SB 165-DEFENSE OF PUB. OFFICER: ETHICS COMPLAINT  2:18:00 PM CHAIR CLAMAN announced the consideration of SENATE BILL NO. 165 "An Act relating to legal representation of public officers in ethics complaints." CHAIR CLAMAN said this is the third hearing of SB 165 in the Senate Judiciary Committee. He invited Ms. Kraly to put herself on the record to answer questions regarding the Department of Law's position on this legislation. 2:19:05 PM STACIE KRALY, Director, Civil Division, Department of Law, Juneau, Alaska, expressed appreciation for the opportunity to appear before the committee to answer questions. She noted that the Civil Division is preparing a written position statement, which will be distributed to the committee. 2:19:30 PM CHAIR CLAMAN asked if it is fair to say that the written position statement is, to some extent, in response to the testimony of Jahna Lindemuth, former attorney general (AG), regarding SB 165 on March 22 in the Senate Judiciary Committee. MS. KRALY replied that is part of it, but the statement also provides a robust explanation of the ethics process from the Department of Law's perspective. It explains why the regulations that have been adopted do not create a conflict or raise concerns identified by the former AG. It provides a broader construct of the Ethics Act and how the Department operates within that system. 2:20:19 PM SENATOR KAUFMAN requested a summary of the Departments position statement, which has not been distributed yet. MS. KRALY reviewed the underlying premise of the recently adopted regulations concerning representation of the governor, lieutenant governor, and attorney general when ethics complaints are filed against them. She said regulations are not only consistent with the Ethics Act as drafted, but also reflect a consistent application of how the Department of Law interprets and applies the Act. This applies both to high-level state officials and to other state employees subject to the Ethics Act. She stated that the Department of Law serves three primary roles under the Act: it advises on ethics, educates on ethics, and prosecutes ethics violations. She said the Department is now adding, in a very limited circumstance, the role of defending certain ethics opinions it has issued. 2:21:34 PM MS. KRALY explained that when an executive branch employee requests an opinion from the Department of Law on whether an activity violates the Ethics Act, the Department's role is to provide legal advice. That service is available to all executive branch employees, including the governor, lieutenant governor, attorney general, commissioners, and others. She stated that such advice becomes a "safe harbor." If the Attorney General's Office opines that a specific activity does not constitute an ethics violation, that opinion can shield the employee from prosecution if a complaint is later filed. If a complaint is received and the individual acted according to the Department's advice, the violation is not prosecuted. If a complaint pertains to conduct not previously reviewed, the Department will evaluate and prosecute the issue consistent with its prior advice and interpretation of the Ethics Act. She noted that the Department also provides ethics advice to the state's highest officials, who are treated differently under the current statute. 2:23:07 PM CHAIR CLAMAN sought confirmation that the three individuals are the governor, lieutenant governor, and attorney general. 2:23:11 PM MS. KRALY answered in the affirmative, stating that the governor, lieutenant governor, and attorney general frequently make inquiries to the Department's designated ethics attorney. They often pose hypothetical scenarios, asking whether a particular situation would create a problem under the Ethics Act, and the Department provides advice accordingly. MS. KRALY explained the difference between these three high- ranking individuals and a commissioner or other employee. The Department does not prosecute ethics complaint cases against those three, rather, those complaints are referred to the Personnel Board. The Personnel Board then hires outside counsel to prosecute the matter on behalf of the State. She explained that the new regulation allows the Department to defend the advice it previously provided or to defend the actions of the governor, lieutenant governor, or attorney general if those actions were based on the Departments advice. She noted that the obligation to represent these high-level officials is not absolute; it must serve the public interest. A determination must be made that the activity in question was conducted in reliance on the Department's advice or consistent with it. If it was not, the Department would decline representation, and the official would be required to hire private legal counsel to address the complaint. She said this broadly explains the Departments position and how it assesses and advises on ethics matters. 2:24:57 PM SENATOR KAUFMAN said the byproduct of your position seems to incentivize legal consultation on ethics questions. He stated that, provided the governor, lieutenant governor, or attorney general followed the advice given, the subsequent defense would rely on that advice rather than the incident itself. MS. KRALY replied that is exactly right. She expressed her belief that this framework encourages the governor, lieutenant governor, and attorney general to seek legal advice from the Department. She explained that if an ethics complaint is filed, the Department does not have authority to screen out the complaint because it does not prosecute those three officials. Instead, the complaint is referred to the Personnel Board, which has that screening role. If the complaint proceeds, the Department may defend its advice, either the specific advice given in that case or advice reflected in prior opinions issued by the Department. She said it may be that the official was engaged in activity that had already been reviewed and deemed not to violate the Ethics Act, and that such prior advice could be relied upon. 2:26:29 PM CHAIR CLAMAN expressed his belief that the new regulation raises concerns about public transparency. He stated that, for example, if he were to ask how many ethics complaints had been received against the governor, lieutenant governor, or attorney general since the new regulation was adopted, his assumption is that the Department's response would be that it is a confidential ethics matter and that information could not be disclosed. MS. KRALY replied that she believes that is correct and that ethics complaints are confidential under state law. She expressed her belief that, pursuant to statute, identifying how many ethics complaints have been filed, screened in, or screened out is not public information. 