Legislature(2021 - 2022)ANCH LIO DENALI Rm
09/28/2022 01:00 PM House LEGISLATIVE BUDGET & AUDIT
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| Audio | Topic |
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| Adjourn | |
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| Report: Alaska Permanent Fund Corporation Investigation |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
September 28, 2022
1:00 p.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Chair
Representative Chris Tuck, Vice Chair
Senator Peter Micciche
Senator Lora Reinbold
Representative Ivy Spohnholz
Representative Andy Josephson
Representative Neal Foster
Representative James Kaufman
Senator Click Bishop (alternate)
Representative Dan Ortiz (alternate)
MEMBERS ABSENT
Senator Bert Stedman
Senator Lyman Hoffman
OTHER LEGISLATORS PRESENT
Senator Jesse Kiehl
Representative Sara Hannan
Representative Bart LeBon
Representative Bryce Edgmon
Senator David Wilson
Representative Matt Claman
COMMITTEE CALENDAR
REPORT: ALASKA PERMANENT FUND CORPORATION INVESTIGATION
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
HOWARD TRICKEY, Attorney at Law
Schwabe, Williamson & Wyatt PC
Anchorage, Alaska
POSITION STATEMENT: Presented a report on the Alaska Permanent
Fund Corporation Investigation and answered questions.
CHRISTOPHER SLOTTEE, Attorney at Law
Schwabe, Williamson & Wyatt PC
Anchorage, Alaska
POSITION STATEMENT: Presented a report on the Alaska Permanent
Fund Corporation Investigation and answered questions.
ACTION NARRATIVE
1:00:47 PM
CHAIR NATASHA VON IMHOF called the Legislative Budget and Audit
Committee meeting to order at 1:00 p.m. Representatives
Spohnholz, Josephson, Foster, Kaufman, Ortiz (alternate) (via
teleconference) and Tuck, and Senators Reinbold, Micciche (via
teleconference), Bishop (alternate) and von Imhof were present
at the call to order.
^Report: Alaska Permanent Fund Corporation Investigation
Report: Alaska Permanent Fund Corporation Investigation
1:01:26 PM
CHAIR VON IMHOF announced that the only order of business would
be Report: Alaska Permanent Fund Corporation (APFC)
Investigation.
CHAIR VON IMHOF read from prepared remarks, as follows [original
punctuation provided]:
I would like to open with a sincere thank you to all
of you here today present and on this committee, for
us joining to hear the results of the investigation
into the circumstances surrounding the termination of
the previous Alaska Permanent Fund Corporation CEO
Angela Rodell. And thank you to counsel for being
here today and for completing this extensive
investigation in a timely manner.
I am going to start out with a brief review of the
circumstances that brought us here today. Per
statute- AS 24.20.156 this committee has the
responsibility for providing the legislature with
fiscal analysis, budget reviews, audits and
performance reviews of state government agencies, to
the extent to which the performance of the agencies
contributes to the fiscal, financial, economic, and
social improvement of the state and its citizens.
The Permanent Fund provides nearly 70 percent of the
state's government annual revenue. It is imperative
that the fund is protected from political intervention
or manipulation to ensure the fund's continued growth
and stability. Without that assurance, the fund's
sustainability for Alaskans is in jeopardy.
The motivation of this committee to look into the
APFC's boards unusual behavior was threefold:
First, this committee wanted to know the circumstances
behind Ms. Rodell's termination last December 2021
which was abrupt and without explanation and without a
clear plan for a professional and timely leadership
transition.
Second, as a committee it is our duty to perform due
diligence and learn more about the process by which
the Alaska Permanent Fund Board evaluates, supports
and as the case may be, potentially terminates the
Executive Director and CEO of the Fund.
And third, this Committee's statutory purpose and goal
is to ensure that the Fund, Alaska's nest egg, stays
politically independent from both legislative and
executive political influence.
So, to reiterate, it is of great interest to the LB&A
committee to keep the APFC politically neutral, to
keep it performing at its highest and best potential,
and to ensure that board governance is conducted in
the most professional manner. Anything short of that
risks weakening the fund.
In January of this year, this committee voted to hire
SCHWABE, WILLIAMSON & WYATT law firm, to conduct a
professional, unbiased, independent, and objective
investigation, to be conducted at arm's length from
this committee and from the political process.
The result of this investigation is a thorough written
report that committee members have in front of them.
Schwabe counsel will begin this meeting by reviewing
their executive summary, which reviews the purpose and
scope of the investigation, as well as the activities
performed. This section will take approximately 30
minutes. I ask that committee members withhold their
questions until after this initial overview is
complete.
Next, counsel will go over the specific findings,
using the aide of power point slides. My intent is to
stop periodically, perhaps at the end of each slide,
or the end of the set of slides, depending on what
makes sense.
I am anticipating that this will take three hours. We
could go over, but we have a hard stop at 5:00 p.m.
today.
At this time, there is no plan to go into executive
session. This meeting will remain public. If,
however, it does become apparent that it could be
appropriate to go into executive session, the
committee does have the right to discuss the merits of
this action.
At the conclusion of today's meeting, this report,
including the full transcripts of all depositions, as
well as attached exhibits, will be uploaded
electronically to BASIS and available to the public.
And finally, at this time, there will be no committee
motion to consider today, nor a committee vote at the
end of this report. The purpose of today is to
listen, consider the presentation, and if at a later
date the committee would like to propose an action,
they may do so at a future meeting.
1:05:43 PM
HOWARD TRICKEY, Attorney at Law, Schwabe, Williamson & Wyatt PC,
offered biographical information for himself and his associates
and explained the firm's approach to and scope of the
investigation. He explained that the investigation had been
conducted in a fair and impartial manner and without
instructions or guidance from the Legislative Budget and Audit
Committee. He stated that the firm had not and was not acting
in an advocacy capacity during the investigation and the purpose
of the investigation was to provide facts. He added that the
investigation had occurred within the general civil standard of
fact finding which presented a preponderance of evidence and it
did not espouse any speculation or inferences. He stated that
the investigation focused on three questions: what the process
for the trustees was to evaluate the performance of the
Executive Director that led to the termination; what the
underlying reasons were which the trustees had for their
decision to terminate; and, what, if any, political influence by
the governor had played into the decision to terminate.
1:09:27 PM
MR. TRICKEY stated that the investigation had revealed three
fundamental facts. The first he described as that the trustees
had reached a consensus that each had lost confidence in the
leadership abilities of Ms. Rodell. He stated that the trustees
who had voted for termination had separate and independent
reasons for so doing. He stated that the next finding was that
the APFC governance charter regarding the executive director's
responsibilities contained specific performance evaluation
criteria and a process that he characterized as good and sound
practice, but that the trustees did not follow. He noted that
there did not exist any direct or credible circumstantial
evidence that the executive branch or the governor had exerted
any undue influence on the trustees to effect their decision.
He noted that there existed some political motivations among the
trustees that led to their decision but that those had not risen
to be that of a substantial motivating factor. He explained
that the firm would offer a presentation entitled, "Schwabe
Williamson & Wyatt Powerpoint Presentation to LBA Committee 9-
28-22.pptx," [included in the committee packet] and referred the
committee to additional materials [included in the committee
packet,] entitled "Schwabe Williamson & Wyatt Report to
Legislative Council 9-28-22 PUBLIC REPORT.pdf," for more
detailed information on the findings.
1:14:06 PM
CHRISTOPHER SLOTTEE, Attorney at Law, Schwabe, Williamson &
Wyatt PC, began his testimony by explaining that the APFC Board
of Trustees Charter of Governance Policy, (Charter) governs the
management and operations of the APFC and it includes a charter
on the executive director, which has a detailed description of
the executive director's duties and responsibilities. He noted
that the Charter provisions are detailed, thorough, and meet
fiduciary standards. He noted that the most recent change to
the Charter had occurred in December of 2020. He added that the
Charter includes an executive director annual performance
evaluation policy which contains a policy and substantive
criteria and includes the use of an anonymous survey tool. He
stated that the trustees have not historically adopted
consistent evaluation instruments and processes that apply to
the relevant [inaudible] of the charter. He stated that the
trustees had evaluated the Executive Director on an annual basis
but that the evaluation process had changed. He noted that
substantive changes to the evaluation process had occurred in
2019, 2020, and 2021 including who had participated in the
survey process, who compiled the results, changes in those who
completed the survey, and changes to the evaluation criteria.
He noted that the evaluation process had not resulted in a clear
set of goals for the Executive Director to achieve, had not
resulted in guidance on performance improvement or where she may
not be meeting expectations, had not resulted in consistent
feedback. He stated that in 2016 and 2017, the Executive
Director had received positive evaluations with a performance
rating between 4 and 5 on a 1-5 scale, with 5 being the highest
in each of 17 evaluation categories. He noted that general
comments had been positive. He stated that in 2018 the
evaluations took on a less positive tone and the average scores
for 12 of the 17 categories had fallen to an average of below 3,
on the 1-5 rating scale. He stated that the lower scores were
mainly in the areas of staff communication and delegation. He
paraphrased trustee comments that included "managing... to
advance her own agenda." He stated that the trustees had
directed the Executive Director and leadership team to attend
executive leadership training to address concerns raised in the
evaluation process. He added that, in 2018, the trustees had
voted to increase her salary by 3 percent. He stated that, in
2019, then-Vice-Chair Carl Brady drastically simplified the
evaluation criteria to that of only two questions requiring a
narrative answer. The first question asked for examples of what
the executive director does well, and the second question asked
how the executive director could improve. He stated that some
of the answers to the first question included compliments to her
passion, her energy, the APFC's overall performance, and her
understanding of government and of APFC's governing documents.
He stated that some of the answers to the second question
included criticism of the Executive Director's relationships
with staff and the board. He added that comments had expressed
the sentiment that the Executive Director had manipulated the
board to serve her own agenda. He stated that, when trustees
were asked to provide specific examples of her acting to further
her own agenda, trustees either disavowed the claim or were not
able to provide specific examples. He noted that the critical
performance evaluations had occurred coincidental to a turnover
on the board. He stated that the investigation into the poor
performance evaluations had not revealed substantive changes to
her approach to performing her job duties. He stated that the
negative performance reviews may have been a result of new
trustees with different expectations for, and perspectives on,
her performance. He noted that, in 2020, the trustees had
elected Trustee Moran as Chair and Trustee Rieger as Vice-Chair
and added that the vice-chair is the Chair of the Governance
Committee and is responsible for the Executive Director's annual
performance review. He stated that Trustee Rieger developed a
new evaluation instrument and set of evaluation criteria, and he
had retained the services of an independent human resources
consultant to develop the instrument and to summarize the
results of the evaluation process. He noted that the new
evaluation process included responses from direct reports and
from other APFC staff in what is known as a "360-degree review,"
among 15 categories of performance. He stated that the ratings
had been between 2.89 and 3.89 on a scale of 1-5, with 5 being
the highest.
