, Senator  Seekins  said that  he  followed Mr.  Bundy's                                                               
recommendations.     Senator  Seekins   found  that   there's  no                                                               
impropriety if the following applies:                                                                                           
     (1)  personal or  financial interest  in the  matter is                                                                    
     [INSIGNIFICANT,  OR]  of  a   type  that  is  possessed                                                                    
     generally by the public or  a large class of persons to                                                                    
     which the public officer belongs; [OR]                                                                                     
     (2)  action or  influence would  have insignificant  or                                                                    
     conjectural effect on the matter;                                                                                        
     (3) financial interest  in a matter is held  in a blind                                                                
     trust or  the public  officer does not  have management                                                                
     control over the financial interest; or                                                                                
     (4) personal  or financial interest  in a matter  is in                                                                
     regard to a                                                                                                            
     business and the public officer                                                                                        
     (A)  does  not  own   a  controlling  interest  in  the                                                                
      (B) does not own stock or options to buy stock that,                                                                  
     (i) equal more than one percent of the stock in the                                                                    
     business; or                                                                                                           
     (ii) have a total value of more than $10,000;                                                                          
     (C) owns or has an option to buy                                                                                       
      (i) less than one percent of the equity interest in                                                                   
     the business; and                                                                                                      
       (ii) an equity interest in the business worth less                                                                   
     than $10,000;                                                                                                          
        (D) is not a member of the board of directors or                                                                    
     another governing body of the business;                                                                                
     (E) is not an elected officer of the business;                                                                         
       (F) does not provide or have an option to provide                                                                    
     or professional services to the business;                                                                              
      (G) does not have a contract or have an option for a                                                                  
     contract with the business; and                                                                                        
     (H) is not an employee of the business.                                                                                
SENATOR  SEEKINS  noted that  a  previous  committee amended  the                                                               
legislation to  also include stock  options or  ownership options                                                               
to  the list  of situations  in  which there  is no  impropriety.                                                               
Senator Seekins  said that he  was also charged with  finding and                                                               
addressing  any  other  problems   in  this  statute.    [Another                                                               
problem] in  the Alaska  Executive Branch Ethics  Act was  in the                                                               
area  of  confidentiality,  which  only applies  to  current  and                                                               
former public officers.  He explained  that a public officer is a                                                               
public employee, a  member of a board or commission,  and a state                                                               
officer designated by the governor to  act as trustee or a person                                                               
with  trust duties.    Furthermore, the  Act  applies during  the                                                               
investigation  and  until a  finding  of  probable cause  by  the                                                               
attorney  general and  formal proceedings  are initiated.   After                                                               
the aforementioned,  the complaint is  a public record.   Senator                                                               
Seekins  pointed   out  that   [CSSB  186(JUD)]   specified  that                                                               
knowingly  and   intentionally  making  a  complaint   public  or                                                               
knowingly  and  intentionally doing  so  prior  to a  finding  of                                                               
probable  cause by  anyone would've  been  a misuse  of the  act.                                                               
Therefore,  the penalty  currently  in law  for public  employees                                                               
would apply to  everyone.  He pointed out  that currently statute                                                               
specifies  that breaking  any part  of [AS  39] may  result in  a                                                               
civil  penalty  in an  amount  not  to  exceed $5,000.    Senator                                                               
Seekins opined  that the  law should  apply to  all equally.   He                                                               
further suggested  that if there  isn't an  equal confidentiality                                                               
requirement  for   everyone,  then   there  should  be   no  such                                                               
11:38:27 AM                                                                                                                   
SENATOR SEEKINS then turned to  the matter of blind trusts, which                                                               
is defined  by the American  Bankers Association as follows:   "A                                                               
trust  is  set up  to  prevent  the  owner from  having  detailed                                                               
knowledge  of assets  in the  trust."   He noted  that government                                                               
officials  frequently   use  blind  trusts  in   order  to  avoid                                                               
conflicts  of  interest  between  official  duties  and  personal                                                               
financial  transactions.     Senator  Seekins  noted   that  many                                                               
successful  individuals with  investments enter  into government,                                                               
and in some cases, the most  qualified person to work on an issue                                                               
is  the person  with  a  potential conflict  of  interest due  to                                                               
his/her  portfolio.    Returning  to  the  blind  trust,  Senator                                                               
Seekins  highlighted that  under the  Act  there has  to be  full                                                               
disclosure  of  the  assets,  then  when  there  is  a  potential                                                               
violation  there  has   to  be  a  declaration   of  a  potential                                                               
violation.   At that point,  the person must refrain  from taking                                                               
