Report targets Stevens' record
Editor's note: The following appeared in the Wednesday edition of the The
Los Angeles Times. Contacted by the News-Miner, Stevens spokeswoman Courtney
Schikora said the senator had no comment to offer on this story.
By CHUCK NEUBAUERand RICHARD T. COOPER
The Los Angeles Times
ANCHORAGE--He wielded extraordinary power in Washington for more than three
decades, eventually holding sway over nearly $800 billion a year in federal
spending.
But outside the halls of the U.S. Senate, which is a world of personal
wealth so rarified some call it "the Millionaires' Club," Sen. Ted Stevens,
R-Alaska, had struggled financially.
Then, in 1997, he got serious about making money. And in almost no time, he
too was a millionaire--thanks to investments with businessmen who received
government contracts or other benefits with his help.
Added together, Stevens' new partnerships and investments provide a
step-by-step guide to building a personal fortune--if you happen to be one
of the United States' most influential senators.
They also illustrate how lax ethics rules allow members of Congress and
their families to profit from personal business dealings with special
interests.
Among the ways that Stevens became wealthy:
* Armed with the power his committee posts give him over the Pentagon,
Stevens helped save a $450 million military housing contract for an
Anchorage businessman. The same businessman made Stevens a partner in a
series of real estate investments that turned the senator's $50,000 stake
into at least $750,000 in six years.
* A Native company that Stevens helped create got millions of dollars in
defense contracts through preferences he wrote into law. Now the company
pays $6 million a year to lease an office building owned by the senator and
his business partners. Stevens continues to push legislation that benefits
the company.
* An Alaska communications company benefited from the senator's activities
on the Commerce Committee. His wife, Catherine, earned tens of thousands of
dollars from an inside deal involving the company's stock.
Stevens, in a written response to questions submitted by the Times, said
that in all these cases his official actions were motivated by a desire to
help Alaska, and that he played no role in the day-to-day management of the
ventures into which he put money.
"I am a passive investor," Stevens said of his real estate dealings. "I am
not now nor have I been involved in buying or selling properties,
negotiating leases or making other management decisions."
In these deals and others, Stevens' brother-in-law, William H. Bittner,
played a pivotal role. An Anchorage lawyer and lobbyist, Bittner represents
major business interests for whom the senator has repeatedly gone to bat. In
one instance, Stevens engineered a $9.6 million federal appropriation that
chiefly benefited a Bittner client, part of South Korea's Hyundai
conglomerate.
Stevens tucked a single line into a must-pass appropriations bill that used
federal tax dollars to buy Hyundai out of a coal-loading facility in Seward.
Stevens said he did it to lower the company's costs and keep it from
canceling an agreement to buy Alaskan coal. Bittner did not respond to
questions from The Times.
Stevens' relationship with Bittner fits an increasingly widespread pattern
in Washington: Senior senators do favors for special interests that pay
hundreds of thousand of dollars in lobbying and consulting fees to the
senators' children, spouses and other relatives.
As the Times documented in a series of articles in the summer, Sens. John B.
Breaux, D-La., Trent Lott, R-Miss., and Orrin G. Hatch, R-Utah, did favors
for companies and groups that paid their sons as lobbyists and consultants.
Sen. Harry Reid, D-Nev., has pushed through federal land trades and other
provisions benefiting Nevada interests that employ his sons and son-in-law.
The Times also reported that Stevens had continually supported interests
that paid his youngest son, Ben, hundreds of thousands of dollars as a
consultant.
The senators all said their decisions on policy issues and legislation had
not been influenced by their relatives.
But Stevens' dealings have carried him a step further. His official actions
have helped individuals and companies from which he himself draws financial
benefits, a six-month Times examination found.
His required financial statements have fallen short of complete
disclosure--especially on the activities of a small investment corporation
owned by his wife and her family, a company which is covered by the
reporting rules.
The Senate has few ethics rules governing such arrangements. Although
accepting expensive gifts and speaking fees is banned, the
conflict-of-interest rules are much less explicit. For example, nothing
clearly bars a senator from sponsoring legislation that benefits the clients
of family members who lobby. Nor are lawmakers prohibited from going into
business with people receiving legislative favors.
Mainly, the Senate relies on an ill-defined injunction not to bring shame
upon the body.
Senate Ethics Committee Chairman George Voinovich, R-Ohio, declined to
discuss the issues raised by The Times articles.
House Ethics Committee Chairman Joel Hefley, R-Colo., said he hoped to
convene an advisory panel of current and former House Ethics Committee
members next year to examine a range of ethics questions, including how to
address the issue of lobbying by relatives.
