Contradictory statements cloud no-bid deal with grandson of Dunleavy donor
On March 26, I received an anonymous tip by email of a sole-source state consulting contract for Clark Penney. His grandfather, Bob Penney, invested $350,000 last year in the effort to elect Mike Dunleavy governor.
The author of the note quoted a state government source that the insider deal originated with the governor’s office and was a “reimbursable service agreement” with a new company, Penney Capital, Inc., which had been formed Jan. 21.
The author believed that the Alaska Energy Authority or the Alaska Industrial Development and Export Authority had been ordered to approve the contract. “AEA/AIDEA has leeway in procurement, which makes it very vulnerable to abuse,” the email said.
I made one phone call that didn’t lead to anything and I failed to follow up. I’m glad that blogger Jeff Landfield of the Alaska Landmine, who also heard about this no-bid contract from someone, had the sense to pursue it.
He broke the story on May 7, with details about a contract with Penney that could be worth up to $441,000 by mid-2022, with renewals.
In the four months since the contract became public, Dunleavy officials have made the obligatory denials, saying that political connections and the 2018 campaign had nothing to do with the Clark Penney deal. But the ‘nothing to see here’ declarations are not convincing.
What we know is that an unnamed high-ranking person or persons in the Dunleavy administration decided to give Clark Penney a no-bid deal, while refusing to open the process to other potential contractors.
Penney “learned of the opportunity when it was presented to him,” AIDEA spokesman Karsten Rodvik told Anchorage Daily News reporter Alex DeMarban in July.
Who picked Penney? “The appropriate economic development personnel,” Rodvik told the Daily News reporter.
Had his name been Clark Nickel, he would not have received this preferential treatment.
And perhaps the state would have taken steps to publicize the contract. Even the board members of AIDEA, the agency that approved the deal, were not briefed on the contract until two days after Landfield’s report.
Penney, 34, was one of many co-treasurers of the Dunleavy campaign. So was Tom Boutin, a longtime government employee and critic of government spending, now the top executive at AIDEA.
Penney signed the contract for $8,000 a month, plus travel expenses, on March 19, while Boutin signed for AIDEA the next day.
There was a desire by Boutin, despite pushback from some at AIDEA, to pay Penney as of March 1—nearly three weeks before the contract was signed—according to emails released to DeMarban through a public records request.
On March 11, Boutin wrote that the contract would have a start date of March 1. A few minutes later, CFO Brenda Applegate wrote, “I don’t think we can do a contract with a start date of March 1, 2019, because the date has already passed. I think the start date will need to be a future date.”
In the end, AIDEA paid Penney for all of March, even though the contract began on March 20. When the Anchorage Daily News asked for a justification, Rodvik did not answer: “Given the fact that time was of the essence, the contractor began work prior to the contract being executed. He did so, however, at his own risk knowing that he would not be paid if a contract was not executed. It is our standard practice to inform contractors of this risk.”
On March 12, Mark Davis of AIDEA filed the request to waive regulations and use a sole-source contract.
The waiver said that Clark Penney would provide “oversight of the new Industry Development Team” and work with “other staff in promoting the business and economic development interests of Alaska.”
Commerce Commissioner Julie Anderson, AIDEA director Boutin and Davis would supervise Penney.
Davis wrote that Penney Capital Inc., created in January, “has extensive experience in connecting investors with opportunities in new business and industry development. Penney Capital Inc. has a network of contacts in numerous business sectors, within and outside Alaska, that align with the goals of the governor’s New Industry Development Team.”
Davis wrote that the combination of “experience, background and networks is difficult to find within Alaska.”
It was made impossible because the state made no effort to find anyone else with experience, background and networks in Alaska.
Had AIDEA been forced to seek competitive bids, there would have been a “delay in implementing the governor’s New Industry Development Team, and delay in achieving tangible results to the governor’s ‘Open for Business’ strategy,” according to Davis.
Boutin signed the waiver on March 19, the day before he signed the contract.
It’s clear that the contract should have gone to competitive bid and that the consequences of a delay would have been negligible. The goal here was to get a contract with Penney. Speed was the cover story.
On March 14, Penney had been asked by one of the AIDEA officials writing the contract to tell her what he would provide to the state to show he was meeting the terms of the agreement.
“Can I also get a list of deliverables you will be providing? Such as monthly reports, a white paper, etc. Just need some type of tangible item I can list for deliverables,” Michele Hope, chief procurement officer of AIDEA, wrote to Penney.
The “deliverables” should have been defined by AIDEA, not by the contractor.
Two days after Landfield made the Penney contract public knowledge, Boutin wrote to the board members of AIDEA that “this contract was not taken to the board for approval nor did it need to be, so you have not seen the contract. The contract pertains to Mr. Penney’s work as managing director of the New Industry Development Team, which is not part of AIDEA.”