any official action relating to  the matter until a determination                                                               
is  made  and the  matter  is  disclosed  in writing  to  his/her                                                               
immediate  designated   supervisor  and  the   attorney  general.                                                               
Therefore, the  designated supervisor is provided  another option                                                               
for a highly qualified individual to  work on behalf of the state                                                               
on a particular  project.  This legislation would  add the option                                                               
of [requiring] the  public official's interest to be  placed in a                                                               
blind trust.  He reiterated that  the objective with SB 186 is to                                                               
make the ethics law clear, fair, and enforceable.                                                                               
11:41:00 AM                                                                                                                   
CHAIR ROKEBERG  noted that throughout  the legislation  there are                                                               
references to "business  associates" and "what a  person knows or                                                               
reasonably ought  to know".   He  related his  understanding that                                                               
"business associates" would  not cover a minority  ownership or a                                                               
limited liability company (LLC) in  which the covered official is                                                               
a limited partner, and asked if that's correct.                                                                                 
SENATOR SEEKINS replied  yes.  With regard to  the language "what                                                               
a  person knows  or reasonably  ought to  know", Senator  Seekins                                                               
specified  that it's  a  term  of art  that  isn't  a "very  wide                                                               
CHAIR  ROKEBERG  recalled  that  as  an LLC  member,  he  had  to                                                               
distinguish whether he  was a managing or  nonmanaging member for                                                               
Internal   Revenue   Services   (IRS)   purposes.      Therefore,                                                               
accountants  would  determine  whether   the  LLC  member  was  a                                                               
majority managing  partner or minority  nonmanaging member  of an                                                               
LLC.  He asked if the legislation makes a similar distinction.                                                                  
SENATOR SEEKINS  answered that [the  legislation makes  a similar                                                               
distinction], although he emphasized  that it's not expected that                                                               
an  individual  would  know  everything  about  his/her  business                                                               
11:43:25 AM                                                                                                                   
CHAIR  ROKEBERG  posed  an  example in  which  an  individual  is                                                               
appointed to  the position  of a  commissioner and  turns his/her                                                               
business  over to  an  associate,  and inquired  as  to how  that                                                               
individual would know what the associate is thinking.                                                                           
SENATOR SEEKINS  replied that the  individual wouldn't  know what                                                               
the associate is thinking, although  the individual should have a                                                               
reasonable idea as whether there is a conflict of interest.                                                                     
CHAIR ROKEBERG posed a situation in  which a public official is a                                                               
business  associate who  owns  1,000 shares  of  a business  with                                                               
which the state is making a deal.                                                                                               
SENATOR SEEKINS explained that if  the public official holds over                                                               
a  $10,000 [interest]  or  over 1  percent,  the public  official                                                               
would  have to  declare a  conflict  to his/her  supervisor.   He                                                               
specified  that  the  public  official   would  have  to  make  a                                                               
declaration of a potential violation  and refrain from taking any                                                               
official action  until the determination  is made and  the matter                                                               
would  have  to  be  disclosed   in  writing  to  the  designated                                                               
supervisor.  If the interest was  in a blind trust to begin with,                                                               
the aforementioned  wouldn't have to  be done because  the public                                                               
official  wouldn't know  what is  in the  blind trust.   However,                                                               
when there  is no  blind trust,  the designated  supervisor could                                                               
recommend that the  employee divest or place  the [investment] in                                                               
a blind trust for the period  during which the public official is                                                               
working  on  the  matter  in  which  he/she  has  a  conflict  of                                                               
interest.  The blind trust is  meant to take [the investment] out                                                               
of [the public official's] direct  control, although he/she would                                                               
know that he/she has a potential investment.                                                                                    
11:46:55 AM                                                                                                                   
REPRESENTATIVE  BERKOWITZ  asked  if  there is  a  definition  of                                                               
"blind trust."                                                                                                                  
SENATOR SEEKINS said the legislation  doesn't currently include a                                                               
definition for  blind trust,  although he said  he would  have no                                                               
problem  inserting  the  earlier mentioned  definition  from  the                                                               
American Bankers Association.                                                                                                   
REPRESENTATIVE BERKOWITZ  suggested that other  legal definitions                                                               
of "blind trust" would be  helpful [to review].  Furthermore, any                                                               
time  a  definition  for  trust  is  added,  it  must  [properly]                                                               
intersect with the already existing trust statutes.                                                                             
SENATOR SEEKINS  noted that  he didn't  review that,  although he                                                               
indicated that  he has reviewed  the last two major  revisions in                                                               
the trust law and didn't see  any conflict.  Still, he offered to                                                               
research  that matter  for the  committee.   He  also offered  to                                                               
develop a  definition for blind  trust because he  didn't believe                                                               
there to be one in statute.                                                                                                     
11:48:53 AM                                                                                                                   