2:27:20 PM CHAIR CLAMAN sought confirmation that this would also have been true under what he referred to as the Sullivan-era structure for handling ethics complaints against the governor, lieutenant governor, or attorney general. MS. KRALY expressed her belief that is correct. CHAIR CLAMAN raised a challenge with the current structure. He said suppose the governor asks the Attorney General's Office if he may attend a dinner. The AG's Office responds with advice indicating the governor may attend. If someone later files an ethics complaint related to that dinner, the Attorney General's Office would then defend its own advice by stating that the governor acted in accordance with its guidance. As a result, the attorney general is using state resources to defend advice it issued. CHAIR CLAMAN drew a comparison of this with the Sullivan-era structure, under which an ethics complaint against the governor would result in the hiring of independent counsel. In that instance, the governor would inform the independent attorney that he had relied on the attorney general's advice. The independent attorney would then contact the Department and confirm whether the advice had been issued. Upon confirmation, the attorney would defend the governor on the basis of that advice. CHAIR CLAMAN pointed out that, under the new regulation, the Attorney General's Office serves both an advisory and defensive role, which may reduce transparency compared to a system where independent counsel defends these three officials. 2:29:23 PM MS. KRALY expressed uncertainty about the chair's concern that the new regulation reduces transparency. She noted that all ethics complaints against the governor, lieutenant governor, and attorney general are referred to the Personnel Board regardless of whether advice is defended by the AG's Office or outside counsel. The AG's Office does not screen those complaints, but it does defend its advice. She said the Personnel Board adjudicates that decision. 2:30:05 PM MS. KRALY explained the rationale behind the new regulation and why it has been promulgated. She contended that in an era of heightened scrutiny, there is the possibility of numerous ethics complaint filings against these top officials. She emphasized that under the prior construct, these officials had to pay for private counsel, which is expensive, then seek reimbursement later, assuming they were found not in violation. She stated that the centralized handling of ethics issues in the Civil Division makes the process more efficient. She emphasized that having in-house, ethics counsel who understand all prior advice and decisions, ensures a streamlined and cost-effective defense before the Personnel Board. She acknowledged that the Personnel Board may still find a violation, but the process is faster and less burdensome on State resources. She said it is a disservice and disincentive to serve if officials must hire private counsel for every ethics complaint, especially frivolous ones, due to lack of complaint screening. She reiterated two points: the importance of defending the Department's advice and avoiding personal financial burdens on elected or appointed officials to defend ethics complaints that could be frivolous. 2:32:48 PM CHAIR CLAMAN compared the Department of Law's request to continue defending the governor with the lack of comparable protections for legislators. He noted that members of the legislature do not receive the same support the Department seeks for the governor, lieutenant governor, and attorney general, such as relief from the high cost of hiring independent counsel. He stated that although the director articulated the rationale clearly, it raises a question of priority: if a governor is found not to have committed a violation and submits for reimbursement, the state pays the cost, but no state staff time or resources are spent on defense. However, under the current system, the Department's staff and daytime resources are spent defending the governor on complaints that could arguably be referred to outside counsel. CHAIR CLAMAN referenced a troubling discussion in the Finance Committee, where members asked how murders in rural Alaska are being addressed and what the public safety implications are. He expressed concern that the Department is dedicating valuable staff time to handling ethics complaints against the governor, while core public safety responsibilities, such as court processes, are sidetracked. He emphasized that although the Department provides legal advice with the hope that the governor follows it, the use of in-house staff to defend against ethics complaints raises important questions. 2:34:52 PM SENATOR KAUFMAN remarked that, in considering what is appropriate for the governor versus a legislator, one distinction is that the governor represents the entire state. He is involved in every statewide issue, making the office a broader and more prominent target. He noted that his observation was offered as a general comment based on personal perspective. 