MR. SLOTTEE stated that the lowest evaluation ratings had been
those made by the investment staff. He stated that 5 of the 6
trustees had completed the survey. He stated that the
evaluation results had been compiled by the consultant and
presented to the trustees. He noted that the 360-degree review
did not comply with the provisions for evaluation in the Charter
and had not included criteria measuring the achievement of the
fund's goals and objectives, nor on the Executive Director's
achievement of special projects.
MR. SLOTTEE went on to explain that, in 2021, the board elected
Trustee Richards as Chair and Trustee Mahoney as Vice-Chair,
making Trustee Mahoney the Chair of the Governance Committee.
He added that the Governance Committee included Trustee Richards
and Trustee Rieger. He stated that the same evaluation tool was
used and sent to all APFC employees, but that no independent
consultant was engaged to distribute the survey and compile the
results, and that decision was based on an attempt to save money
and on Trustee Mahoney's previous experience in administering
360-degree reviews. He stated that all staff were permitted to
participate in the review, despite whether or not they had
experience in the areas of review. He stated that Trustee
Mahoney compiled the results and, in consultation with APFC's
Human Resources Director, Chad Brown, drafted a summary report.
He noted that average ratings ranged between 3.35 to 4.11, and
the average overall rating was 3.6 across all 14 categories.
1:22:02 PM
MR. SLOTTEE continued, the evaluation conducted under Trustee
Mahoney's supervision did not follow the Charter and did not
follow standard human resources practices. In particular, the
evaluation tool lacked any meaningful focus on the objective
performance criteria prescribed by the Charter's Evaluation
Policy, including the achievement of the goals and objectives of
the APFC; the completion of specific projects and initiatives
set out in the strategic plan for that fiscal year; the
implementation of board policies and reporting requirements; and
compliance with the Executive Director's Charter. The
evaluation further failed to comport with best practices because
it went to some evaluators with no knowledge or experience with
individual performance indicators within a rating category, who
nevertheless provided ratings in those categories. The
categories and indicators within categories were also
occasionally redundant.
MR. SLOTTEE further explained that the evaluation summary
prepared by Trustee Mahoney was also deficient. It
overemphasized negative comments by including almost all
negative comments, but not all of the evaluators' positive
comments. It did not provide a comparison to scores from the
prior year, when such a comparison showed an improvement in Ms.
Rodell's scores. Finally, the evaluation summary Trustee
Mahoney prepared did not account for the "halo/horn" effect of
extreme raters who harbored obvious bias, either favorable or
unfavorable, toward the Executive Director. The 2021 evaluation
tool did not provide a complete assessment of the Executive
Director's performance.
MR. SLOTTEE continued that the Executive Director's annual
evaluation was on the agenda for the trustees' quarterly meeting
on December 8 and 9, 2021. On December 8, 2021, the trustees
convened an executive session to begin discussion and
consideration of the annual evaluation results. The private,
closed-door meeting extended over two days, reconvening on
December 9, 2021. The Executive Director did not participate in
the board's evaluation of her performance during executive
session. The trustees discussed the Executive Director's
performance in executive session over parts of two days but
never allowed the Executive Director the opportunity to address
their concerns. Initially, there was no unanimous decision to
terminate the Executive Director, although several trustees
testified that things were clearly headed in that direction by
the end of the first day. The trustees reached a majority
consensus to terminate the Executive Director by the end of
their deliberations on the second day. After the trustees'
deliberations, the Executive Director was called into the
meeting and advised by Chair Richards that the trustees had
decided to move in a new direction. The Executive Director was
given the option of resigning or being terminated. The trustees
did not provide the Executive Director the reasons for her
termination. Ms. Rodell elected to be terminated and angrily
told the trustees that there would be political consequences for
their actions. When the trustees came back into public session,
Chair Richards, Vice-Chair Mahoney, Trustee Feige, Trustee
Schutt, and Trustee Rieger voted in favor of terminating the
Executive Director. Trustee Moran voted against termination.
After terminating Ms. Rodell, the trustees issued a press
release that simply stated the fund would be moving in a new
direction: "After the review and completion of the annual
Executive Director evaluation, the Board of Trustees of the
Alaska Permanent Fund Corporation have decided to undertake a
search for a new executive director to lead the Permanent Fund
in its continued growth and evolving role in support of Alaska."
The trustees gave little to no consideration to how to explain
the termination decision to the public or to the legislature.
The trustees did not anticipate that the public would seek some
explanation for why Ms. Rodell was terminated.
MR. SLOTTEE explained that, based on the testimony of the
trustees, each trustee who voted in favor of termination had
different reasons why they believed the fund needed new
leadership. The primary consensus reasons that emerged from the
trustees' deliberations justifying the termination was that the
trustees lacked confidence in the Executive Director's
leadership, concerns over the Executive Director's relationship
with the board, and that some trustees lacked trust in the
Executive Director. Most of the trustees also thought the low
scores in the survey from the investment team indicated that Ms.
Rodell had not improved her working relationship with the
investment team. The trustees thought and feared there was a
risk that the Corporation would lose top investment talent. For
the majority of the trustees, their fiduciary duty compelled
them to support termination because the trustees delegate their
fiduciary duty to invest the funds for Alaskans to the
investment team, and retaining a talented investment team was
paramount. Although various comments in the 2021 Evaluation
Report cited a lack of trust and candor by the Executive
Director, there was little objective evidence supporting such
considerations as a cause for termination. Each trustee was
asked under oath to provide concrete, specific examples of what
the Executive Director had done or said that would support such
a conclusion. The trustees could not point to a situation in
which the Executive Director actually misled the trustees or
withheld or manipulated information, though some trustees voiced
unsubstantiated concerns she may have done so. The trustees
gave little weight to the performance indicators in the survey
evaluation, except for the scores from the investment team.
Only four of the six trustees completed the evaluation survey
themselves in 2021. The trustees who voted to terminate Ms.
Rodell gave little to no weight to the fact that APFC has
enjoyed record-breaking returns under her leadership. The
trustees declined to credit Ms. Rodell for these returns because
they attributed them to prevailing market conditions and
attributed the gains to a team effort led primarily by
investment staff. While the trustees chose not to explain their
reasons for terminating Ms. Rodell to her when they called her
into the executive session or to the public, a lack of
confidence in the leadership of a Chief Executive Officer is a
sufficient reason to support the termination of such a high-
level executive. The trustees' subjective assessment of their
level of confidence in the Executive Director's leadership is a
legally sufficient reason for their decision based on their
direct working relationship, communications, and interactions
with Ms. Rodell.
SENATOR VON IMHOF interjected at this point in the presentation
to invite committee questions.
1:28:10 PM
REPRESENTATIVE JOSEPHSON referred to paragraph 20 of the report
pertaining to legal sufficiency. He noted that he had extensive
knowledge of the covenant of good faith and fair dealing and he
stated that he considered his role to be to protect the state's
coffers against lawsuit. He asked whether the covenant of good
faith and fair dealing would require evidence that a jury would
find legally reasonable, and whether the firm was asserting that
it had found it to be so. He added that "at-will" employment
status was a misnomer.
MR. SLOTTEE answered that, under the covenant of good faith and
fair dealing, there exist two aspects. He described the first
to be the objective requirement to treat the employee in a fair
manner, and the second to be the subjective requirement that the
employee may not be terminated on an unfair basis. He stated
that the firm had found during its review of the facts that the
trustees had a lack of confidence in the Executive Director and
had expressed concerns over attrition among the investment
staff. He opined that those findings would amount to a legally
sufficient reason for termination.
REPRESENTATIVE JOSEPHSON referred to the section of the report
that indicated that the lack of trust and candor could not be
adequately explained by the trustees and he asked why that would
be perceived as objectively reasonable.
MR. TRICKEY offered two responses to Representative Josephson's
question. He noted that the reasons given by the trustees were
supported by his/her direct experience in working with the
Executive Director in the 6-9 months preceding the termination
and had been found to be valid. He added that in cases that had
involved bad faith dealings, evidence is found that the reasons
given for a termination are found to be false. He allowed that
the reasons given were subjective in nature, involving trust and
confidence, and that the testimony and underlying events and
circumstances had supported the decision. He offered that
courts have instructed in good faith and fair dealing cases that
while senior executives in an organization may not agree with
the decisions of the employer, it is ultimately the employer's
decision to make. He stated that no evidence was found that the
reasons were false or implausible.
1:32:46 PM
REPRESENTATIVE TUCK noted that there existed an objective
evaluation process in the corporation's Charter that had not
been followed, and he asked whether the process that had been
implemented was more subjective in its nature.
MR. SLOTTEE answered that the survey processes in 2020 and 2021
consisted entirely of subjective commentary and scoring by the
trustees and by APFC staff. He noted that varying weights of
the survey results in 2021 had been taken to guide the decision
to terminate and had appeared to have been based on each
trustee's individual, personal interactions with Ms. Rodell. He
stated his belief that, had the evaluation policy in the Charter
been used during the evaluation, it would have produced a more
accurate performance evaluation result.
MR. TRICKEY added that the Charter performance evaluation would
provide for more objective performance evaluation and metrics
and would be easier to verify. He added that the trustees could
still make subjective evaluations.
CHAIR VON IMHOF asked whether the Charter document would be
available on BASIS, which was confirmed that it would.
REPRESENTATIVE TUCK suggested that there may be no unlawful
aspect to a subjective decision to terminate an employee and
rhetorically stated, "just because you can, doesn't mean you
should," and expressed his interest in understanding the full
presentation and report. He suggested that some performance
measures may have been overlooked, and the decision to move
forward with termination rather than performance improvement may
have been affected.
MR. TRICKEY noted that the trustees had relied on the survey
scores from the investment team and the trustees' evaluations.
He noted that prior evaluations shared the trend of low scores
from investment staff. He noted that the trustees had expressed
concerns over losing top fiduciary investment staff considering
the trend of low evaluation scoring of the Executive Director.
He suggested that it may have been objective evaluation that the
investment team scores were lower.
1:37:54 PM
REPRESENTATIVE TUCK noted that returns on investment had been
attributed to prevailing market conditions, and some
contradictory information in the report that characterized the
returns as being fantastic, despite market volatility. He asked
how it had been concluded that there existed good returns in a
volatile market. He asked whether the conclusion was based on
other organizations' performance over the same period, or it had
been based on the corporation's own determination.
MR. SLOTTEE stated that it had been a comment submitted by
either APFC staff or a trustee during the course of the survey.
CHAIR VON IMHOF noted that paragraph 18 of the report reflected
that only four of the six trustees had completed the evaluation
themselves. She stated her belief that it was of concern that
not all had completed the evaluation on a matter of such
importance.