The Penney contract is with AIDEA, the agency headed by Boutin. He was listed as a supervisor and “coordinated” with the commerce department to select Penney for the job, according to a statement to the Daily News.
In an email to the AIDEA board, Boutin distanced himself from the New Industry Development Team and the Penney contract.
“To the best of my knowledge the AIDEA board has not been briefed on this team (nor have I by the way, but that is not something I will say outside of our board; certainly I could have asked for a briefing and received one),” Boutin wrote May 9, more than a month-and-a-half after he signed the Penney contract.
Anderson, an AIDEA board member, replied an hour later that day: “I thought I had explained the team to you when you first came on board, and you met with the team and DNR last week, is there something further that you would like to know?”
Because of Landfield’s story, the governor’s office had been getting calls from reporters, Boutin said in another email, mentioning a conversation he had had with Matt Shuckerow, Dunleavy’s press secretary. Boutin told Shuckerow to pretend to reporters that he didn’t know anything about the contract.
“To date the press calls are few and far between, and entirely manageable,” Boutin wrote Anderson in an email on May 9 at 1:33 p.m. “I told Matt that if I were him I would tell the press there are 128 boards and commissions (or how many there are now) and he cannot possible know of all the contracts and projects of every one of them; this is an AIDEA contract and he should tell the press to call AIDEA.”
Boutin said Shuckerow told him the new industry team was in the commerce department, which came as a surprise to Boutin. “I told him I thought it is in the Gov's office, and we each said we are not sure we know. But no matter,” Boutin said.
On May 10, after Nat Herz of Alaska’s Energy Desk did a story on the Penney contract, Boutin wrote to Anderson, “My first read of it is that the governor’s office did well in referring the reporter to Karsten (Rodvik) and Karsten did very well in this media contact.”
In that “media contact,” Herz said Rodvik, who handles publicity for AIDEA, mentioned “that he did not know the specific legal or regulatory authority that AIDEA used to hire Penney on a no-bid basis. But he reiterated that the need to go outside the standard competitive process stemmed from the urgency of the work.”
“The goal here was to get moving,” Rodvik said to Herz. “It was important that there not be any delay in the work of this new industry development team, or delay in achieving tangible results.”
In late June, the contract was extended. According to the public records released to the Anchorage Daily News, DeMarban wrote to Rodvik on July 1 with several pertinent questions: “Why was a sole-source, no-bid contract, (a secret contract, made without public knowledge) the path AIDEA chose to take?”
Rodvik, whose written answers had been approved by Boutin, replied with the same line used from the start, it was a no-bid deal because speed was a priority. The state never publicized the Penney contract, but Rodvik said the documents were available to anyone who knew enough to ask for them.
“Documents related to this contract are public. The contractor's background in finance and economics along with his network of investors represented a valuable and ready resource to Governor Dunleavy's recently established new industry development team. It was important to get moving without delay,” Rodvik said.
The reporter also asked: “How were the large donations from Bob Penney supporting Dunleavy's campaign a factor in the decision (to award a large contract that only became public knowledge after documents were leaked to the Landmine)?”
Rodvik said, “It is my understanding there is no connection between any election campaign and this Penney Capital, Inc. contract.”
After the Penney contract became public knowledge, Reps. Zack Fields and Jonathan Kreiss-Tomkins wrote to AIDEA asking about why a three-month-old company was the only option. Boutin, who had his response approved by the governor’s office, gave them a heavy dose of buzz words and no direct reply.
“I believe there is an urgency to bring business initiators to Alaska, gaining the attention of proven entrepreneurs, learning details of real and perceived impediments businesses face in coming to Alaska,” Boutin wrote to the two legislators.
Boutin said he knew of Bob Penney’s donations to Dunleavy only by reading the news and he does not know the family. “I did not know Clark Penney until earlier this year,” he said. The legislators replied that he had refused to explain why a no-bid deal was good for the state.
After reading Boutin’s legislative missive, Deputy Revenue Commissioner Greg Samorajski wrote to Boutin on June 7 that “certainly there are others in Alaska who could have provided the services, but I am not aware of anyone who would have been willing to do so at anywhere near the cost of this contract. I (sic) fact, I am a little surprised that we were able to acquire the current contractor at the price we are paying. It speaks to the service orientation of the contractor and your sensible work as AIDEA ED.”
So there are others who could have provided the service. A competitive process would have eliminated all uncertainty about whether this is what it looks like—a political payback.
We are left with the question of who in the Dunleavy administration decided that Boutin should approve a no-bid contract with Clark Penney and why? The governor should answer that question since no one else in his administration will.
(If you want to contribute financially to this independent reporting and analysis project, you can do so here through PayPal. Or simply mail checks to: Dermot Cole, Box 10673, Fairbanks, AK 99710-0673. Thank you.)