CHAIR ROKEBERG related his plan  to offer an amendment that would                                                               
insert language such that a blind trust is placed in statute.                                                                   
REPRESENTATIVE  BERKOWITZ commented  that  he  doesn't intend  to                                                               
support the aforementioned amendment.                                                                                           
SENATOR SEEKINS offered his  assistance with [inserting language]                                                               
allowing blind trusts.                                                                                                          
11:49:38 AM                                                                                                                   
CHAIR ROKEBERG  pointed out  that he didn't  see a  definition of                                                               
"campaign period" in the legislation.                                                                                           
SENATOR  SEEKINS  clarified  that   the  campaign  period  mainly                                                               
applies to the  Legislative Ethics Act than  the Executive Branch                                                               
Ethics  Act.   However, [if  the committee  deems it  necessary],                                                               
then  he said  he wouldn't  have any  objection to  including the                                                               
same campaign period for the Legislative Ethics Act.                                                                            
CHAIR ROKEBERG  inquired as to what  is meant by the  term "close                                                               
social unit."                                                                                                                   
SENATOR   SEEKINS    highlighted   the   varying    family   unit                                                               
configurations, which are difficult to define.                                                                                  
CHAIR ROKEBERG  posed a  situation in which  two to  three people                                                               
are  rooming together.    Under the  Legislative  Ethics Act  the                                                               
aforementioned group  would be considered  "economic associates".                                                               
Therefore, he asked if that would apply here as well.                                                                           
SENATOR  SEEKINS specified  that "if  you were  working on  their                                                               
behalf and  against the best interest  of the state, that  is one                                                               
of the  groups that we  would look  at."  In  conclusion, Senator                                                               
Seekins said  that he has  found that  those who comment  on this                                                               
legislation on a regular basis  haven't read the Alaska Executive                                                               
Branch Ethics Act and don't  even understand the provisions being                                                               
suggested in SB  186.  Therefore, he encouraged  everyone to read                                                               
the Act  in order  to understand that  only public  officials are                                                               
held responsible for breaking confidentiality.                                                                                  
11:51:38 AM                                                                                                                   
CHAIR  ROKEBERG, upon  determining  that no  one  else wished  to                                                               
testify, closed public testimony.                                                                                               
11:53:19 AM                                                                                                                   
CHAIR ROKEBERG  moved Amendment 1, labeled  24-LS0874\P.1, Wayne,                                                               
3/6/06, which read:                                                                                                             
     Page 1, line 10, following ";":                                                                                        
          Delete "or"                                                                                                       
          Insert "(3)  financial interest in a matter is                                                                    
     held in  a blind trust  or the public officer  does not                                                                
     have  management control  over the  financial interest;                                                                
     Page 3, following line 25:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 8. AS 39.52.210(b) is amended to read:                                                                      
          (b)  A public employee's designated supervisor                                                                        
     shall   make  a   written   determination  whether   an                                                                    
     employee's   involvement    violates   AS 39.52.110   -                                                                    
     39.52.190  and  shall provide  a  copy  of the  written                                                                    
     determination  to  the  public   employee  and  to  the                                                                    
     attorney general.  If the supervisor determines  that a                                                                    
     violation  could exist  or will  occur, the  supervisor                                                                    
               (1)  reassign duties to cure the employee's                                                                      
     potential violation, if feasible; or                                                                                       
               (2)  direct                                                                                                      
               (A)  the divestiture or removal by the                                                                       
     employee of  the personal  or financial  interests that                                                                    
     give rise to the potential violation; or                                                                               
               (B)  the placement by the employee of the                                                                    
     financial  interest that  gives rise  to the  potential                                                                
     violation into a blind trust  or other investment where                                                                
     the employee does not have  management control over the                                                                
     financial interest."                                                                                                   
     Renumber the following bill sections accordingly.                                                                          
     Page 9, lines 3 - 4:                                                                                                       
          Delete "[ESTABLISHMENT OF A BLIND TRUST,]"                                                                            
           Insert "establishment of a blind trust for a                                                                     
     period   of  time   or   under  conditions   determined                                                                
     appropriate, placement  of the financial  interest into                                                                
     an  investment   where  the  employee  does   not  have                                                                
     management control over the financial interest,"                                                                       
REPRESENTATIVES BERKOWITZ AND HARRIS objected.                                                                                  
CHAIR  ROKEBERG explained  that  Amendment 1  would reinsert  the                                                               
blind  trust provisions  that  were deleted  in  the House  State                                                               
Affairs  Standing  Committee.   Chair  Rokeberg  opined that  the                                                               