1:40:20 PM
SENATOR REINBOLD commented that page 64 of the report that
concluded with the finding that, "Trustees did not follow the
APFC Charter in all material respects with regard to their
evaluation of the Executive Director. The Trustees did not use
an evaluation instrument or process to assess the Executive
Director's performance that was consistent with the Executive
Director Performance Evaluation Policy." She stated her concern
of a lack of objectivity in the evaluation process.
1:41:30 PM
MR. SLOTTEE went on to explain that each trustee testified
regarding their respective initial reasons for either supporting
or opposing termination of the Executive Director. Trustee
Schutt was troubled by a June 18, 2021, press release the
Executive Director issued during an impasse in budget
negotiations between the governor and the legislature. The
press release explained the negative consequences that a
government shutdown would have on the APFC. Trustee Schutt
viewed the press release as taking aim at the governor, and
improperly staking out a position in a politically fraught
dispute between the executive and legislative branches. Trustee
Schutt was also concerned that the press release was inaccurate,
and that the APFC would be protected in the event of a
government shutdown. Trustee Schutt was also concerned about
what he described as an "unnatural and unhealthy tension"
between the Executive Director and certain trustees. He
recalled an incident at the September 2021 annual meeting in
Kodiak in which he claims the Executive Director acted
unprofessionally toward Trustee Mahoney and unfairly accused her
of not acting in the best interests of the APFC. Trustee Schutt
also testified that, based on his experience serving as an
executive and on boards of directors, when a senior executive's
relationship with the board is negative, it can be better and
more effective for the organization to go in a different
direction than attempt to divert the resources and time needed
to try and fix the problem. Trustee Schutt expressed concern
about the low scores on the survey from the investment team and
expressed concern about the risk of losing the top-level members
of the investment team.
MR. SLOTTEE continued, Trustee Mahoney's primary concern was a
tension between the Executive Director and APFC's investment
staff, as reflected in comments and low ratings that investment
staff provided in response to the 2021 survey. Trustee Mahoney
worried about investment staff attrition. Trustee Mahoney
testified that she began to question the Executive Director's
leadership at the 2021 annual meeting in Kodiak and in the
budget workshops leading up to that meeting. According to
Trustee Mahoney, the Executive Director's proposed budget was
inflated and unrealistic, and she felt the Executive Director
lashed out at her when Trustee Mahoney expressed her view that
the budget was too high. Trustee Mahoney testified she was also
disappointed in the Executive Director's decision to invite a
mediator to the board meeting to facilitate a discussion about
strategic plan implementation with the board. Trustee Mahoney
had a vision that the fund would grow to be a $100 billion fund
and that new leadership would be needed for the fund to reach
this goal.
MR. SLOTTEE continued, Trustee Feige was troubled by the
Executive Director's June 18, 2021, press release regarding the
effects a government shutdown would have on the APFC. She
viewed the press release as "wildly inappropriate,"
"inaccurate," and overtly political. It played a "major role"
in her decision to vote in favor of termination. Trustee Feige
also described the Executive Director's plan to have a mediator
facilitate discussions with the trustees at the 2021 annual
meeting in Kodiak as a "bright line event." In Trustee Feige's
view, this plan demonstrated that the Executive Director was not
comfortable engaging directly with the board and evidenced a
breakdown in that relationship.
MR. SLOTTEE continued, Trustee Richards testified to a variety
of concerns about the Executive Director's performance dating
back to his original term as Trustee in 2015 and 2016 and
continuing through 2021. He was candid that he may have been in
favor of terminating the Executive Director in 2018 and 2019,
but the trustees at that time were not supportive of such a
move. Trustee Richards's concerns were wide ranging, but his
most pressing concerns during the 2021 evaluation process
related to what he described as the Executive Director's
strained relationship with investment staff, and the possibility
of losing "another" Chief Investment Officer (CIO) or other top
investors because of that relationship. He also cited the
Executive Director's proposed addition of 15 new staff and plan
to use a mediator as examples of a breakdown in the Executive
Director's ability to communicate candidly and directly with the
board.
1:45:17 PM
MR. SLOTTEE continued, Trustee Rieger did not share the
performance concerns expressed by Trustees Schutt, Mahoney,
Feige, and Richards. He stated that Trustee Rieger testified
that he had a lot of confidence in the Executive Director, and
that the performance concerns raised by other trustees could be
addressed. Trustee Rieger nevertheless voted in favor of
termination because he viewed the situation in which a majority
of the board had lost confidence in the Executive Director as
"untenable," and believed it was therefore in the best interests
of the APFC to move forward with the decision as quickly as
possible. Trustee Rieger testified that the trustees in favor of
termination had valid bases for their concerns, though those
concerns were not significant enough in Trustee Rieger's mind to
justify terminating the Executive Director.
MR. SLOTTEE continued; Trustee Moran was the only trustee who
voted against terminating the Executive Director. In his view,
the Executive Director's performance had been exceptional, and
she deserved credit as one of the key principals in achieving
record returns for the APFC, as measured both against internal
benchmarks, and as compared with other large sovereign wealth
funds. Trustee Moran described these achievements as
"spectacular" and noted that APFC's advisors were very
complimentary of the whole organization. Trustee Moran did not
agree with the substantive criticisms of the Executive Director
in the 2021 evaluation, and he maintained confidence in her
leadership. However, although Trustee Moran disagreed with the
substantive criticisms and the decision to terminate, he did not
have concerns about how the decision was reached. In his view,
the trustees who voted to terminate the Executive Director were
acting in good faith in furtherance of what they believed was in
the best interests of the APFC. In addition, a number of
trustees cited comments made by Trustee Moran in executive
session as confirming their inclination to move in a new
direction. According to these trustees, Trustee Moran commented
that the issues that the other trustees were raising with the
Executive Director's leadership were part of her leadership
style, and were not likely to change.
MR. SLOTTEE concluded the presentation of the trustees'
interview summaries by stating that, collectively, the reasons
expressed by the trustees for their decision to terminate the
Executive Director supported the termination as a matter of
employment law, in that they were a valid exercise of the
trustees' ability to terminate an at-will employee such as Ms.
Rodell. A loss of confidence in the chief executive of an
organization such as the APFC is a sufficient legal reason under
the legal standards applicable to at-will employment in Alaska.
MR. SLOTTEE explained that the Alaska Permanent Fund Corporation
is enmeshed in politics by virtue of its structure and purpose.
APFC is within the Department of Revenue, an executive branch
agency. The fund's annual budget is included in the governor's
budget and must be funded by legislative appropriations. The
trustees are appointed by the governor, and two trustees are
members of the governor's cabinet. Given this structure,
protecting the independence of the fund requires vigilance and
strict adherence to fiduciary duties by the trustees. The
trustees all acknowledged fiduciary standards as their compass
in making decisions. The trustees' strict compliance with their
fiduciary duties of loyalty and due care protect the fund from
undue political interference. The relatively recent transition
to using the fund's investment returns to fund state services
has had further political implications for APFC. Historically,
earnings on permanent fund investments were used primarily to
fund Permanent Fund Dividends in accordance with a statutory
formula. That changed in 2018, when, in the face of declining
oil revenues, the state began drawing on investment returns to
fund government services. The importance of the fund's
financial performance had therefore changed in importance in
Alaska. He added that the Board of Trustees has adopted
resolutions advocating for or supporting the adoption of
specific legislative and constitutional policies. The trustees
expect the executive director to advance those policy positions
in front of the legislature and to the executive branch. These
expectations are also inherently political. The Executive
Director testified to the political pressures inherent in the
position because of these developments.
MR. SLOTTEE stated that Ms. Rodell explained that when she was
hired in 2015, "the focus was to generate positive returns that
would, in effect, be used for [the] Permanent Fund Dividend.
During my time as Executive Director, that changed substantially
in the sense that there was no change in generating returns, but
there was a change in the use of the fund. The state began
using the fund for state government purposes. And there was a
lot of pressure placed on my position to testify to the long-
term sustainability of some of those plans. There was a big
focus on ensuring the sustainability of the Permanent Fund.
That was a turn away from what historically had been the
executive director role. So it raised the profile of the
position."
MR. SLOTTEE continued that, given all of the foregoing, it is
neither reasonable nor feasible to expect that the Executive
Director can be insulated entirely from political pressure or
influence, making adherence to fiduciary principles even more
important. There is no direct or circumstantial evidence that
the governor directed the trustees to terminate the Executive
Director. There was no direct evidence or credible
circumstantial evidence that the governor knew in advance that
the Executive Director would be terminated. Chair Richards,
Trustee Feige, and Trustee Mahoney denied when asked directly if
there had been any advance communications or directions from the
governor regarding terminating the Executive Director. Non-
commissioner Trustees Schutt, Rieger, and Moran also reported no
contact whatsoever with the governor or his administration
related to the Executive Director and did not perceive the other
trustees to be acting at the direction or on the behest of the
Governor's Office. The governor first learned about the
termination from Trustee Feige when they were both attending a
mining conference in Reno, Nevada. Trustee Feige testified the
governor reacted with surprise when she told him about the
termination of the Executive Director.
1:50:45 PM
REPRESENTATIVE JOSEPHSON stated that the APFC had generated a
16-page internal report concurrent to the one being presented to
the committee. He allowed that he had not read the report, and
said that it allegedly contained a reference that the governor
was aware of issues regarding Executive Director Rodell. He
asked whether the firm found the testimony, that the governor
had reacted with surprise, to be credible.
MR. SLOTTEE answered that the conclusion had been based on the
testimony of Trustee Feige under oath relaying her experience of
his reaction.
REPRESENTATIVE JOSEPHSON stated that he had questioned Ms.
Rodell during committee hearings on Senate Bill 26 and
overdrawing the fund. He relayed that her answers consistently
referred to APFC Board resolutions which, over time, were
consistently directing that future actions should be taken with
consistency and in a sustainable manner. He asked, relative to
this topic and the occurrences at the Kodiak meeting, whether
there had been any deposed testimony regarding the dividend. He
opined that it could be taken as fact that the administration
would have, and still would, welcome an overdraw to pay back
past dividends. He characterized the issue as central.
CHAIR VON IMHOF cautioned that additional information yet to be
presented may address the matter raised by Representative
Josephson and advised that there are other interested parties
online who may not have the full presentation before them, and
the information was visible to remote attendees only on the
screen.
MR. SLOTTEE agreed to proceed with the presentation.
REPRESENTATIVE TUCK further recommended conclusion of the
presentation.
SENATOR VON IMHOF noted that the documents would be posted on
BASIS by 5:00 p.m.
