Dunleavy's brother, key figure in J.P. Morgan scandal, will be issue in Alaska governor's race

Texas resident Francis Dunleavy, brother of Alaska Republican gubernatorial candidate Mike Dunleavy, has already provided $100,000 as the major funder of  "Dunleavy for Alaska," a group pledging to spend "whatever it takes" to get his brother elected.

Under the law, Dunleavy for Alaska has to keep a polite distance from  "Alaskans for Dunleavy," the official Dunleavy campaign apparatus.

We are supposed to trust that all Francis knows about the workings of the campaign is what he reads in the papers. And that all Mike knows about the TV ads his brother is buying is what Mike reads in the papers.

.The Anchorage Daily News reported that Francis is a former J.P. Morgan executive in Houston and that the group has already received pledges of $560,000.

But so far, according to documents on file with the Alaska Public Offices Commission, the group has only had $110,600 in donations, nearly all of that from Francis Dunleavy.

The APOC reports say that in addition to the $100,000 from Francis, retired businessman Bob Penney has given $10,000, Alaska Airlines pilot Bob Griffin has given $500 and Matt Larkin of Dittman Research has given $100. It could be that the additional money pledged is waiting in the wings.

The group has spent $87,000 with Porcaro Communications for a Dunleavy ad spree during the Super Bowl and the Olympics to introduce him to Alaskans. The ad buy includes $54,000 worth of TV time and $30,000 for ads on eight radio stations.

Documents filed with the Federal Communications Commission show that we can expect to hear Mike Dunleavy's name a lot in the days ahead. There is a 30-second spot on KTUU during the Super Bowl that went for $15,000 and many ads during the Olympics, which cost $2,000 during prime time.

(A comment posted by someone named Bob Griffin regarding the Anchorage Daily News story about the group, a copy is pasted below, rejected a claim that this is an Outside political action committee: "Outside PACs? Did you read the article? This is a PAC of Alaskans supporting a longtime Alaskan who is married to a lifelong Alaskan with three daughters who live in Alaska. Over 20 years of public service in Alaska as school teacher, principal, superintendent, school board member/president and Alaska State Senator. Yes, Senator Dunleavy has a brother who is a minority contributor to this Dunleavy for Alaska PAC, who lives outside Alaska. Is it unusual that brothers would help one another?")

I made two requests to check details with the Dunleavy for Alaska organizers, who include former Murkowski budget directory Cheryl Frasca, spokesman Terre Gales, and Bob Griffin, but they have not replied. If the comment at ADN is by the same Bob Griffin, then one question is why Francis is called a minority contributor when he is the major contributor?

One reason we can have an independent group backed by your rich brother with no connection to the candidate is that the U.S. Supreme Court has made a mess of campaign financing and the rules are easy to manipulate.

Direct donations to candidates are limited by Alaska law to $500, but there is no limit on donations to supposedly independent organizations that are nearly indistinguishable from formal campaign operations. 

Only by looking at the fine print can you tell that the "Dunleavy Governor: Standing Tall for Alaska"  from Francis et al. is officially unconnected to Alaskans for Dunleavy. (To show you just how confusing this can get, on Jan. 23, an application was filed with the Alaska Public Offices Commission mistakenly calling the independent group "Alaskans for Dunleavy." The form was later amended to say "Dunleavy for Alaska.")

Francis has given the $500 limit to his brother's campaigns for the Senate in the past and a year ago he gave $2,500 to a political action committee called "The Truth Alaska," but this time the stakes are much higher.

The two groups are legally separate, but  Francis and his background will be an issue in the Mike Dunleavy campaign in Alaska.

Before J.P. Morgan, Francis was a senior executive at Bear Stearns, a company that was sold at a steep discount in 2008 during the financial crisis.

Francis Dunleavy was a key figure in a scandal that led to J.P. Morgan paying a $410 million settlement five years ago in connection with accusations of manipulating electricity prices in California and the Midwest.

In a 2014 Senate hearing, Michigan Sen. Carl Levin said Dunleavy had rushed to hire a young man who had boasted about finding a weakness in the regulation of California power markets, discovering a way to profit from that flaw.

Levin said he found two incredible things about this episode: First, that anyone would advertise in a resume that he had found a flaw to manipulate a market system. "And, second, that somebody would hire the person sending that signal."

Between 2010 and 2012 the Federal Energy Regulatory Commission staff found that J.P. Morgan  "engaged in 12 types of improper bidding strategies," Levin said.

In 2010-2011, as J.P. Morgan was running up big profits from electricity rates, one company employee sent an email to colleagues with an image of Oliver Twist and the words "Please sir, more BCR!!!!" BCR refers to one system J.P. Morgan used to make money manipulating the system.

Levin said, "it is mighty offensive to me that J.P. Morgan portrays its actions as a joke, comparing itself to a poor orphan needing charity when it was ripping off consumers."

A report in Forbes said that Dunleavy and his team developed strategies to use "bids that falsely appear economic to automated systems, sending low priced bids for wholesale energy and triggering compensation systems that resulted in higher electricity prices for rate payers and nice profits for J.P. Morgan.  Many of the plants were operated by the California Independent System Operator Corporation (CAISO), the same types of units being manipulated by Enron in the early 2000s."

Francis retired in 2013, two-and-a-half months after the settlement.

A Reuters report in 2013 said, "The U.S. Federal Energy Regulatory Commission identified Dunleavy and two members of his team, Andrew Kittell and John Bartholomew, as instigating the alleged strategy, but it did not seek to fine them or press charges. Their lawyers have said they did nothing that broke the law."

In 2013, a Los Angeles Times columnist complained about the FERC deal: "What's worse is that even though FERC identified four J.P. Morgan employees as the perpetrators of the manipulation — Andrew Kittell and John Bartholomew of the bank's Houston-based Principal Investments unit, their supervisor Francis Dunleavy, and his supervisor Blythe Masters, Morgan's commodities mastermind — there's no indication that these individuals will suffer any consequences for this rip-off."



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Dermot Cole10 Comments