blind trust mechanism should be  available [because] it's already                                                               
difficult enough to recruit competent  people in the state, which                                                               
is  a small  state  in  which people  tend  to have  interlocking                                                               
business  interests.    [Amendment   1]  would  allow  a  typical                                                               
portfolio  to  be  continued  and   managed  while  allowing  the                                                               
individual  to participate  in public  service without  divesting                                                               
his/her investment portfolios.                                                                                                  
11:54:58 AM                                                                                                                   
CHAIR ROKEBERG related  his understanding that under SB  186 if a                                                               
public  official   didn't  have  a   blind  trust  prior   to  an                                                               
appointment by the governor, for  example, full disclosure of the                                                               
contents of the  trust [would be required] before  it's placed in                                                               
a blind trust.                                                                                                                  
SENATOR SEEKINS replied  yes.  He related  his understanding that                                                               
when a  [public official] enters  [public service] he/she  has to                                                               
make  a disclosure  statement.   If  later  that public  official                                                               
places the  [investment] in  a blind  trust, everyone  would know                                                               
what's  in  the  blind  trust.   However,  that  public  official                                                               
wouldn't have control  over what is sold or not  sold and what is                                                               
retained or not retained because that  would be the charge of the                                                               
person  controlling the  trust.   Senator Seekins  then suggested                                                               
that the governor may own bank  stock.  He questioned whether the                                                               
governor should  be forced to sell  that bank stock and  face the                                                               
tax consequences  in order to  make any decision relating  to the                                                               
regulation of  banking in  the state  or could  he be  allowed to                                                               
place  it in  a blind  trust under  a petition  of a  conflict of                                                               
interest.   He reiterated  that [a  blind trust]  merely provides                                                               
one more  option with full  disclosure for the  ethics supervisor                                                               
in regard to conflicts of interest.                                                                                             
11:57:53 AM                                                                                                                   
REPRESENTATIVE  BERKOWITZ  said  that  Senator  Seekins'  initial                                                               
supposition  is  incorrect because  no  one  is saying  that  the                                                               
governor has  to sell  his bank  assets.  Rather,  if there  is a                                                               
conflict,  the   individual  shouldn't  participate   in  related                                                               
decisions  or   divest.     Anyone  with   a  conflict   has  the                                                               
aforementioned choices, he opined.                                                                                              
SENATOR SEEKINS  interjected that [under Amendment  1] the option                                                               
of a blind trust would be available as well.                                                                                    
11:58:26 AM                                                                                                                   
REPRESENTATIVE HARRIS  pointed out  that the  governor has  to be                                                               
involved with  every decision, and  if he/she had  prior business                                                               
dealings, he/she  would have  to place  [investments] in  a blind                                                               
trust, divest it,  or not make action.  However,  the governor is                                                               
constitutionally  bound  to  make  an   action.    Therefore,  he                                                               
questioned  why   the  governor  couldn't  merely   provide  full                                                               
11:59:52 AM                                                                                                                   
CHAIR ROKEBERG posed a scenario  in which a governor with banking                                                               
stock  was   faced  with  banking   legislation,  and   asked  if                                                               
Representative  Berkowitz would  recommend  that the  legislation                                                               
become  law without  the  governor taking  action  or should  the                                                               
governor veto the legislation.   He clarified that this situation                                                               
wouldn't include the option of a blind trust.                                                                                   
REPRESENTATIVE BERKOWITZ  pointed out  that in HCS  CSSB 186(JUD)                                                               
there are  eight alternatives,  as specified on  page 1,  line 12                                                               
through  page  2, line  15.    He  mentioned  his belief  that  a                                                               
governor shouldn't be an elected  officer of any business because                                                               
there's an inherent conflict.   He opined that the instances that                                                               
would   arise  would   be  relatively   few   and  far   between.                                                               
Representative Berkowitz further opined  that if the governor has                                                               
a controlling interest  in a banking business,  then the governor                                                               
shouldn't participate.                                                                                                          
SENATOR SEEKINS  clarified that it's not  a controlling interest,                                                               
but rather  a $10,000  interest.  He  emphasized that  the reason                                                               
[the  legislation  is  before the  committee]  is  because  these                                                               
situations are few  and far between, but the state  was caught in                                                               
such a situation.  Therefore, in  order to address this [one must                                                               
realize] that  for some a  $10,000 investment isn't a  large sum.                                                               
He  reiterated  that the  legislation  specifies  that with  full                                                               
disclosure  and  a  letter  to   the  attorney  general  and  the                                                               
individual's ethics  supervisor relating the conflict,  the blind                                                               
trust would merely provide another option to AS 39.52.210.                                                                      
12:03:12 PM                                                                                                                   
REPRESENTATIVE  BERKOWITZ opined  that  there has  never been  an                                                               
instance  in  which  the  governor   has  had  such  a  conflict.                                                               