1:55:04 PM
MR. SLOTTEE, to the question posed by Representative Josephson,
offered that Trustee Richards testified about several
conversations with the executive branch regarding the Executive
Director's performance. In a conversation with the governor
about other matters, Richards took the opportunity to advise the
governor that there were concerns about the Executive Director's
performance. The governor responded by telling Richards that
any decision regarding the Executive Director's performance or
termination was solely that of the trustees to make. Trustee
Richards had two conversations about the Executive Director's
performance with Governor Dunleavy's Chief of Staff in the
months preceding the trustees' decision to terminate. According
to Trustee Richards, the Chief of Staff advised him to make sure
the trustees followed a lawful process and documented the basis
for any decisions. Trustee Richards explained he believed it
was important to give the governor notice of potentially
important decisions under consideration by the trustees that
could impact state government. He stated that Trustees
Richards, Feige, and Mahoney each denied under oath that they
had communications with the governor's office regarding the
decision to terminate Ms. Rodell prior to that decision being
made, regarding the governor giving direction or a "heads up."
MR. SLOTTEE continued, in light of the fund's critical
importance to sustaining government services and payment of
dividends to Alaskans, and the trustees' adoption of resolutions
requiring the Executive Director to advocate for certain policy
positions, the Executive Director could not avoid being drawn
into political discussions and debate around the funds available
for appropriations. When the Executive Director attempted to
navigate these political waters, the trustees ultimately held it
against her. In some cases, trustees viewed the Executive
Director's actions and statements as being too political, such
as a press release and a [Twitter] Tweet. In other
circumstances, the trustees faulted the Executive Director for
not advocating APFC's policy positions forcefully enough. In
both cases, several trustees attributed the Executive Director's
conduct as being driven by a personal "agenda," rather than
APFC's agenda. He referred to Representative Josephson's
earlier question and stated that, in 2018, the trustees adopted
resolutions supporting a rules-based legal framework for
transfers into, out of, and between the permanent fund principal
account and Earnings Reserve Account. The resolutions directed
the Executive Director to support the need for a rules-based
framework in front of the legislature. Ms. Rodell testified
that she did so, despite what she acknowledges were misgivings
about the APFC advocating policy positions in front of the
political branches. Some trustees perceived, fairly or not,
that the Executive Director was not advocating forcefully enough
for the positions adopted by resolution.
MR. SLOTTEE continued, in light of the high stakes and
politically charged operating environment for anyone serving as
the chief executive officer of the APFC, the need to have a
fair, objective evaluation instrument that measures performance
in relation to clear objectives and implementation of the
strategic plan of APFC is critical to preserving the sustained
performance and independence of the fund. The Charter provides
a good and effective process for evaluating the performance of
the Executive Director. The trustees should follow the mandates
of the Charter to minimize bias and improper attribution of
unsupported motives.
1:58:30 PM
REPRESENTATIVE TUCK agreed that the trustees should follow the
evaluation process in the Charter and minimize bias and improper
attribution and asked whether it was unlawful to use bias and
improper attribution in terminating an at-will employee.
MR. TRICKEY answered that direct personal experience with
someone informs one's decision. He stated that the firm had
found no evidence of overt bias and he allowed that there may
have existed a personality conflict between the Executive
Director and a trustee. He added that the firm was drawing a
distinction between subjective decisions based on relevant
factors for an executive board, and for relationships, trust and
confidence and that trust and confidence are inherently
subjective. He stated that a personality conflict could
unfairly influence an evaluation. He added that, when a
relationship is strained and communication difficulties exist
and are supported by facts, it would support a board member's
subjective conclusion that he/she had lost confidence with that
person. He stated that a solid evaluation tool includes
objective measures to minimize or eliminate bias.
REPRESENTATIVE TUCK stated his reason for asking the question
was curiosity that, if the Charter evaluation process had been
used, whether improvements could have been made. He noted that
APFC is very publicly visible, and conflict in the public which
is predicated on no clear guidance amounted to the executive
being "between a rock and a hard place." He suggested that
deviating from the evaluation process in the Charter would allow
for the board to make mistakes. He stated his observation that
there existed a conflict between personality and performance and
suggested that the fund's performance would be hard to deny, and
it may have contributed to some trustees conflicted with the
decision to terminate. He suggested that third-party, positive
evaluations, including "Best Places to Work," would necessarily
be attributed to the Executive Director.
2:03:05 PM
SENATOR BISHOP referred to page 11 of the report, under item B.1
which read, in part: "Given this structure, protecting the
independence of the Fund requires vigilance and strict adherence
to fiduciary duties by the Trustees. The Trustees all
acknowledged and adhered to fiduciary standards..." and he asked
how much fiduciary training trustees had received since their
appointment to the board.
MR. TRICKEY answered that, once appointed, a trustee receives
training on fiduciary duties and standards, and ongoing training
annually.
MR. SLOTTEE added that trustees do not receive training on
evaluating the Executive Director, nor do they receive training
on the use of a 360-degree survey. He noted that, in 2021, the
board did not have an outside consultant to provide expertise in
evaluations. He stated that, in 2020, an outside consultant had
been retained. He added that Ms. Rodell had testified that the
2020 evaluation had provided feedback that she characterized as,
for the first time, helpful.
2:05:14 PM
REPRESENTATIVE SPOHNHOLZ asked whether the foundation of the
individual trustees' testimony regarding the Kodiak meeting had
been based on the evaluation and asked whether the trustees held
the belief that they had received an objective evaluation
report, in light of the revelation that the comments provided to
the board had been "cherry-picked" and may have misrepresented
the totality of the evaluation.
MR. SLOTTEE answered that the trustees had assigned a variety of
weights to the evaluation results, with some weighting the
scores more heavily, and some weighting the comments more
heavily. He stated that it was not shown that any of the
trustees questioned the report prepared by Trustee Mahoney. He
stated that the board did not have training in evaluation and
had only been provided with the summary report prepared by
Trustee Mahoney that did not include all the comments.
MR. TRICKEY added that there had been the appearance of a
cumulative effect of happenings in 2021 that led to the lack of
confidence. He noted that there had been the June 2021 press
release that addressed the budget impasse between the governor
and the legislature. He added that a Tweet had been released in
August of 2021 correcting fund balances, and the September 2021
Kodiak meeting at which there had been events described as
"disturbing" by the trustees. He stated that these were the key
points of the discussion regarding Ms. Rodell's lack of judgment
and ineffective communication in relationships.
2:08:46 PM
CHAIR VON IMHOF asked whether the trustees held any concern or
expressed regret that they had not followed the Charter, that
they had brought the evaluation process in-house, that only four
of the six trustees had participated, or that not all the
comments had been provided to the board.
MR. SLOTTEE offered background information on the evaluation
process and drew attention to the slideshow presentation
entitled, "Schwabe Williamson & Wyatt Powerpoint Presentation to
LBA Committee 9-28-22.pptx," [included in the committee packet,]
slides 4-5, which read as follows [original punctuation
provided]:
The policy was intended to:
Ensure that the Executive Director receives
appropriate and useful feedback on their performance
from the Board on an annual basis, and
Help develop clear and meaningful performance
objectives for the Executive Director.
The policy identifies specific criteria to evaluate
Executive Director's performance against.
(a) Achievement of the goals and objectives of the
APFC;
(b) Completion of the specific projects and
initiatives set out in the strategic plan for that
fiscal year;
(c) Implementation of Board policies and reporting
requirements;
(d) General leadership and management skills; and
(e) Compliance with the Executive Director's charter.
MR. SLOTTEE described the Governance Committee's process for
initiating and coordinating the annual survey and review
process, as depicted on slides 6-7 of the presentation, which
read as follows [original punctuation provided]:
The Vice Chair meets with Executive Director to
develop survey.
The Vice Chair distributes a package of survey
materials to Trustees.
Trustees complete survey and a summary report is
presented to the Governance Committee.
The Governance Committee reviews the report and
submits it to the Board of Trustees.
Trustees meet in executive session to discuss the
evaluation results.
The Governance Committee prepares a draft Evaluation
Report.
The Trustees then meet with Executive Director in
executive session to discuss the evaluation and
opportunities for improvement.
The Trustees approve the Evaluation Report, which is
to be signed by the Chair, Vice Chair, and Executive
Director.
The Evaluation Report is filed in the Executive
Director's personnel file.
MR. SLOTTEE added that the meeting between the Governance
Committee and the executive director includes a discussion to
identify and agree on any changes to the content of the survey
questions. He added that the survey is distributed to the
trustees in advance of the board's fourth quarterly meeting each
December.
2:12:36 PM
MR. SLOTTEE continued explaining the evaluation process, as
depicted on slide 8 of the presentation, which read as follows
[original punctuation provided]:
An effective evaluative process adequately and fairly
documents past performance while outlining
expectations for future performance.
The process should enable the identification of under-
performance in key areas while identifying significant
strengths and achievements towards the organization's
mission.
APFC's Performance Evaluation Policy, as drafted,
adopts sound HR practices for executive leaders.
MR. SLOTTEE stated that the investigation had revealed that the
evaluation process had largely remained the same during Ms.
Rodell's tenure, but the trustee's adherence and application of
the policy had not. He summarized that the policy had changed
in different ways, not all trustees completed and submitted the
evaluation surveys each year, and the specific mandates of the
policy were not followed. He stated that the Governance
Committee did not meet and did not prepare reports for
submission to the board, and documentedonly one instance, in
2018, in which the evaluation report had been completed and
signed by all parties.
MR. SLOTTEE related that, during the interviews of the trustees,
they had been asked about the policy not having been followed.
He summarized the responses from the trustees to be that they
had considered the deviation from the policy to be non-material.
He stated that the board did not consider the meeting of the
Governance Committee as essential and they had proceeded to the
meeting of the full board. He stated that the trustees' choices
to not participate in the survey indicated a lack of priority or
importance on the evaluation.
2:14:56 PM
CHAIR VON IMHOF asked what the firm's consultant had surmised
about the "non-material deviations" from policy.
MR. SLOTTEE related that the consultant had endorsed the policy
as a good one and that it should be followed. He added that the
consultants had concluded that the evaluation process in 2021
had not resulted in a complete and fair evaluation of Ms.
Rodell's performance.
CHAIR VON IMHOF asked whether the consultant's opinions would be
available in the report that would be made publicly available,
which Mr. Slottee confirmed that it would.
2:15:27 PM
REPRESENTATIVE SPOHNHOLZ asked that, if the board did not follow
its own policy, what the point would be of having such a policy.
MR. SLOTTEE offered his opinion as an attorney that if an
organization has a policy, then it should be followed. He
offered that it would not be possible to know whether a
different outcome in the evaluation would have occurred would
the policy have been adhered to in 2021. He stated that, had
the policy been followed from 2015 2021, it may have resulted
in constructive feedback that could have enabled Ms. Rodell to
address concerns raised by the board.
REPRESENTATIVE SPOHNHOLZ asked whether it was a reasonable
expectation by an Executive Director that a board would follow
its own policy.
MR. SLOTTEE answered yes, and he noted that neither Ms. Rodell
nor any of the trustees had objected to the existing policy.
REPRESENTATIVE SPOHNHOLZ asked whether it is illegal to not
adhere to a policy if it is part of a governing document.
MR. SLOTTEE answered no, and that the board may change its
policies either formally or informally. He stated that it was
"probably not good practice" to not follow an existing policy.
