Dunleavy's brother continues to pump money into Alaska governor's race

Texas resident and financier Francis Dunleavy has now upped his investment in his brother's gubernatorial campaign in Alaska to $250,000.

Add to that donations from Alaskan Bob Penney of $175,000 and it is easy to see how Mike Dunleavy—who decries the lack of state leadership—has been able to get so much public notice in the months since he quit his position as a state leader to try to become the leader of the executive branch.

To be clear about this, it is not the official campaign of the former state senator that has collected $425,000 from two people, but it is "Dunleavy for Alaska," a so-called "independent" organization set up to take advantage of the giant loopholes in state and federal campaign funding laws. 

From outside appearances, "Dunleavy for Alaska" seems identical to "Alaskans for Dunleavy," but the latter is the official campaign organization, while the former is a shadow campaign free to do almost anything. 

The two campaigns are supposed to have nothing to do with each other, but it's easy to repeat the same messages and avoid official contact. Most people will never know that the two campaigns are separate. The websites of the two groups feature the same photo of the candidate's family and their dogs, as well as similar text, 

A shadow campaign doesn't have to be authorized, paid for or approved by the candidate to be 100 percent in keeping with what the candidate wants.

As a sign of just how confusing things can get, on Jan. 23 the independent group filed a form with the Alaska Public Offices Commission calling itself "Alaskans for Dunleavy." The form was later amended to operate as "Dunleavy for Alaska." 

And a $1,000 donation by Dunleavy for Alaska to Alaskans for Dunleavy was returned to sender on April 19.

"Dunleavy for Alaska" made a big show early this year of promising to spend "whatever it takes" to get Mike elected and that it had pledges of $560,000. The shadow campaign also boasted that Francis would be a "minority contributor." The third biggest contributor is Josh Pepperd, president of Davis Constructors & Engineers, who has chipped in $50,000.

"Whatever it takes" so far is largely the work of Francis, Penney and Pepperd. Frances gave $100,000 on April 18, while Penney gave $25,000 that day, according to the latest reports filed with the Alaska Public Offices Commission.

They have bankrolled "Dunleavy for Alaska" with the buying power that would require more than 1,000 people to give the maximum amount to an official campaign.  Direct donations to official campaigns are limited by Alaska law to $500.

If you have a lot of money, the best way to get the most bang for your buck is to bankroll a shadow campaign.

It helps if you have a rich brother in Texas.

As I've written before, Francis and his background will be an issue in the Dunleavy campaign as the summer progresses.

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

Francis headed the "principal investments unit" for JP Morgan in Houston that developed bidding strategies that the Federal Energy Regulatory Commission claimed amount to unfair manipulation that harmed utilities and consumers.

The company manipulated the bidding system so that utilities had to make inflated payments that benefited JP Morgan from 2010-2012, FERC said. The commission required the company to pay back $125 million in unjust profits and pay a civil penalty of $285 million.

JP Morgan did not admit or deny wrongdoing, FERC said.

A Forbes columnist wrote that JP Morgan had acquired several antiquated power plants after the collapse of Bear Stearns and that Francis, a former Bear Stearns employee, led the team that developed the bid strategies targeted by FERC.

"Said strategies were devised specifically to obtain above-market payments through 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 JP Morgan," a Forbes columnist wrote in 2013.

Francis retired in 2013, two-and-a-half months after the settlement. Reuters said he denied wrongdoing. He was not fined or charged.

In 2013, a Los Angeles Times columnist complained about the FERC deal: "What's worse is that even though FERC identified four JP 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."

With Francis Dunleavy as a major financial player in the Alaska governor's race, his actions in the electricity markets and the FERC settlement ought to be addressed by brother Mike. It won't be enough for Mike to say he has no connection with the shadow campaign.


Dermot Cole3 Comments