2:35:35 PM SENATOR KIEHL sought clarification about the existing regulation. He asked whether the governor, lieutenant governor, or attorney general must have specifically requested advice from the Department in order to qualify for public representation if an ethics complaint is later filed against them. 2:35:55 PM MS. KRALY replied if they had sought advice, inquired about prior opinions, or relied upon prior opinions, that would indicate a public interest. If they were relying upon that advice, the issue of whether or not they actually sought advice, is not determinative of whether or not the Department would defend them. Each situation would be evaluated on a case- specific basis to determine whether the public interest standard was satisfied. If it was, the Department would provide representation; if not, the Department would decline. MS. KRALY explained that these high-ranking officials, like many others, ask for ethics advice all of the time. The Department regularly provides ethics guidance to the governor, lieutenant governor, attorney general, commissioners, and other state employees. She stated that even she asks for ethics advice. She described it as a standard and expected part of their roles. 2:37:08 PM SENATOR KIEHL sought confirmation that if a high-level official asked for advice, then yes, they would get a public defense. If they did not ask for advice, then maybe they might qualify. MS. KRALY replied, they may; it would depend on the circumstances. SENATOR KIEHL expressed concern that there may be insufficient incentive for officials to seek ethics advice in advance if they might still qualify for a public defense regardless. SENATOR KIEHL stated that he was somewhat confused. He asked whether the Personnel Board has acted capriciously and questioned whether the Department's current approach suggests a lack of confidence in the Board's review process. He further asked if that perception is sufficient to justify dedicating significant departmental resources to defend against what are seen as weaponized ethics complaints. 2:38:08 PM MS. KRALY replied that this is not an indictment of the Personnel Board. It is recognition that every other executive branch employee who seeks and gets ethics advice, receives safe harbor from a complaint. In contrast, the governor, lieutenant governor, and attorney general do not receive that same protection. Even though complaints filed against them are automatically referred, there is no screening process. She emphasized that this is not a criticism of the Personnel Board's decisions but an attempt to level the playing field by affording the same protections to the state's highest officials that are given to all other executive branch employees. MS. KRALY addressed the chair's concerns about resource allocation. She explained that the Department of Law comprises two divisions: Civil and Criminal. The Civil Division handles the Ethics Act, with a designated attorney advising on all ethics matters, including accepting gifts or meals and disclosure requirements. She clarified that the Civil Division does not handle the public safety components of the entire state. Ethics guidance is a duty of the Civil Division and does not detract from its other responsibilities. She added that the division also manages conflicts, screening, and due process safeguards to prevent any appearance of partiality in representing agencies or individuals. MS. KRALY reiterated that the Departments position involves two main points: - creating a level playing field so that the governor, lieutenant governor, and attorney general receive similar protections under the Ethics Act as other executive branch employees. - reducing the cost burden caused by potential weaponization of ethics complaints against these high-level officials. 2:41:06 PM SENATOR KIEHL sought clarification about state employees who did not seek prior ethics advice, asking whether the Attorney General's Office would defend those employees against an ethics complaint. MS. KRALY replied that the Department would serve as the prosecutor in that context. The Department would evaluate whether the activity, as described in the complaint, was consistent with prior advice or constituted a violation of the Ethics Act. If an issue was identified, the Department would prosecute the case, evaluate it, and issue an opinion. She stated that employees benefit from prior opinions and advice when they ask for it. The Department provides Ethics Act training across the state and encourages all employees to ask questions, regardless of how minor they may seem. The Civil Division will provide an answer, and the employee may rely on that guidance going forward. 2:42:17 PM SENATOR KIEHL observed that this framework does not create parity, but rather provides a deferential benefit to the governor, lieutenant governor, and attorney general. He expressed that he has not heard concern about the Personnel Board itself, nor seen a great shortage of candidates. He expressed his understanding that SB 165 proposes reimbursement for legal costs if the ethics complaint brought before the Personnel Board against a high-level official is dismissed, meaning those officials would not bear the expense if cleared. He emphasized that when the question centers on whether one of these three officials acted in personal interest rather than public interest, that distinction is crucial. A state employee or commissioner accused of acting in personal interest may be required to defend themselves at their own expense. 2:43:16 PM CHAIR CLAMAN expressed his understanding that there is no circumstance in which the Department would represent a State employee in an ethics complaint. He described a scenario in which the Department receives a complaint and makes a prosecutorial decision whether to proceed. The Department may choose not to prosecute if it determines the conduct falls within the scope of its prior advice. In such a case, the Department may conclude there is no violation and decline to move forward. However, should the Department proceed, it would not under any circumstance represent the State employee because the Department is the prosecutor. MS. KRALY affirmed that the Department could not simultaneously represent and prosecute the State employee in the same proceeding. 