REPRESENTATIVE SPOHNHOLZ asked whether the board had the ability
to change the policy but never did.
MR. SLOTTEE answered that it would be accurate to say that the
board did not follow the policy and it did not adopt any formal
change or amendment to the policy. He stated that a board may
collectively decide to disregard a policy in one instance, and
he characterized such a decision as not being good corporate
governance and would typically be advised against.
2:18:14 PM
MR. TRICKEY addressed Senator von Imhof's question of whether
the board had reflected on its decisions and whether they had
expressed any regret. He stated that there were new members of
the board which had resulted in some inconsistency, and that
Chair Richards had, when asked, recognized that changing the
evaluation over the years had resulted in the Executive Director
having received inconsistent feedback. He added that there
appeared to be a disconnect between the board's expectations and
Ms. Rodell's understanding of what was expected of her. He
attributed that disconnect to the deviation from the Charter's
evaluation process. He stated that the most striking disconnect
was that Ms. Rodell held the belief that she was evaluated on
the overall performance of the fund, and that the performance of
the fund reflected on her leadership of the organization. He
added that the board placed nearly no weight on the overall
performance of the fund to the Executive Director's performance.
He stated that the performance of the fund was credited to the
investment team and not to any one individual.
SENATOR VON IMHOF stated that Chair Richards had acknowledged
responsibility and asked whether he had taken any accountability
for the decisions, since he had been a member of the board
through Ms. Rodell's tenure. She asked who hires the investment
team.
MR. SLOTTEE answered that the Executive Director, in accordance
with the Executive Director Charter, is responsible for
identifying investment staff and that the board may have final
say over the higher-level staff, such as the Chief Investment
Officer (CIO). He referred to Exhibit 1, entitled, "EXH 1.pdf"
[included in the committee packet] that contains the policy
specific to the Executive Director's Charter, beginning on page
14, which read as follows [original punctuation provided]:
The Executive Director will develop and recommend to
the Board:
(a) An investment policy, including the Board's
overall investment philosophy, and mechanism for
monitoring and managing investment risk;
(b) The long-term or strategic asset allocation of the
Fund in terms of the proportion of total assets to be
invested within a minimum-maximum range at any point
in time; and
The Executive Director will implement all investment
policies and strategies as approved by the Board.
The Executive Director will direct that appropriate
financial and operational controls and procedures are
put in place to safeguard the assets of the Fund
CHAIR VON IMHOF asked Mr. Slottee to repeat who is responsible
for the hiring of investment staff.
MR. SLOTTEE answered that the information provided had been
excerpted from the Executive Director charter policy document as
adopted by the trustees.
2:22:33 PM
REPRESENTATIVE JOSEPHSON asked whether at-will employees who had
been terminated have brought action and had prevailed and won
damages.
MR. TRICKEY affirmed that it was true.
REPRESENTATIVE JOSEPHSON stated that the firm's consultant had
concluded that Ms. Rodell had not received a complete and fair
evaluation and asked whether that conclusion could be presented
as evidence to a jury regarding the objectivity of a
termination.
MR. TRICKEY answered that it is possible and that the board
would be permitted to explain its reasons other than those
concluded in the investigation for the basis of their decision
to terminate. He stated the investigation and depositions
regarding the decision to terminate had not found that any of
the reasons for termination were false.
REPRESENTATIVE JOSEPHSON noted that some of the trustees had
based their decision on the evaluation and some had not, and he
asked whether a faulty evaluation leading to a termination would
result in a problem for the board.
MR. TRICKEY answered yes in the context of a prima facie for a
breach of the covenant of good faith and fair dealing it would
be an unfavorable fact for the board. He noted that this was
one fact among others including reasons that are sufficient
pertaining to the top executive of an organization. He allowed
that it may be difficult in this case because the consensus
reason was lack of confidence, and the use of an objective
evaluation tool would likely have resulted in the same reason.
REPRESENTATIVE JOSEPHSON referred to the statement of findings
in the report that the trustees faulted the Executive Director
for not advocating APFC's policy positions forcefully enough and
asked what positions the board had considered Ms. Rodell to be
not adequately forceful in advocating. He postulated that the
legislative record would provide evidence that Ms. Rodell had
been forceful regarding a rules-based framework.
MR. SLOTTEE offered that the general testimony was regarding
more than this issue and that the board had not specified what
Ms. Rodell's own agenda had been, but the consensus was that it
was different than the board's agenda. He noted that Chair
Richards had testified that Ms. Rodell did support the APFC's
resolutions regarding the Percent of Market Value (POMV)
approach, with which he took no issue. He offered two potential
examples of differing agendas, one in which there was a proposal
for an APFC Anchorage office, and the other was the compensation
proposal.
2:28:08 PM
REPRESENTATIVE TUCK surmised that the problems emerged in the
latter half of 2021 and asked whether the press release and
tweet were inconsistent with those she had issued prior.
MR. SLOTTEE noted that the press release had been identified by
at least two of the trustees as a pivotal event.
REPRESENTATIVE TUCK asked whether the Executive Director would
have the authority to discipline or reward a CIO after his/her
hire.
MR. SLOTTEE answered that the day-to-day operations are the
responsibility of the Executive Director, including the
selection of staff and staff training. The duties also include
making policy recommendations and to make recommendations for
compensation based on the board-approved compensation policy.
He offered that the selection of the CIO position and the
board's involvement was not associated with a governance
document but rather was a matter of practice.
REPRESENTATIVE TUCK said that there had been one CIO that had
left the corporation with no reason given and asked whether a
reason had ever been determined.
MR. SLOTTEE stated that the departure of a prior CIO was not
within the scope of the investigation. He stated that Chair
Richards had expressed his concern about the potential to lose
the current CIO and had referred to the loss of a prior CIO. He
stated that it was unknown why former APFC CIO Russell Read had
chosen to leave. He added that several trustees had expressed
concerns regarding the relationship between Ms. Rodell and the
current CIO, Marcus Frampton, and they expressed their desire
that he remain with the corporation. He added that Ms. Rodell
had related her experience with Mr. Frampton to have started on
a "somewhat rocky" basis, but that it had improved significantly
since.
MR. TRICKEY added that the trustee with the longest tenure was
Chair Richards, and Mr. Richards had testified that Mr. Read had
departed due to a strained relationship with the Executive
Director. He stated that there was a perception that low
evaluation scores indicated a potential for the loss of top
investment staff.
REPRESENTATIVE TUCK asked to confirm that the October [2021]
board meeting was the one at which Ms. Rodell had invited a
facilitator, which Mr. Slottee confirmed as true. He noted his
prior experience with facilitators aiding in the development of
strategic plans, and he asked if it was true that a facilitator
had been invited to participate with no notice given to the
board.
CHAIR VON IMHOF directed the committee to refer to page 12 of
the presentation for information related to the line of
questioning.
MR. SLOTTEE referred to the press release from June 2021, and he
noted that some trustees had cited it as a significant event in
their evaluation of Ms. Rodell. He explained that in June of
2021, the deadline for a state budget to pass without a
government shutdown was approaching, and a budget impasse raised
the potential for a government shutdown. On June 18, 2021, the
Executive Director issued a press release explaining the
negative consequences that a shutdown would have on APFC's
operations and investments. Mr. Slottee stated that the press
release raised the possibility that APFC staff would be
furloughed and would not be able to monitor investments during
any shutdown. Several trustees testified that they viewed the
press release as overtly and improperly political, and
unnecessarily drew APFC into a dispute with the executive and
legislative branches. He stated that Ms. Rodell had not run the
press release by the trustees prior to its issuance. He stated
that Trustee Feige testified that the press release was "wildly
inappropriate," "absolutely out of bounds," and that she was
"absolutely furious." He added that Trustee Schutt viewed the
press release as an empty and inaccurate threat and "to use that
lever in a public debate was a very poor choice and over the
line," and, in his view, it was a "serious problem," that
"undermined the credibility of the fund, and a decision that
should have been cleared in advance with the board." Mr.
Slottee added that Trustee Moran had indicated that no one
expressed concerns to him about the press release until October
of that year. He stated that Trustee Moran acknowledged that
the press release was perceived by some as a criticism of either
the legislature or of the executive branch, but he viewed it as
a statement of the issues. He added that Ms. Rodell thought
that she had the authority to issue press releases such as this
one in her role as the spokesperson for the APFC under the
Charter, and that Ms. Rodell and Trustee Moran issued a joint
letter to the administration three days later regarding the
potential impact of a shutdown at APFC that had not created a
similar objection from other trustees. He added that the 2021
press release was like one that had been issued by Ms. Rodell in
2017.
2:35:58 PM
MR. SLOTTEE related that the other related event was the August
20, 2021, Tweet. He stated that this was the second public
statement that was viewed by some of the trustees as too
political. He stated that, on that date, Neil Steininger,
Office of Management & Budget (OMB) Director, was providing a
budget presentation to the House Finance Committee. Mr. Slottee
stated that Mr. Steinenger was asked by the committee what the
balance of the Earnings Reserve Account would be if the
legislature adopted the governor's proposed appropriation bill,
which Mr. Steininger did not have readily available. He noted
that Ms. Rodell was viewing the proceeding remotely and
published the following Tweet: "As of June 30th the ERA has an
uncommitted balance of $9.3 billion of which the Governor's
appropriation bill would use $3 billion leaving the balance of
$6.3 billion for future appropriations." The Tweet included a
tag to the akleg Twitter handle. He stated that Trustee
Richards characterized the Tweet as "very political,
unprofessional, backhanded critique of the governor." He stated
that a member of the governor's staff, Brandon Brzezinski,
contacted Commissioner Mahoney to express the administration's
displeasure with the Tweet, which Commissioner Mahoney did not
find to be problematic, and Commissioner Mahoney had trusted
that the numbers in the Tweet were correct. Mr. Slottee
explained that Commissioner Mahoney had conveyed the
administration's displeasure to the Executive Director and
advised her to be "mindful" of how public statements may be
perceived. He stated that, according to Ms. Rodell's deposition
testimony, Trustee Mahoney had contacted Ms. Rodell on more than
one occasion and advised her to "watch her back," and Ms. Rodell
had offered to tender her resignation, which Trustee Mahoney had
responded as being not necessary.
2:37:44 PM
REPRESENTATIVE TUCK asked whether [the trustees took issue with
the fact that] she Tweeted or if the concern was with the
content of the Tweet. He suggested that Ms. Rodell was giving
information that had been requested.
MR. SLOTTEE answered the Trustee Richards had questions
regarding the accuracy of the numbers and that the calculation
of the balance had been esoteric and considered realized and
unrealized gains. He added that some members of the
administration had concerns with the numbers' accuracy but that
was "not the main focus of their ire," and expressed that they
viewed the Tweet as APFC inserting itself into a political
issue.