However,  if  such  a  conflict  exists,  then  the  governor  is                                                               
incapacitated  for that  legislation and  the responsibility  for                                                               
the course of  action should be left to  the lieutenant governor.                                                               
He said  that he didn't want  to design a system  for an instance                                                               
that hasn't occurred.   He then expressed concern  with regard to                                                               
creating  a blind  trust  because  "we" don't  know  what it  is.                                                               
Furthermore,  the circumstances  under which  the blind  trust is                                                               
created don't  necessarily mean that the  individual whose assets                                                               
are held  in the blind  trust doesn't know  what's in them.   For                                                               
example, someone  could have  a blind trust,  know what's  in it,                                                               
and  decide to  sell  the assets  in order  to  capitalize on  an                                                               
official  action, which  would be  problematic.   Therefore,  the                                                               
stark   choice   created   under  the   current   statute   seems                                                               
SENATOR SEEKINS commented  that he didn't know  that the statutes                                                               
or the  constitution contain a provision  allowing the lieutenant                                                               
governor  to sign  legislation.   Senator Seekins  then specified                                                               
that the  example with the  governor is merely that,  although he                                                               
said he could provide other  examples [with public officials] all                                                               
of  which  are  subject  to  the  law.    With  full  disclosure,                                                               
knowledge  of the  investment, and  consultation with  the ethics                                                               
supervisor, he  opined that there is  protection against possible                                                               
problems while allowing the individual  [with the investment] the                                                               
opportunity  to  use his/her  expertise  to  the benefit  of  the                                                               
12:05:48 PM                                                                                                                   
REPRESENTATIVE BERKOWITZ  opined that there are  ethics [laws] so                                                               
that  there is  a democracy  rather than  a kleptocracy  in order                                                               
that   individuals  don't   utilize  their   official  government                                                               
positions  to enhance  their personal  position.   Representative                                                               
Berkowitz  emphasized that  if one  has an  inescapable conflict,                                                               
then he/she shouldn't be involved in government.                                                                                
CHAIR ROKEBERG  pointed out that in  Section 9 of Article  III of                                                               
the  Alaska  State  Constitution  it  says:    "In  case  of  the                                                               
temporary  absence of  the governor  from office,  the lieutenant                                                               
governor  shall serve  as the  acting governor."   Therefore,  he                                                               
surmised  that the  governor would  have  to be  absent and  thus                                                               
Representative Berkowitz's suggestion isn't appropriate.                                                                        
12:06:47 PM                                                                                                                   
CHAIR  ROKEBERG   expressed  concern  with  the   15,000  [public                                                               
officials] who  could have  a retirement plan  of their  own that                                                               
could easily amount  to seven figures.  He opined  that he didn't                                                               
believe it to be appropriate  for those people to liquidate their                                                               
portfolio  to  serve  the government.    Therefore,  providing  a                                                               
mechanism  by which  the individual  can  have a  blind trust  in                                                               
order   that  the   individual  can   serve  the   government  is                                                               
appropriate, which is  the basis of the  amendment.  Furthermore,                                                               
he opined that it's quite defensible.                                                                                           
REPRESENTATIVE BERKOWITZ  reiterated the  lack of  [a definition]                                                               
of blind trust in statute and  the lack of actual examples beyond                                                               
the Renkes incident,  which he characterized as  a clear conflict                                                               
of interest.   Although the  Renkes incident was a  bit difficult                                                               
under the statute, a bright line  could be inserted in statute to                                                               
address such situations.                                                                                                        
CHAIR ROKEBERG  opined that  the $10,000  limitation is  a bright                                                               
line.   He further opined  that a  blind trust is  appropriate so                                                               
that  one  doesn't have  to  liquidate  his/her entire  portfolio                                                               
because owning $10,000 of a  equity position is relatively small.                                                               
Chair Rokeberg  pointed out that  he would have to  liquidate his                                                               
entire retirement  portfolio or major  portions of it if  he were                                                               
appointed to an executive position  because of the $10,000 limit.                                                               
He characterized [having  an equity interest in  a business worth                                                               
more than $10,000] as common,  especially for those who have been                                                               
self employed.                                                                                                                  
12:09:53 PM                                                                                                                   
REPRESENTATIVE  HARRIS posed  a  situation in  which a  long-term                                                               
employee  of the  state who  had  built up  retirement under  the                                                               
Public Employees Retirement System (PERS)  was selected to be the                                                               
commissioner of Department  of Administration.  He  asked if that                                                               
individual,  with more  than $10,000  worth of  retirement, would                                                               
have to liquidate the retirement  or not participate in decisions                                                               
related to the retirement system.                                                                                               
SENATOR  SEEKINS  answered  that  the  aforementioned  individual                                                               
would  be  part of  a  large  group  with which  that  individual                                                               
doesn't have  control and thus  wouldn't be a conflict  under the                                                               