"I do think we ought to revisit this," he said. He declined to comment on
the issue of lawmakers' financial partners.
Lawmakers should be careful about their business relationships, John D.
Saxon, a former Senate ethics counsel, said, speaking generally and not
about Stevens in particular.
"It's a very slippery slope for a member of Congress to be entangled with
someone in a business dealing and then use their official position to help
them, even if it's on something completely different," he said.
Today, Stevens is the longest-serving Republican in the Senate, and as
president pro tempore stands just behind the vice president and the speaker
of the House in the constitutional line of succession to the Oval Office.
For more than 20 years, he has been chairman or ranking member of the
Senate's Defense Appropriations Subcommittee. Since 1997, he has been
chairman or ranking member of the full Appropriations Committee, which must
approve every dollar of federal discretionary spending each year.
Stevens' position as a senior member of the Commerce Committee adds to his
clout--especially in telecommunications policy, which is under the
committee's jurisdiction.
In Alaska, Stevens exerts unparalleled influence. No state is so dependent
on federal dollars and decisions. The federal government still owns 60
percent of all its land, generates one-third of all jobs and holds the keys
to economic growth through regulation of its major industries--oil and gas,
fishing, timber and tourism.
Federal spending in Alaska, known locally as "Stevens money," runs as much
as 70 percent above the national average on a per capita basis.
Since his first day in the Senate in 1968, Stevens has delivered for Alaska.
He has won tax breaks for Native businesses, bailouts for fishermen, a
pipeline for an oil consortium and restoration of an abandoned Army post as
a tourist attraction for a Yukon village.
He got $28 million for a rail terminal open only during the summer and $40
million for a commercial space satellite facility.
Almost every institution, region and segment of the population in the state
has benefited from Stevens' efforts, from its schools and social programs to
its transportation system, its urban areas and the far-flung villages of
Alaska's Native peoples.
But during the period Stevens has grown wealthy, some longtime supporters
say the senator has become less willing to hear their views.
"I've been here a long time, and always had a great deal of respect for
Senator Stevens' enormous power and the good he's done for Alaska," Terry
Haines, a veteran commercial fisherman from Kodiak Island, said recently.
"But lately he's become extremely rigid and doesn't seem to be listening to
his constituents much."
Where it began
Theodore Fulton Stevens was born Nov. 18, 1923, in Indianapolis. At the
outset of the Great Depression, when Stevens was 6 years old, his parents
divorced, according to his campaign biography.
Stevens went to live with his grandparents after the divorce, helping out by
selling newspapers and working evenings and weekends in a drugstore. He
later moved in with an aunt and uncle in Manhattan Beach, Calif., where he
graduated from high school. Both his father and grandfather died of cancer,
Stevens has said.
Stevens joined the Army Air Corps during World War II, flying cargo planes
"over the Hump" in the Himalayas--some of the most dangerous missions of the
war. He won two Distinguished Flying Crosses and two Air Medals, his
biography says.
The biography describes how he graduated from UCLA and Harvard Law School.
After working in the 1952 Eisenhower campaign, he was hired by a Washington
lawyer, but soon took a new job as a lawyer in Alaska, which was still a
territory.
He played a leading role in the successful campaign for statehood, but
Alaska's voters rejected Stevens the first two times he ran for the Senate.
Winning a seat in the state Legislature, he became speaker of the House and
go-to man for Gov. Walter J. Hickel. In 1968, when Sen. E.L. "Bob" Bartlett
died unexpectedly, Hickel picked his ally to fill the vacancy.
In the Senate at last, Stevens worked hard to master legislative details and
committee politics.
But increasing political success was accompanied by personal tragedy.
In 1978, his first wife, Ann, died along with four others when the executive
jet carrying them home crashed at the Anchorage airport. Stevens was one of
two survivors.
At that point, the Stevens' five children were adults. Two years later, he
remarried, and soon had a daughter, Lily, who recently graduated from
college.
In the 1980s, Stevens and his new wife, the former Catherine Bittner,
suffered a serious financial reversal.
Along with her younger brother, William Bittner, and other partners, Stevens
invested in the construction of a $2 million crab boat, records show. Before
it was finished, costs soared and the crab market crashed, plunging Stevens
into debt.
The unexpected inheritance of a 54-foot yacht helped Stevens to regain his
financial footing. Records show the boat was a bequest from the late Charles
Willis "Bill" Snedden, publisher of the Fairbanks Daily News-Miner, a
longtime friend of Stevens'. Stevens sold the boat for about $400,000,
according to a source involved in the transaction who did not want to be
named.