REPRESENTATIVE TUCK asked whether Trustee Mahoney had recognized
that the numbers were correct.
MR. SLOTTEE answered that no one had testified that the numbers
had been inaccurate.
REPRESENTATIVE TUCK suggested that the board should implement a
policy that the Executive Director not be allowed to Tweet
because he could not find where the issue lie, and it appeared
to be an issue with the fact that she Tweeted.
MR. TRICKEY surmised that the trustees seemed to find a problem
with Ms. Rodell injecting herself when she had not been
requested to do so. He stated that the trustees held the belief
that the Executive Director should remain scrupulously neutral
and not inject the fund nor her own position into debates
without having been requested to do so. He added that the Tweet
followed the recent press release that was characterized as
crossing the line that had not been clearly drawn, but that the
fund had, as a result, been injected more directly into the
budget process politics more than it need to be.
2:40:39 PM
REPRESENTATIVE JOSEPHSON stated that, when previous shutdowns
had been imminent, both the Dunleavy and Walker administrations
had requested an accounting of the ramifications. He suggested
that the implications would prompt whoever was causing the
impasse to "get their house in order" to avoid such
consequences. He added that the APFC webpage reflects the
projected realized and unrealized gains and the available
balance of the Earnings Reserve Account, and that Ms. Rodell is
requested to provide that information each time she testifies to
the legislature.
CHAIR VON IMHOF expressed her view that there appeared to be
excessive ire placed on benign documents and a Tweet and
rhetorically asked whether the board was seeking "a place to
hang their hat."
MR. SLOTTEE continued explaining that several trustees had
expressed that several events which had occurred at the 2021
Kodiak meeting had influenced the decision to terminate Ms.
Rodell's employment. Several trustees recounted a tense
exchange between the Executive Director and Trustee Mahoney at
that meeting, describing Ms. Rodell as having "verbally
attacked" Trustee Mahoney or that she had "lashed out" at
Trustee Mahoney. The Executive Director acknowledged that she
had contentious interactions with Trustee Mahoney related to the
fiscal year 2023 budget proposal at the 2021 annual meeting, and
that budget workshops had preceded it. He said that an exchange
had occurred off the record during a break. He stated that Ms.
Rodell had denied approaching Trustee Mahoney regarding any
breach of Trustee Mahoney's fiduciary duties, and she denied
having engaged in conduct that could have been reasonably
characterized as an attack. He added that neither in the 2021
annual meeting minutes, nor the video recording of that meeting
contain an exchange between the Executive Director and Trustee
Mahoney that could be reasonably characterized as an attack or
as lashing out. He added that this fact does not preclude the
fact that the exchange may have occurred off the record, or
perhaps at a different meeting such as at one of the budget
workshops. He added that there exists no evidence to
substantiate that such an exchange occurred on the record at the
annual meeting.
MR. SLOTTEE noted that another example that Trustees pointed to
as evidence of a disconnect in their relationship with the
Executive Director occurred at the 2021 annual meeting in
Kodiak. The Executive Director invited an executive leadership
coach named Al Bolea, with whom she had worked in 2019, to
facilitate a discussion with the Trustees at that meeting about
creating alignment between the board's current priorities, and
the priorities officially adopted in the board's five-year
strategic plan and Strategic Planning and Budgeting Policy. The
Executive Director explained that her purpose in inviting a
facilitator was to tease out the trustees' collective vision for
APFC going forward, i.e.: whether they envisioned it as a large
investment management company, or something more streamlined.
The Executive Director's plan to have a third party facilitate a
public discussion with trustees about the alignment of their
strategic priorities caught most of the trustees by surprise.
Although the board packet each trustee received prior to the
meeting stated that "Al Bolea will facilitate a conversation of
creating alignment of the strategic plan priorities with
Trustees, APFC Staff, and APFC stakeholders," the agenda item
for the discussion stated only "ALIGNMENT OF STRATEGIC PLAN" as
presented by Angela Rodell, CEO. The Executive Director had
vetted the idea with then-Chair Moran, but the other trustees
were not aware of it. He stated that several trustees testified
that they viewed Ms. Rodell's decision to bring Mr. Bolea to the
Kodiak meeting without vetting the idea with the whole board was
an example of Ms. Rodell's reluctance to meaningfully engage
with the board and it reflected a problem with the relationship
between the Executive Director and the board, such that the
Executive Director had felt the need for a mediator to
facilitate a meaningful discussion. He added that, when the
meeting reached this point in the agenda, Mr. Bolea was
introduced, several of the trustees questioned the purpose for
which he was there, and the board thanked Mr. Bolea and
dismissed him, did not proceed with the agenda item, and went on
to the next agenda item. He noted that several trustees had
characterized the event as embarrassing, and Trustee Feige
testified that it was a "bright line event" that influenced her
decision to terminate Ms. Rodell.
2:45:36 PM
CHAIR VON IMHOF asked to confirm that then-Chair Moran was aware
of the mediator and, since it was listed as an agenda item, that
he had approved it.
MR. SLOTTEE answered yes.
CHAIR VON IMHOF asked whether there was any account of either
Mr. Moran or Ms. Rodell defending the decision to the rest of
the board prior to terminating the mediator.
MR. SLOTTEE answered that any such defense was not reflected in
either the minutes or the video footage of the meeting.
CHAIR VON IMHOF asked when the trustees had received the full
board packet including the details of the mediator prior to the
Kodiak meeting.
MR. SLOTTEE answered that he was not aware how far in advance of
the meeting trustees had received the board packets.
CHAIR VON IMHOF asked whether Mr. Slottee had listened to the
full recording of the Kodiak meeting, to which Mr. Slottee
replied that he had listened to all three days of the meeting.
CHAIR VON IMHOF asked Mr. Slottee if he had observed anything of
significance at that meeting considering the depositions that
had been obtained.
MR. SLOTTEE stated that there had been a budget discussion
during which Ms. Rodell had presented the budget, Trustee
Mahoney moved to reduce the budget and the number of personnel
in the proposed budget and remove the additional 5 investment
and 2 administrative staff. He stated his observation that the
discussions and conduct appeared to be professional, and the
motion was defeated. He stated that other discussions took
place during the meeting regarding different analyses and risk
factors and, other than an "uncomfortable event" pertaining to
the interaction with Mr. Bolea, there did not appear to be any
exchange that could be characterized as unprofessional or as an
attack on anyone.
CHAIR VON IMHOF stated that there had been concerns expressed
that Ms. Rodell had not been following the APFC board's vision
and asked whether the board's vision is articulated in
resolutions passed by the board.
MR. SLOTTEE answered yes, the board passes resolutions, and the
executive director is expected to advocate for those
resolutions. He noted that Trustee Richards had acknowledged
that Ms. Rodell did advocate for the resolutions of the board.
He stated that the "disconnect" between the "agenda" of Ms.
Rodell and the board was never clearly articulated during the
deposition process.
CHAIR VON IMHOF noted that the Legislative Budget and Audit
Committee had reviewed all the APFC's adopted resolutions, and
she stated that she had not observed any public inconsistency
between the resolutions and the behavior of Ms. Rodell. She
asked Mr. Slottee to confirm that no link between the claim that
Ms. Rodell was not following the resolutions passed by the board
had been identified during the deposition process, and asked Mr.
Slottee to further explain.
MR. SLOTTEE offered an example that had been identified as
evidence of a disconnect between the goals and objectives of the
board and those of Ms. Rodell as the cost analysis of opening an
APFC office in Anchorage. He stated that the 5-year strategic
plan adopted by the board included a feasibility investigation
by the Executive Director. He said that Trustee Richards had
stated that Ms. Rodell "went out of her way to make it appear a
little more expensive and throw a little cold water on it." Mr.
Slottee said that the Executive Director had acknowledged in her
deposition that she thought that opening an office in Anchorage
was a bad idea and would be a waste of APFC resources. He
related that she had suggested that it would make more sense to
open an office in locations in which the fund was making
significant investments such as New York, Chicago, or Nashville
and that having two offices in Alaska "felt like a waste of
money." He noted that Ms. Rodell testified that she had
directed her staff to prepare a cost analysis, and further
testified that she had told her staff that she disagreed with
opening an Anchorage office. She testified she did not direct
staff to structure the cost analysis in such a way to make it
seem more expensive than it really was. He added that she
reviewed the analysis and did not make any changes prior to
submitting it to the board. He stated that the board did not go
forward in opening an office in Anchorage, and that no other
trustees believed that the Executive Director had manipulated
the cost analysis. He noted that no other evidence
substantiated that conclusion.
2:51:23 PM
CHAIR VON IMHOF asked whether the board had the option to hire
an outside real estate firm to provide the same type of
analysis. She postulated that the cost of two offices would
include travel between and the management of the two offices.
MR. SLOTTEE confirmed Chair von Imhof's statements as correct.
He offered further information that the perceived tension was a
primary motivating factor in the decision to terminate, based on
deposition testimony. He stated that in the 2021 evaluation
reports, there had been comments such as, "The Director's
relationship with the board is soured," and "Information that
comes to the board is controlled and manipulated or goals are
sometimes ignored or even undermined." He stated that the
allegations were not supported by any actual examples of conduct
that the evaluator viewed as problematic. He stated that, when
asked under oath, few trustees would endorse the idea that the
Executive Director tried to manipulate the board; withhold or
control information; or to pursue her own agenda; nevertheless,
regardless of its cause, tension between the Executive Director
and certain Trustees was real. That tension was observable even
to some APFC staff, who commented that the "CEO [is] at odds
with [the] Board," the "dynamic between CEO and the Board
appears difficult," and the "Board needs to empower the CEO."
The Executive Director testified that, while her relationship
with Trustees improved in early 2020, by September 2021 "it felt
like it all fell apart" and "all felt, starting September 1st
[2021], to go off the rails[.]" He added that, most Trustees
agreed that, at least by the time of her evaluation in December
2021, the Executive Director's relationship with at least
certain trustees was strained, and that strain likely impacted
her relationship with the Board as a whole.
CHAIR VON IMHOF stated her observation that there had been
assertions of conflict but that no concrete evidence other than
a Tweet and a press release offered as evidence. She asked
whether it was problematic that a person could make such an
assertion and yet "can't back it up."
MR. TRICKEY offered that, between a corporate board of directors
and its executive leadership, the relationship will be
inherently impacted by personal interactions. He stated that
the purpose of the objective evaluation process included in the
Charter is to remove personal, subjective considerations from
the evaluation process and to provide a full, accurate, and fair
evaluation of performance. He stated that when such a policy is
not followed, there is a risk that influence motivated by
personal subjective interactions may occur and stated his
viewpoint that this is not good corporate governance. He added
that it is within the trustee's "gambit of authority" to do so.
He stated that, even considering the applied covenant of good
faith and fair dealing, in an employment context, a personality
conflict is a justifiable reason for terminating an employee.