2:44:30 PM CHAIR CLAMAN explained that the new regulation involves a distinction: unlike ordinary State employees, who cannot be represented by the Department in an ethics complaint, the three high-ranking officials may receive such representation. Because the Personnel Board, rather than the Department, prosecutes these complaints, the regulation provides these officials a benefit not available to other State employees. MS. KRALY framed her position differently, reasoning that in these cases, the Department would be defending its prior advice. If the conduct at issue was in the public interest and consistent with the Department's guidance, then the governor, lieutenant governor, or attorney general may be represented by the Department. She emphasized that this is the same benefit State employees receive when they obtain advice and rely on a safe harbor. MS. Kraly further explained that for regular State employees, if they have a safe harbor, the complaint is screened out, and no proceeding occurs. They do not need an attorney as the matter does not advance. By contrast, for the three high-ranking officials, even if the complaint is frivolous and they have a safe harbor, the Personnel Board must still process it. The prosecutor may not accept the Department's prior advice. Therefore, these officials do not receive the same benefit as other State employees. She contended that it is not an apples- to-apples comparison. 2:46:14 PM CHAIR CLAMAN highlighted that though the governor is not required to seek advice from the Department, the Department might choose to defend the governor based on advice given years earlier to someone else. He emphasized that State employees do not receive that same benefit. Only the governor, lieutenant governor, and attorney general receive a State-funded defense in such cases. 2:46:57 PM MS. KRALY disputed that State employees do not receive the same benefit. She explained that if the Department previously opined that the activity was not a violation, it would screen out the complaint on that basis. 2:47:10 PM CHAIR CLAMAN asserted the notion that the prosecutor provides protection to the defendant is marginally credible. He noted that while an employee is not required to retain counsel, from his experience in private practice, he would advise it is beneficial to do so. He said the attorney would advocate with the prosecutor on behalf of the client. He asked whether a State employee has the right to hire private counsel. 2:48:17 PM MS. KRALY replied, absolutely. 2:48:23 PM CHAIR CLAMAN asked whether the Civil Division receives calls from private attorneys representing public employees and whether these attorneys ask the division not to prosecute. MS. KRALY responded, potentially yes, but emphasized complaints are not filed against the individual directly. Instead, they are submitted to the Department, which conducts an initial screening. If the Department determines there is no violation based on advice previously issued, it dismisses the complaint without notifying the employee. If the Civil Division finds no safe harbor exists and concludes there is an ethics issue, then the employee is notified. At that point, the employee may choose to hire private counsel. She reiterated that the process is structured so that complaints are screened before reaching the employee. 2:49:36 PM CHAIR CLAMAN asked whether a public employee is notified if an ethics complaint is filed and the Department concludes there is no ethics violation. MS. KRALY replied that she did not know the answer well enough to provide it on the record and offered to follow up with the committee. 2:50:20 PM SENATOR TOBIN raised a question pertaining to individuals appointed to State boards and commissions. She sought confirmation that these individuals would not be eligible for representation from the Department of Law if an ethics complaint were prosecuted. Instead, those individuals would need to get independent counsel. 2:51:04 PM MS. KRALY replied, no, explaining the intent of the Ethics Act is to promote the use of the safe harbor provision. The Act encourages board members, employees, and others to contact the Ethics Office with questions in order to receive guidance, such as confirmation that a certain action is permissible. MS. KRALY stated that if the Ethics Office advises someone not to take a certain action and the person proceeds anyway, that may result in a problem, and the individual would then need to secure their own attorney. In such a case, the Department may pursue the matter. Conversely, if the individual asks whether an action is permissible and receives a Department safe harbor response, the matter would be screened out and dismissed. MS. KRALY emphasized that failure to seek advice carries risk. While the action might still be found acceptable and screened out, without the safe harbor, there is no guarantee. She explained that the Department provides ethics training throughout the State and uses its website to inform individuals about how to submit inquiries. She stated that the purpose is to continue encouraging and incentivizing the use of safe harbor provisions, not only for employees and board members but also for the governor, lieutenant governor, and attorney general. 2:52:37 PM SENATOR TOBIN said her question had been answered, specifically, individuals appointed to State boards and commissions would not receive representation from the Department if an ethics complaint were prosecuted. They would instead need to get independent counsel. 2:52:46 PM CHAIR CLAMAN agreed that one purpose of the Ethics Act is to encourage individuals to seek advice and conform their conduct to the requirements in ethics law. CHAIR CLAMAN asked whether another feature of the Ethics Act is that, when individuals do not comply, there are mechanisms to determine noncompliance and impose consequences. He noted that the Ethics Act is multipurpose in this way. MS. KRALY replied, absolutely, yes. CHAIR CLAMAN found no further questions and thanked the director for testifying. 2:53:28 PM [CHAIR CLAMAN held SB 165 in committee.]