Stevens' financial problems underscored the disparity between his personal
situation and that of his wealthy Senate colleagues.
In a news interview in the late 1980s, he lashed out at Alaska voters for
failing to appreciate the personal and financial sacrifices he had made for
them.
Things change
In 1997, Stevens began making up for lost time.
"Money was never what Ted Stevens was about," one close associate said of
Stevens' sudden focus on accumulating wealth. The associate attributed it to
Stevens' age--he turned 80 last month--and to concern about his family.
Whatever the reasons for the change, sometime in 1997--acting at the
senator's request--brother-in-law Bittner contacted a friend, Anchorage real
estate developer Jonathan B. Rubini, about investment opportunities for the
senator, Rubini said.
At the time, Stevens was making about $130,000 a year as a senator, and his
wife reported annual earnings of about $100,000.
Rubini said he would be honored to help, the developer recalled recently
during extensive interviews in his Anchorage office.
A lawyer and a Democrat known for representing liberal clients, Rubini had a
gift for engineering complex deals.
Rubini and his partner, Leonard B. Hyde, made it a practice to form a
separate syndicate of investors for each project. Bittner had often been
among those participants. If Stevens wanted to join in such deals, no
problem, Rubini said.
He arranged for Stevens to put up $50,000, giving him a 7.7 percent interest
in a new syndicate called JLS Properties.
Rubini, Hyde and another partner who came in on the deal were required to
personally guarantee, if necessary, debts the partnership took on. They also
agreed to contribute more capital if needed.
Stevens was not asked to guarantee notes or promise more money because he
was brought in as a passive investor, Rubini said. The senator said he asked
for that status because it shielded him from the kind of open-ended
financial obligation that had caused his "bad experience" in the crab boat
venture.
The deal began in characteristic Rubini fashion, with the purchase of an $11
million collection of what he called "ragtag" properties whose out-of-state
owners wanted to unload. Rubini quickly resold several of the properties to
pay down debt.
Among the properties retained were a small office park near the Anchorage
airport and a modest two-story office building downtown. Within three years,
Rubini said, Stevens' equity climbed to about $250,000.
Stevens also invested $50,000 in a separate Rubini syndicate to acquire an
apartment complex in Fairbanks in 1999, records show. Steven
' equity in
that property has grown too, Rubini said.
Stevens was soon in a position to do a favor for Rubini.
When Elmendorf Air Force Base, immediately north of Anchorage, was selected
to participate in a new Pentagon program to privatize base housing, Rubini
and another set of partners bid on the $450 million contract in 2000.
The chosen developer would take title to the existing housing, upgrade and
expand it, then rent the houses back to service families. At 828 units, the
Elmendorf contract was far larger than anything Rubini had built before--"a
big reach for us," as he put it.
Yet with low-interest government construction loans and the Air Force
pledging to pay tenants' housing allowances directly to the contractor for
the next 50 years, it looked like a moneymaker.
Bittner became an investor in the Elmendorf group that Rubini put together,
records show. Stevens did not, and he said Monday that he had been unaware
of Bittner's involvement.
The senator said he "strongly supported" privatization because it improves
housing for military families and "it would greatly enhance the likelihood
that Elmendorf would not be closed in the next round of base closures."
When Rubini sought more time to prepare his bid, Air Force officials noted
in their records, he sent the senator a copy of the request.
"I purposely CC'd Sen. Stevens to send a signal to the Air Force that we
would raise the issue with the Alaska delegation if the Air Force acted
unreasonably," Rubini said.
Although it was less than he wanted, Rubini was given a two-week extension.
With only the final paperwork to wrap up, Rubini was told he'd won.
Then, in September 2000, days before the deal was to become final, the Air
Force reneged. One government memo said the Air Force thought Rubini's group
"lacked capacity and adequate financing," claims Rubini strenuously rejects.
Rubini, whose group had already spent $1 million on preparation work, fought
back. He filed a formal protest and also wrote to Stevens, explaining the
problem and requesting help. Then he flew to Washington. First, he tried to
talk to Air Force officials, who refused to see him. Next, he visited
Stevens on Capitol Hill.
The meeting went so well that Stevens invited Rubini home, where they
watched one of the presidential candidate debates between Al Gore and George
W. Bush, Rubini said.
In the days that followed, Stevens said, he got involved.
"My involvement with the Elmendorf project was motivated to ensure that the
Air Force moved forward with this project," he said in his written response.