current  law  or  this  legislation.     With  regard  to  actual                                                               
examples, Senator Seekins opined  that before the Renkes incident                                                               
there  wasn't  a  clear  line.   Had  such  been  in  place,  the                                                               
governor, as  the attorney general's ethics  supervisor, may have                                                               
suggested  that Mr.  Renkes divest  himself of  the interest  and                                                               
have nothing  more to do with  the project or place  the interest                                                               
in a blind trust with full  disclosure.  The Renkes situation was                                                               
something  that  wasn't thought  of  before,  and therefore  this                                                               
legislation attempts  to avoid  future [similar]  situations with                                                               
some reasonable  and full disclosure  on the part of  someone who                                                               
works for state government and may have a potential conflict.                                                                   
12:12:51 PM                                                                                                                   
REPRESENTATIVE GUTTENBERG  opined that he would  rather have full                                                               
disclosure rather than  a blind trust, which seems to  be a smoke                                                               
screen.  He noted that in  the past there have been situations in                                                               
which some  chief executives have  had control of a  blind trust,                                                               
although it may not have been direct control.                                                                                   
SENATOR  SEEKINS pointed  out that  under AS  39.52.270 a  public                                                               
official is required to provide  full disclosure, which has to be                                                               
screened by that public official's designated ethics supervisor.                                                                
CHAIR ROKEBERG surmised  then that the asset has  to be disclosed                                                               
and   screened,   which    seems   to   overcome   Representative                                                               
Guttenberg's concern.                                                                                                           
12:15:40 PM                                                                                                                   
REPRESENTATIVE BERKOWITZ informed the  committee of AS 39.50.040,                                                               
which read:                                                                                                                     
     Sec. 39.50.040.  Blind trusts.                                                                                             
          (a) A public official may transfer all or a                                                                           
     portion of the official's assets to a blind trust for                                                                      
     the duration of service  in public office. The original                                                                    
     assets placed  in the  blind trust  shall be  listed by                                                                    
     the  official in  the statement  required  to be  filed                                                                    
     under this chapter.  The  instrument creating the blind                                                                    
     trust must be included with the statement.                                                                                 
          (b) For a trust to qualify under this section,                                                                        
          (1) assets transferred to the trust shall be                                                                          
          (2) the trustee shall be a bank or other                                                                              
     institutional fiduciary;                                                                                                   
          (3) the trustee shall have full authority to                                                                          
     manage  the trust,  including the  purchase, sale,  and                                                                    
     exchange  of its  assets in  accordance with  fiduciary                                                                    
          (4) information regarding the identity and the                                                                        
     nature  of its  assets shall  be confidential  from the                                                                    
     trustor for the duration of the trust;                                                                                     
          (5) the trustee shall be required to report any                                                                       
     known breach  of confidentiality or the  termination of                                                                    
     the trust to  the office where the  trustor is required                                                                    
     to file statements under this chapter; and                                                                                 
          (6)   {[}Repealed, Sec. 26 ch 25 SLA 1975{]}.                                                                         
SENATOR SEEKINS  highlighted that the ethics  law doesn't include                                                               
an allowance to accommodate that blind trust.                                                                                   
REPRESENTATIVE  BERKOWITZ  clarified   that  once  an  individual                                                               
becomes  a public  official,  nothing  prohibits that  individual                                                               
from establishing a blind trust.                                                                                                
SENATOR  SEEKINS  noted  his  agreement,  but  pointed  out  that                                                               
nothing [in statute] specifies that  the individual wouldn't have                                                               
a  conflict  of  interest  if  "there's  something  there."    He                                                               
specified  [that the  statute]  doesn't include  for a  potential                                                               
conflict of  interest to  utilize blind trusts  nor does  a blind                                                               
trust remove  the individual  from the  first conflict,  which is                                                               
what SB 186 accomplishes.                                                                                                       
12:18:10 PM                                                                                                                   
REPRESENTATIVE  HARRIS asked  if  Senator  Seekins would  support                                                               
Amendment 1.                                                                                                                    
SENATOR  SEEKINS replied  yes,  adding that  blind  trusts are  a                                                               
legitimate method  that he opined  was originally intended  to be                                                               
included  in  statute.   In  further  response to  Representative                                                               
Harris, Senator Seekins specified  that the blind trust provision                                                               
was deleted in the House State Affairs Standing Committee.                                                                      
12:19:24 PM                                                                                                                   
REPRESENTATIVE HARRIS  expressed the  desire for  the legislation                                                               
to  include  a  definition  for   blind  trust,  which  could  be                                                               
accomplished through amendment.                                                                                                 
SENATOR SEEKINS  explained that [AS  39.50.040] doesn't  define a                                                               