He added that, Trustee Schutt had stated that when a CEO's
relationship with a board has soured, regardless of cause or
fault, it is sometimes in the best interest of the organization
to move forward in a new direction rather than to direct
resources and time to fix the relationship.
2:56:29 PM
CHAIR VON IMHOF invited the committee to consider how to
proceed.
SENATOR BISHOP asked for a professional opinion from the firm
whether the APFC board had learned lessons going forward to
create a good work environment and whether the board would
continue to be subjective in its evaluation process.
MR. TRICKEY stated that he held no personal opinion and would
base his response on the facts and evidence before the
committee. He suggested that Senator Bishop's question could be
directed to the trustees. He stated that each trustee had been
asked whether there was anything that he/she would have done
differently. He related that the answer was no, and that the
breakdown of the relationship was "messy" and there was no way
to work through it rather than to decide to terminate. He added
the caveat that the depositions had been obtained by lawyers in
a somewhat adversarial proceeding, that the trustees may not
have considered their answers in advance of the proceeding, and
there may have existed some defensiveness in response to the
question of what could have been done differently.
SENATOR BISHOP stated his hope that there is a plan and protocol
in place to hire the "best-of-the-best" due to the importance of
the fund.
2:59:54 PM
The committee took an at-ease from 2:59 p.m. to 3:14 p.m.
3:14:40 PM
REPRESENTATIVE SPOHNHOLZ asked Mr. Slottee to describe the
timeline of the agenda items including the budget discussion and
the mediator during the September 2021 board meeting.
MR. SLOTTEE answered that the budget presentation was scheduled
for 10:30 a.m. and the proposed strategic planning session with
the mediator was scheduled for 1:00 p.m. on the same day.
REPRESENTATIVE SPOHNHOLZ recalled that the budget request had
included an increase in staff of 7 positions and that discussion
had occurred, during which it was proposed that the APFC "feel
the pain" that Alaskans had suffered because of decreased
dividend payments. She asked whether such a proposition would
be entirely at the discretion of the legislature.
MR. SLOTTEE answered that the budget proposal included 5
additional investment staff and 2 additional administrative
staff, and the motion was made to reduce the number of
additional requested positions. He acknowledged that there was
an intention that government should be cut "across the board"
and that it may not be appropriate to add additional staff. He
noted that the motion to reduce the proposed additional
positions was defeated and the budget was approved as presented.
3:16:54 PM
REPRESENTATIVE JOSEPHSON asked whether the deposition process
had revealed any differences of opinion regarding a proposed
overdraw of the fund. He noted that he had participated in a
meeting with the then-Commissioner of the Department of Revenue,
and it had been proposed to request multiple billions of dollars
of overdraw that was referred to as a "bridge" that could result
in net positive fiscal benefit to the state into the 2030s based
on realized gains and cuts to agency funding. He stated that
the legislature would likely be allowed by the courts to
appropriate such an overdraw based on the Wielechowski v. Alaska
ruling. He expressed his disbelief that a board would reverse
its position in an arbitrary and capricious manner on
resolutions dating as far back as the late 1990s that directed
that any endowment structure should be rules-based. He stated
his belief that the issue that was "infected" by politics and as
such had resulted in undercurrents based on these factors.
MR. SLOTTEE answered that each of the trustees had been asked
during the depositions whether the governor's agenda or issues
regarding draws from the fund were a topic of discussion during
the Executive Director's evaluation process during the executive
session, and each denied, under oath, that it had been raised or
addressed.
MR. TRICKEY added that, at the time of the executive session, it
was understood that the session was closed and private and not
subject to scrutiny. He expressed that, had that matter been
discussed, it would likely have been revealed during the
deposition process of the 6 trustees. He added that draws from
the fund had not been identified as a motivating factor in the
decision to terminate the Executive Director.
3:21:08 PM
CHAIR VON IMHOF asked whether Commissioner Mahoney hired an
outside consultant to offer scenarios on ad-hoc draws and the
effect to the fund in 2021. She noted that such analysis had
been presented during Senate Finance Committee hearings. She
stated that she had knowledge that the board had hired its own
consultant to provide analysis of ad-hoc draws.
MR. SLOTTEE answered that during the September 2021 APFC
meeting, there had been a presentation that included analysis of
asset reallocation and rebalancing of the fund considering an
ad-hoc draw. He recalled that discussions had taken place
questioning the methodology, timeline, and the basis of the
analysis, and that some trustees had expressed their belief that
there was an overstatement of the impact of such a draw. He
reiterated that the issue of a draw was not raised in testimony
as a reason for the decision to terminate.
CHAIR VON IMHOF asked whether discussion had taken place
regarding a governor's cabinet member trustee holding the vice-
chair position, as the primary evaluator of the Executive
Director's performance and the real or perceived political
implications of such an appointment. She asked whether a
governor's cabinet member appointee had ever held the position
of vice-chair. She noted that the 2021 evaluation had been
found to have some weaknesses and asked whether the firm's
consultant hired to review the performance evaluation procedures
had considered the vice-chair's position.
MR. SLOTTEE offered his understanding that the vice-chair
position had not influenced the review of the evaluation policy.
He stated that Ms. Rodell had raised concerns that a
commissioner appointee had been in the position of vice-chair,
and it was unknown whether such an appointment had occurred in
the past.
MR. TRICKEY added that past practice had been that commissioner
appointees were not elected to the position of vice-chair, and
there had been discussion at the September Kodiak meeting that
Ms. Rodell was perceived to be interfering with the election of
the vice-chair. He stated his recollection that no provision in
the Charter or bylaws would preclude such an election [of a
commissioner as vice-chair.] He stated that he had not directly
asked the consultant whether there being a commissioner as the
vice-chair had been a factor in its review of the evaluation
process.
3:26:39 PM
REPRESENTATIVE JOSEPHSON referred to an article published by the
news organization KTOO, authored by Andrew Kitchenman on October
3, 2021, in which Ms. Rodell had been interviewed and had
advocated for incentive pay for investment staff. He
characterized the timing of the article as contextual to the
evaluation and termination of Ms. Rodell, and that her advocacy
for incentive pay could be construed to be her advocacy for
employee retention. He noted that Ms. Mahoney opposed incentive
pay, based on dividends having been paid at less than the
statutory formula. He noted that the article addressed the
proposed overdraw of the fund, its effect on future budgets and
dividends, and concerns among lawmakers that a draw could
threaten the future of the fund. He stated that the context of
Ms. Rodell's termination was captured in the article published
two months prior to her termination and consisted of matters
regarding employee pay and the size of the dividend. He asked
whether the investigation had revealed facts related to those
issues.
MR. SLOTTEE answered that the matter of incentive-based
compensation had been brought up by trustees during the
deposition process. He explained the budget is prepared by the
Executive Director, presented to the trustees for approval,
submitted to the governor's office for review and approval, and
submitted to the legislature for review and final approval. He
stated that the budget included incentive compensation, and that
the budgeted amount for incentive compensation was less than
what employees would have otherwise been entitled to. He stated
that Ms. Rodell related that this had caused tension with the
investment staff and was further evidenced in survey comments.
He noted that the process requiring the additional approvals
rendered the process out of the control of Ms. Rodell. He noted
that discussions had taken place as to whether operational staff
would be included in the incentive compensation, which he
characterized as having caused additional tension among staff.
He stated that Trustee Richards had been asked to provide
instances of conduct by Ms. Rodell in 2021, and he quoted from
the testimony from Trustee Richards entitled, "Richards, Craig
6.22.22.PDF," [included in the committee packet,] which read as
follows [original punctuation provided]:
I, based on my conversation with Trustee Moran, was
left with the impression thatMs. Rodell was meddling
with the officer appointments for?the board, which is
a big no-no.
What do you mean by "meddling"?
She was trying to keep Commissioner Mahoney off from
being vice chair was the impression I was left with.
And how was she doing that?
Through Trustee Moran.? He asked to meet with me the
second day.? He and I went out to dinner.? And
he?asked to meet with me early in the morning the next
day.? ?And he didn't tell me what it was about, so I
showed up to?the meeting 15 minutes early to meet with
him.? And he ?expressed something to the effect that
he had a?conversation with Angela and, you know, he
was concerned?because the -- the commissioner
positions, you know, shouldn't hold the chairmanship
or the vice chairmanship?and maybe it wasn't
appropriate to have Commissioner Mahoney be vice
chair. And I remember expressing to him that
I?disagreed with that as a historical observation, and
I didn't think it was an appropriate thing for her to
be?involved in.
MR. SLOTTEE cited this as the testimony related to the objection
by Ms. Rodell to the election of Ms. Mahoney to the position of
Vice-Chair.
3:32:25 PM
MR. TRICKEY added that Representative Josephson had raised an
important matter, that of the conflict between a governor's
cabinet member as trustee, the governor's agenda including a
proposed draw, and the board's position in opposition to the
draw. He allowed that such a position was a difficult one in
which to be placed. He added that each non-commissioner trustee
was asked whether they had received any statements, comments, or
actions by the commissioner trustees that indicated advocacy of
the governor's agenda in their role as trustees, to which they
answered that they had not. He added that it had been concluded
that even non-commissioner trustees had placed their fiduciary
duties paramount to political loyalties or obligations to
advocate for the governor.
REPRESENTATIVE JOSEPHSON opined that APFC board reform was
necessary to resolve the conflict that may arise for a
commissioner trustee. He stated that this problem is that of
the legislature and the state. He noted that there exist
constitutional considerations including separation of powers
that would need to be considered when contemplating such
reforms.
3:35:17 PM
REPRESENTATIVE TUCK asked for confirmation that Ms. Rodell had
been the Commissioner of the Department of Revenue [prior to her
role as Executive Director] and would have been a commissioner
trustee and would have knowledge of the historical trends and
traditions regarding a commissioner trustee serving as vice-
chair.
MR. TRICKEY answered yes, absolutely she would have that
knowledge.
SENATOR BISHOP echoed Representative Tuck's question and added
that it was possible that Ms. Rodell may have been advocating
for Commissioner Mahoney's best interest.
3:36:07 PM
CHAIR VON IMHOF directed the testifiers to present the
conclusions beginning on page 64 of the report to be followed by
an invitation to committee members to offer closing statements.
MR. SLOTTEE noted that the firm had produced a 65-page, single
spaced report which includes more detail of events, and which
included citations. He expressed the hope that committee
members will find the report to be comprehensive and that
questions which may arise should be answered within the report
and among its supporting documents. He then summarized the
conclusive points based on factual evidence, beginning on page
64 of the report entitled, "Schwabe Williamson & Wyatt Report to
Legislative Council 9-28-22 PUBLIC REPORT.pdf," which read as
follows [original punctuation provided]:
1. Trustees did not follow the APFC Charter in all
material respects with regard to their evaluation of
the Executive Director. The Trustees did not use an
evaluation instrument or process to assess the
Executive Director's performance that was consistent
with the Executive Director Performance Evaluation
Policy.