In addition, he said, he was "looking out for an Alaskan company that was
getting short shrift from the Department of Defense."
Stevens did not answer questions about the specific actions he took. He was
quoted in an August Anchorage Daily News article as saying he called Air
Force generals. The article reported on his relationship with Rubini.
Whatever he did, the Air Force began to feel some heat.
As chairman of Appropriations, Stevens is an ex officio member of its
Military Construction Subcommittee. The chairman of that subcommittee,
Conrad R. Burns, R-Mont., is one of Stevens' fishing buddies.
In October 2000, Burns wrote to the secretary of the Air Force, F. Whitten
Peters, threatening to take away the Elmendorf privatization money because
of the glitch in awarding the contract.
Burns arranged for a similar letter to go to the Air Force from the chairman
of the corresponding House committee, and House aides said they knew Stevens
was interested in the matter.
Burns did not respond to calls or written questions about his actions.
Meanwhile, Rubini tried one more move: Joining forces with the only other
Elmendorf bidder-- Hunt Building Corp. of El Paso, Texas. Hunt was an
established builder of military housing, though the government had forced
the company to pay $8 million in compensation for construction problems on
an earlier project.
In early December 2000, the Air Force put aside its reservations and decided
Rubini and his new partner were acceptable.
Rubini said he did not know specifically what Stevens did on the Elmendorf
project. Whatever it was, "Senator Stevens would have stepped up to assist
any Alaska business," he said.
Air Force officials say they are happy with the work Rubini's firm has done
at Elmendorf, and recently announced the Rubini group would get to do a
second round of housing upgrades without further competition--this phase 50
percent larger than the first.
Stevens' efforts to help Rubini with Elmendorf came just as Rubini was
making a decision that transformed Stevens from a modestly successful
investor into a millionaire.
In October 2000, while Rubini was enlisting the senator's help with the Air
Force, the developer acquired 30 acres in midtown Anchorage that he planned
to cover with gleaming office towers.
Like Elmendorf, this deal was a big step up for Rubini--larger both in size
and potential profits than his earlier ventures.
And Rubini chose to make Stevens and JLS Properties part of it. He said JLS
had accrued equity in the properties it already owned and thus could help
with the new financing.
Rubini could have financed the new development in many ways. He could have
used the financial resources of almost any of his numerous successful
holdings. Or, as he frequently did in such cases, he could have attracted an
entirely new set of investors.
Why did he choose to use JLS to help with financing instead of one of the
other options? It was just a decision he made, Rubini said.
Once again, the senator did not have to guarantee the new venture's debts,
as the other JLS partners were required to do.
The first new building to be constructed, called Centerpoint I, is a
striking $35 million edifice with commanding views of snow-capped mountains.
The remainder of the 30-acre parcel is being developed as Centerpoint II.
Stevens is part of that project too.
Stevens has reported that his investments in JLS, Centerpoint I and
Centerpoint II, all stemming from his initial $50,000 investment, are now
worth between $750,000 and $1.5 million.
Rubini said there was no connection between Stevens' intervention on
Elmendorf and Rubini's decision to move the senator into the Centerpoint
deals.
"Clearly, a phone call from Senator Stevens does not hurt," Rubini said,
referring to the senator's contacts with the Air Force on his behalf.
"But there was no quid pro quo, plain and simple," he said.
All of Centerpoint I is leased out--at $6 million a year for 20 years--to
Arctic Slope Regional Corp.
Arctic Slope is no ordinary tenant. A $1 billion-a-year business, it is the
largest Alaskan-owned company in the state. More important, the
company--along with 12 other regional Native corporations--was created
through legislation the senator took the lead in drafting. And it has
prospered through his continuing efforts in the Senate.
Native corporations
Arctic Slope and the other Native regional corporations were born in 1971 as
part of a landmark bill called the Alaska Native Claims Settlement Act,
hailed as a humanitarian alternative to the failures of traditional
reservations.
Under the act, about 40 million acres and almost $1 billion in working
capital went to Native corporations and to some 200 much smaller village
bodies to settle their claims on the land. They were to help their
shareholders, the Native people living in their regions, by making
investments, starting businesses and in other ways generating economic
activity.
Many of the Native corporations have found it hard to fulfill their mission,
but Arctic Slope, which represents Inupiat Eskimos on the oil-rich North
Slope, gradually built a strong base providing support services to the giant
oil companies at Prudhoe Bay.
And Stevens is now fighting to authorize oil extraction from the nearby
Arctic National Wildlife Refuge, where Arctic Slope owns petroleum rights to
92,000 acres.