blind trust, although  it specifies the elements  that qualify it                                                               
as  a  trust.    Therefore,  the  committee  may  want  to  cross                                                               
reference AS 39.50.040 in SB 186.                                                                                               
12:20:30 PM                                                                                                                   
REPRESENTATIVE  BERKOWITZ  opined  that there  is  a  substantial                                                               
difference  between the  blind trust  referenced in  AS 39.50.040                                                               
and  what Amendment  1 suggests.   He  related his  understanding                                                               
that  Amendment  1 suggests  that  once  it's determined  that  a                                                               
violation could  exist or will  occur, then the  supervisor shall                                                               
direct the  placement of the  finanical interest of  the employee                                                               
into a  blind trust.   The aforementioned is very  different than                                                               
one transferring all or a portion  of his/her assets into a blind                                                               
trust for the duration of service in a public office.                                                                           
CHAIR ROKEBERG said  that he tended to  agree with Representative                                                               
SENATOR  SEEKINS returned  to the  situation in  which an  public                                                               
employee  enters  service  and   that  employee's  disclosure  is                                                               
screened for  a potential  violation.   If the  ethics supervisor                                                               
determines that  there is  a potential  violation, there  are two                                                               
options  and  this  [amendment] would  provide  a  third  option.                                                               
Moreover, if  the financial interest  in violation is in  a blind                                                               
trust from the  beginning, then it's not  a substantial violation                                                               
of the ethics code.                                                                                                             
12:22:51 PM                                                                                                                   
REPRESENTATIVE   HARRIS  inquired   as   to   the  problem   with                                                               
automatically  placing  the  financial   interests  that  are  in                                                               
violation in a blind trust when the individual takes office.                                                                    
CHAIR   ROKEBERG  opined   that  the   aforementioned  could   be                                                               
problematic because  there could  be certain businesses  that one                                                               
wouldn't want to place in a  blind trust.  Therefore, such should                                                               
be an  optional provision.   He commented  that one with  a broad                                                               
portfolio   that  places   the  individual   under  the   $10,000                                                               
limitation  would  probably  want   to  utilize  a  blind  trust.                                                               
Amendment 1, he explained, specifies  that if one has a financial                                                               
interest in  a blind trust, it  would be out of  the individual's                                                               
control.  However, Section 8  allows the establishment of a blind                                                               
trust after the supervisory review.                                                                                             
SENATOR SEEKINS noted his agreement.                                                                                            
12:25:05 PM                                                                                                                   
REPRESENTATIVE KOHRING asked if the  chair's intention is to take                                                               
an amendment  to Amendment 1  to insert the language  "as defined                                                               
in AS 39.50.040."                                                                                                               
CHAIR ROKEBERG  said that such  an amendment could be  offered or                                                               
an  amendment  stripping out  the  Section  8 language  could  be                                                               
offered.    Although he  recognized  the  sponsor's intention  to                                                               
allow the [ethics]  supervisor to have the  freedom, he indicated                                                               
that he did have a bit of concern with that.                                                                                    
SENATOR  SEEKINS   opined  [that   a  blind  trust]   provides  a                                                               
reasonable alternative that's fully disclosed.                                                                                  
CHAIR  ROKEBERG  commented that  he  wasn't  sure what  would  be                                                               
gained by  the mere  act of placing  the [financial  interest] in                                                               
the blind  trust because  it doesn't  eliminate the  conflict "if                                                               
you know what's already there."                                                                                                 
SENATOR  SEEKINS reiterated  his earlier  remarks that  sometimes                                                               
those  with  conflicts  are  the  best to  have  working  on  the                                                               
12:26:38 PM                                                                                                                   
CHAIR  ROKEBERG  reviewed  the elements  of  Amendment  1,  which                                                               
includes  the  provision   to  establish  a  blind   trust  as  a                                                               
methodology  and  the provision  that  allows  the supervisor  to                                                               
recommend  the placement  of any  assets in  conflict in  a blind                                                               
trust.   He asked  if the discretionary  action, as  specified in                                                               
the Section  8 provision of  Amendment 1, is the  primary concern                                                               
of Representative Berkowitz.                                                                                                    
REPRESENTATIVE BERKOWITZ replied yes.                                                                                           
CHAIR  ROKEBERG referred  to changes  in Amendment  1 to  page 9,                                                               
lines 3-4, of the legislation.                                                                                                  
The committee took an at-ease from 12:28 p.m. to 12:30 p.m.                                                                     
12:30:06 PM                                                                                                                   
CHAIR ROKEBERG  moved that  the committee  adopt an  amendment to                                                               
Amendment 1 such  that page 1, lines  7-23 to page 2,  line 2, as                                                               
numbered on Amendment 1, would  be deleted.  Therefore, Amendment                                                               
1, as amended, would read as follows:                                                                                           
     Page 1, line 10, following ";":                                                                                        
          Delete "or"                                                                                                       
          Insert "(3)  financial interest in a matter is                                                                    