2. Trustees lost confidence in the Executive
Director's leadership and her relationship with
several Trustees was strained. There were several
incidents that Trustees testified about that eroded
their confidence and trust in the Executive Director's
leadership. The cumulative effect of these incidents
motivated the decision to terminate the Executive
Director, even though these incidents were not
directly addressed through the evaluation process. The
majority of Trustees were concerned that the lack of
improvement in the relationship between the Executive
Director and the investment team would lead to
investment team departures.
3. Collectively, the reasons expressed by the Trustees
for their decision to terminate the Executive Director
supported the termination as a matter of employment
law, in that they were a valid exercise of the
Trustees' ability to terminate an at-will employee
such as Ms. Rodell. A loss of confidence in the chief
executive of an organization such as the APFC is a
sufficient legal reason under the legal standards
applicable to at-will employment in Alaska.
4. APFC's structure and importance as the primary
source of funding for general government services and
payment of dividends inevitably drew the Executive
Director into political discussions and debates. The
Executive Director, as the designated spokesperson,
took actions and made statements that Trustees
perceived as being "political" and advancing a
personal "agenda".
5. There was no direct evidence or credible
circumstantial evidence that the Governor knew in
advance that the Executive Director would be
terminated. There is no direct or circumstantial
evidence that the Governor directed the Trustees to
terminate the Executive Director.
6. Trustees did express a concern about the political
impact of certain actions and statements by the
Executive Director. These concerns were a factor the
Trustees considered in the executive session
discussions that lead to the termination decision.
These concerns did not rise to the level of politics
being a substantial motivating factor in the decision
to terminate, but did undermine the confidence
Trustees had in the Executive Director's ability to
continue as Executive Director.
7. In order to prevent political concerns from
becoming a factor in evaluating the Executive
Director's performance, the APFC would be best served
if Trustees use an evaluation tool or instrument and
process that takes politics out of the equation. The
Charter provisions on evaluating the Executive
Director and the process for conducting the evaluation
would reduce or possibly eliminate the political
influence in evaluating the performance of the
Executive Director, if followed by the Trustees. The
stability and independence of the Fund can only be
protected by insulating the Executive Director from
political pressures and political repercussions of
doing the job.
MR. SLOTTEE offered that he would add as an addendum to the
conclusions that the Executive Director would be better
served by the trustees if they would give him/her clear,
objective performance metrics each year and make clear the
expectations of the performance and goals for the coming
year, rather than the subjective, ad-hoc method that was
used from 2016-2021.
3:40:00 PM
REPRESENTATIVE FOSTER stated that he would take some time to
reflect on the report and its findings. He stated that the
Tweet being one of many factors that led to the termination was
evidence of the tenuous balance and the potential for breakdown
of the relationship between the Executive Director and the
board. He stated his wish that there had been better adherence
to the Charter. He rhetorically asked, regarding conclusion 7,
"where do we go from here?" He acknowledged that it was the
responsibility of the board to improve its internal systems and
offered that the legislature may have a role in developing and
implementing improvement.
REPRESENTATIVE JOSEPHSON shared his recollection of Chair
Richard's apparent dismay at having been called to testify
before the Legislative Budget and Audit Committee in January of
2022 regarding the termination. He noted that the month prior,
Ms. Rodell had been selected as the presiding officer at the
International Forum of Sovereign Wealth Funds (ISFWF), and that
she was well-respected by a group of bipartisan legislators. He
noted that she had initially come to Juneau as a member of the
Parnell Administration and continued public service during the
Walker Administration. He allowed that a personality conflict
such as has been found to exist should not be allowed to
continue indefinitely, comparing such a relationship to a
marriage that had soured. He stated that the October 2021
article published by KTOO was a public airing of the differences
between the Executive Director and Commissioner Mahoney and that
it was indicative of an unhealthy relationship. He opined, with
all due respect to the legal conclusion offered by the firm,
that the state would be obligated to pay a settlement, should a
case be brought challenging the termination. He expressed his
main concern to be that of an apparent "infection" of politics
among the trustees, with the caveat that he did not intend to
disparage any of them. He stated that in October of 2021, the
administration was seeking a $3 billion draw from the fund, and
he described Ms. Rodell as not being an acolyte to that policy.
He suggested that this type of situation had not occurred
frequently with the APFC in the past. He expressed gratitude to
the firm and its counsel for providing a factual based report as
requested. He suggested that the need exists to reform the
appointment of the members of the board to optimally isolate the
members from this type of situation.
3:45:49 PM
REPRESENTATIVE SPOHNHOLZ stated that the report had revealed no
explicit evidence of interference by the administration. She
stated that there is inherent tension for two of the trustees
who have "two masters" and that may conflict with the goals of
the fund itself. She stated that it would be worthwhile to
restructure the way that trustees are appointed due to the
strategic importance of the fund to the state. She referred to
page 2 of the report and the evaluation criteria of the
Executive Director as listed in the Charter and suggested that
there was no clear measure of success to the criteria. She
observed that there exists an inherent challenge when the
Executive Director is not acknowledged for the success of the
organization as a whole. She stated that there had not been
consistent management nor clearly stated expectations and that
complexities among the reporting structures within the
corporation require reform. She characterized the situation
that had occurred as inevitable. She suggested that, without
reform, there exists further risk of political conflict within
the fund.
3:50:04 PM
REPRESENTATIVE TUCK thanked the firm for its complete, thorough,
and objective investigation and report. He opined that
personality had played a larger role than performance had in the
situation. He suggested that certain things may have been
prevented or mitigated. He suggested that the short timeframe
of the events leading to the termination indicated the
termination may have been based on misunderstandings. He stated
that what had occurred was a detriment to the APFC and that Ms.
Rodell was renowned and well-respected based on both the
performance of the fund and on her individual performance,
worldwide. He opined that the conclusions were not adequately
substantiated, such as, "These concerns did not rise to the
level of politics being a substantial motivating factor in the
decision to terminate," yet there was a perception that certain
things were political in nature. He stated that he had learned
during the meeting that any employer could effectively terminate
an at-will employee at any level in the organization by issuing
a statement of lack of confidence or a statement of change in
direction, as either would protect and justify the
organization's decision. He stated that he did not believe the
termination to be justified. He stated that he understood the
rationale of bringing a facilitator to bring clarification when
expectations are not clearly understood. He allowed that
bringing such a facilitator without the prior knowledge of the
board had been risky but could be characterized as "an innocent
mistake." He stated that there had been difficulty in the
legislature in determining the fund's role in funding state
government, and the implications to the Earnings Reserve Account
over the prior 6 years, and he stated that a press release or a
Tweet being haphazardly used as justification for termination
was disproportionate. He encouraged the board to follow its own
policies in the future to promote efficient and effective
management.
REPRESENTATIVE TUCK expressed his surprise to the board's lack
of recognition of the role and responsibility of the Legislative
Budget and Audit Committee as the statutory oversight authority
of the board. He added that the auditing authority of the
committee is protected by the constitution. He commended the
committee and its leadership for investigating the termination
and suggested that a failure to do so would be a dereliction of
the duty of the committee. He expressed his hope that the
investigation is found to be as helpful to the board and to the
public as it had been for him.
3:55:48 PM
CHAIR VON IMHOF expressed her appreciation of the firm and
complimented the report as fair, thorough, and comprehensive.
She suggested that it would be imperative to the benefit of the
state that the APFC board remain professional, contemplative,
fair, and transparent and opined that the board had acted with
impulsivity and haste in December of 2021. She stated that
firing an executive director in the absence of a backup plan or
transition plan lacked wisdom. She stated that the fund is one
of the largest in the world and provides 60-70 percent of the
state's revenue and the board should be professional and
consistent. She noted that there had been a turnover of three
members of the board over the prior year, half the board. She
stated that the CEO evaluation process needs to be more
consistent, robust, and thorough. She suggested that the
Executive Director's evaluation should be brought before the
Legislative Budget and Audit Committee annually to allow for
oversight of the board and an evaluation of its performance.
CHAIR VON IMHOF stated that there had been potential reform of
the board appointment process and structure suggested by some of
the committee members. She offered specific suggestions for
reform, as follows:
Through new legislation, potentially, I think we
should expand the board to 7 seats. Let's have an
odd number. We should have 5-year terms versus 4-
year terms. This makes it outside the governor's
term as a 4-year term. We should have two, 5-year
terms. All future board seats should be confirmed
by the legislature. That way, the people of Alaska
can weigh in. I suggest that two of the seven board
members should be out-of-state seats. We are a
globally invested, very large fund. We should look
to see out-of-state people with different
perspectives and different backgrounds since we are
a globally invested fund. The governor gets one
selected seat, not two. The governor can choose
anyone from his/her cabinet, it does not necessarily
have to be the Commissioner of [the Department of]
Revenue or the [Department of Natural Resources] DNR
Commissioner. These are just suggestions. The
evaluation, again, of the CEO should be a public
process. The board should evaluate themselves. Are
they following their own processes? And lastly, I
don't think the vice-chair should ever be the
governor's appointee, or, excuse me, a governor's
employee. That would be changed with the bylaws or
a statute. Those are my suggestions. Hopefully
something that has come out of this process.
4:00:19 PM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
4:00 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Schwabe Williamson & Wyatt Report to Legislative Council 9-28-22 PUBLIC REPORT.pdf |
JBUD 9/28/2022 1:00:00 PM |
Report |
| Schwabe Williamson & Wyatt Powerpoint Presentation to LBA Committee 9-28-22.pptx |
JBUD 9/28/2022 1:00:00 PM |
Powerpoint |
| Schwabe Press Release.pdf |
JBUD 9/28/2022 1:00:00 PM |
Press release |
| EXH 1.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 2.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 3.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 4.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 5.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 6.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 7.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 8.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 9.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 10.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 11.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 12.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 13.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 14.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 15.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 16.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 17.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 18.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 19.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 20.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 21.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 22.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 23.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 24.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 25.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 26.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 27.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 28.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 29.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 30.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 31.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 32.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 33.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| EXH 34.pdf |
JBUD 9/28/2022 1:00:00 PM |
|
| Moran, William 6.16.22.PDF |
JBUD 9/28/2022 1:00:00 PM |
|
| Feige, Corri 6.17.22.PDF |
JBUD 9/28/2022 1:00:00 PM |
|
| Richards, Craig 6.22.22.PDF |
JBUD 9/28/2022 1:00:00 PM |
|
| Rieger, Steven 6.16.22.PDF |
JBUD 9/28/2022 1:00:00 PM |
|
| Rodell, Angela 8.25.22.PDF |
JBUD 9/28/2022 1:00:00 PM |
|
| Schutt, Ethan 6.15.22.PDF |
JBUD 9/28/2022 1:00:00 PM |
|
| Mahoney, Lucinda 6.14.22.PDF |
JBUD 9/28/2022 1:00:00 PM |