Thanks to Stevens, Arctic Slope and the other Native corporations also enjoy
preferences when seeking federal contracts that go well beyond anything
available to blacks or Latinos, even though Arctic Slope ranks among the
nation's 500 largest privately owned companies.
One set of preferences that Stevens inserted into his annual defense
appropriations bills recently enabled Arctic Slope and another Native
corporation to land a $2 billion Pentagon deal without competitive bidding.
Now money is flowing the other way--to Stevens.
A company executive, Conrad Bagne, said Arctic Slope did not find out about
Stevens' ownership in Centerpoint until the company had finalized the deal.
He said Stevens' involvement had no effect on the company's decision to sign
the lease and that there was no impropriety.
"No one is more committed to public service than Senator Stevens," Bagne
said.
Stevens now has a personal stake in his tenant's future. At the same time,
he continues to aid the company's bottom line through his position as
chairman of the Appropriations Committee. This year, for example, he pushed
through legislation renewing the federal defense contract preferences.
In addition, Stevens has inserted a provision in this year's pending
appropriations bill that directs federal agencies to consult with Arctic
Slope and the other Native corporations on equal footing with tribal
governments.
This gives Arctic Slope, for one, new legal standing when pushing to open
the Arctic wildlife refuge to oil and gas drilling--a position opposed by at
least some tribal leaders.
"I have and will continue to work with all Alaska Native Corporations--both
individually and collectively--in my official capacity," said Stevens,
noting that he does not deal directly with Arctic Slope on its lease.
An Arctic Slope subsidiary has paid Bittner $120,000 since 2002 to lobby on
appropriations and government contracts.
Business interests that look to her husband for support have also enriched
Catherine Stevens in a series of transactions that went through Chamer Co.,
the private family investment firm run by Bittner.
Stevens did not report some of these deals on his financial disclosure
reports; others were reported only sketchily--without the details required
by law.
Quick stock deal
One of the transactions was a quick stock deal involving the Alaska
Communications Systems Group that earned Catherine Stevens at least $47,000,
records show.
The company has benefited from the senator's influence over communications
policy as a senior member of the Commerce Committee.
For example, Stevens pushed through legislation in 1996 that created a
subsidy for remote telephone service, and he has fought efforts to dilute
Alaska's sizable share of the subsidy. ACS considers the subsidy, called the
universal service fund, an important revenue source.
Alaska Communications Chairman Charles Robinson said, "The universal service
fund is important to every telephone company in Alaska." He said Stevens had
"done a great job in preserving it."
The senator said his actions had "benefited all Alaskans and all Alaska
communications companies."
Stevens stands to be an even more valuable ally in 2005, when he's scheduled
to take over as Commerce Committee chairman.
Robinson combined the Fairbanks and Anchorage phone companies to create ACS
in 1999 and took it public in the fall of that year.
As is common before companies go public, a select group of insiders was
allowed to buy stocks at a bargain price, in this instance $6.15 a share,
the documents show. In this group were several financiers and others
involved in creating the company, including Bittner, the company's
Washington lobbyist.
Though she was not on record as an officer or financier for the company,
Catherine Stevens ended up with some of the bargain shares. Robinson said he
knew she had shares but did not remember how she obtained them.
Alaska Communications issued 42,248 shares to Chamer Co., which Catherine
Stevens owns with Bittner, their sister and their mother. She purchased
16,250 of those shares and sold them a year later, according to the
Securities and Exchange Commission.
Ted Stevens did not report the shares on his ethics report for 1999, the
year Chamer acquired them.
Ethics rules require disclosure of activity by a family-owned business, in
detail and in the same year a transaction occurs.
The deal was not reported until 2000, after Catherine Stevens had sold her
shares, most of them at $9.25, for a profit of at least $47,000.
Rubini, the developer of Centerpoint I, said Chamer also had an interest in
that project. He said Chamer put up $250,000 for a 3 percent short-term
stake in Centerpoint I that earned a 15 percent return on investment.
Records show Chamer also invested $125,000 in an earlier Rubini syndicate.
Stevens did not disclose either of these investments on his Senate financial
forms.
Although Senate ethics rules encompass his wife's financial activities as
well as his own, Stevens sought to distance himself from Chamer.
"I have no interest in that company, do not participate in its meetings, nor
do I participate in any decisions related to its business activities," he
said Monday. His wife did not respond to telephone messages on Tuesday.
Researcher Mark Madden in Washington assisted in this report. Staff writer
Judy Pasternak in Washington also contributed.
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