      held in a blind trust or the public officer does not                                                                  
      have management control over the financial interest;                                                                  
     Page 9, lines 3 - 4:                                                                                                       
          Delete "[ESTABLISHMENT OF A BLIND TRUST,]"                                                                            
           Insert "establishment of a blind trust for a                                                                     
     period   of  time   or   under  conditions   determined                                                                
     appropriate, placement  of the financial  interest into                                                                
     an  investment   where  the  employee  does   not  have                                                                
     management control over the financial interest,"                                                                       
There  being  no  objection,   the  aforementioned  amendment  to                                                               
Amendment 1 was adopted.                                                                                                        
CHAIR  ROKEBERG explained  that Amendment  1, as  amended, leaves                                                               
the blind  trust concept  intact and  allows it to  be used  as a                                                               
tool when  one enters public  service.   Therefore, if one  has a                                                               
blind trust  after taking  a position,  as is  allowed currently,                                                               
the language  allows the individual  to operate.  He  related his                                                               
assumption that the blind trust  would be defined by AS 39.50.040                                                               
without  a specific  reference  because it  resides  in the  same                                                               
12:32:59 PM                                                                                                                   
CHAIR  ROKEBERG,  upon  determining  there  were  no  objections,                                                               
announced that Amendment 1, as amended, was adopted.                                                                            
12:33:19 PM                                                                                                                   
REPRESENTATIVE BERKOWITZ, in response  to Chair Rokeberg, related                                                               
his  belief  that  the  language  [in  Amendment  1  as  amended]                                                               
adequately  sets   forth  the  definition   of  a   blind  trust.                                                               
Representative  Berkowitz  then  related his  understanding  that                                                               
when the language regarding the  criminal sanctions for those who                                                               
made mention of  a complaint was removed, a  section allowing for                                                               
the  filing  of  a  civil complaint  against  an  individual  was                                                               
inadvertently left in.                                                                                                          
SENATOR  SEEKINS responded  that  he wasn't  aware  of such,  but                                                               
offered to review the language  if Representative Berkowitz could                                                               
direct him to it.                                                                                                               
REPRESENTATIVE BERKOWITZ  reiterated that the  language regarding                                                               
the  fine  was  deleted,  although the  possibility  of  a  civil                                                               
complaint with compensatory damages remains in the legislation.                                                                 
SENATOR SEEKINS  pointed out that  there still is a  wrongful use                                                               
of  the complaint  if  it's a  frivolous  complaint, which  would                                                               
result  [in a  civil  penalty].   In  response to  Representative                                                               
Harris,  Senator  Seekins  specified  that  the  personnel  board                                                               
determines whether a complaint is frivolous.                                                                                    
12:35:53 PM                                                                                                                   
REPRESENTATIVE BERKOWITZ  turned attention  to Section 15  of HCS                                                               
CSSB 186(JUD),  which is  a negligence  standard and  thus leaves                                                               
open the possibility of a civil complaint.                                                                                      
SENATOR SEEKINS  pointed out that the  legislation specifies that                                                               
the personnel board  may recommend sanctions.  He  noted that the                                                               
[House]  Judiciary Standing  Committee  determined that  reckless                                                               
disregard was the proper standard.                                                                                              
12:37:31 PM                                                                                                                   
REPRESENTATIVE  BERKOWITZ related  that reading  Section [15]  in                                                               
conjunction with the Section [14]  leaves the complainant open to                                                               
a civil suit.                                                                                                                   
The committee took an at-ease from 12:37 p.m. to 12:40 p.m.                                                                     
12:40:46 PM                                                                                                                   
SENATOR SEEKINS explained that  currently [AS 39.52].340 requires                                                               
confidentiality [and the legislation]  clearly sets out where the                                                               
confidentiality is.   He pointed  out that under current  law one                                                               
would  be in  violation if  he/she talks  with his/her  attorney.                                                               
Therefore,   the  legislation   specifies  that   the  level   of                                                               
confidentiality  can be  broken  with  the specified  individuals                                                               
under the  specified bases.   The  legislation also  describes at                                                               
what  point  the  information  becomes  public.    Moreover,  any                                                               
penalty only applies to a public employee.                                                                                      
CHAIR ROKEBERG  pointed out that  under Section 15  the sanctions                                                               
under AS 39.52.410-AS  39.52.440 only apply as a civil  fine to a                                                               
public employee.                                                                                                                
12:43:39 PM                                                                                                                   
REPRESENTATIVE  HARRIS  moved to  report  HCS  CSSB 186(JUD),  as                                                               
amended,  out of  committee with  individual recommendations  and                                                               
the accompanying  fiscal notes.   There  being no  objection, HCS                                                               
CSSB  186(RLS)  was  reported  from   the  House  Rules  Standing                                                               
The committee took an at-ease from 12:44 p.m. to 12:46 p.m.                                                                     

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