SR 2 - WORLD PLUS, INC., INVESTIGATION CHAIRMAN TAYLOR explained SR 2 relates to the World Plus Inc. (WPI) ponzi scheme perpetrated in Fairbanks. He asked if anyone from the Department of Law was prepared to testify on this legislation. Hearing no one, CHAIRMAN TAYLOR commented that the silence from the department on this issue was deafening. Number 71 CHAIRMAN TAYLOR asked MS. PAT DAVIDSON, Legislative Auditor to come forward and give the committee an update. MS. DAVIDSON testified that there was a Legislative Budget and Audit meeting scheduled for April 30, 1998, at which time she would provide information and a briefing to that committee. CHAIRMAN TAYLOR asked MS. DAVIDSON how the audit was going. SENATOR ELLIS asked CHAIRMAN TAYLOR to clarify what MS. DAVIDSON could discuss with the committee and what would be inappropriate to ask of her. CHAIRMAN TAYLOR suggested committee members might ask whatever they liked, though he was not sure what MS. DAVIDSON would be able to say. Number 100 MS. DAVIDSON reported that the auditors don't generally talk about audits in public while they are conducting them, especially before they present their report to the Budget and Audit committee. She indicated she couldn't really give the committee any information at this time. CHAIRMAN TAYLOR stated that the committee has a prior report with findings indicating an apparent conflict of interest within the Department of Law. He asked if, after further investigation, the auditors had changed that original opinion. MS. DAVIDSON replied she was unable to answer that question due to the confidentiality of the audit process. CHAIRMAN TAYLOR asked MS. DAVIDSON if they could defer this matter until Thursday, after her report to the Budget and Audit Committee, giving the committee time to decide what information could be released. MS. DAVIDSON said that might be premature, as she will need to brief the Budget and Audit committee as well as submit to them a written report. She said she is in the process of preparing the report, but she anticipates it might take a bit longer due to the ongoing actions against WPI. CHAIRMAN TAYLOR asked if the class action suit filed in the case against the State of Alaska was impacting MS. DAVIDSON's ability to conduct the audit. MS. DAVIDSON replied they are getting cooperation from all departments involved and she thinks the difficulty posed by the suit will lie in determining what is and what is not public information. CHAIRMAN TAYLOR remarked this was understandable and he was having the same problem with information he received from the Department of Law in relation to the Alaska Public Safety Information Network. He said his concern was how people in the state would find out that the chief prosecutor in the state failed to prosecute anyone in this case if he couldn't get answers in a legislative hearing. MS. DAVIDSON said that at some point in time, the auditors could make a public report. CHAIRMAN TAYLOR asked if that would be before the end of this legislative session and MS. DAVIDSON replied that she doubted that. Number 175 CHAIRMAN TAYLOR expressed frustration with his inability to access the information necessary to act on behalf of the people. CHAIRMAN TAYLOR said he wants a legal opinion from the Department of Law on who they think their client is. He said everything he has seen so far indicates that the Department of Law thinks that the state employees and their agencies are their clients and so attorney/client privilege applies. CHAIRMAN TAYLOR said this is not an appropriate use of this privilege and not a reasonable reason to prevent the transmittal of information to the auditors and the Judiciary committee. CHAIRMAN TAYLOR understood MS. DAVIDSON couldn't tell the committee anything at this time but hoped when the Budget and Audit committee allowed her to do so, she could provide them with a preliminary report. CHAIRMAN TAYLOR said he was primarily concerned about the statement made in the original report regarding an apparent conflict of interest and the failure to prosecute on the part of the Attorney General. Number 215 MS. DAVIDSON reported that her office drew their initial conclusions entirely from public information, especially the statement made by the Attorney General regarding why the state deferred prosecution to the federal government in this case. She said they did not question this decision, only suggested that when the federal authorities were done with the case, someone with a state perspective should look into it. CHAIRMAN TAYLOR thanked MS. DAVIDSON and said he hoped they could take this up again in order to clear up some lingering questions.