Sullygate update 2: “Five administrations have been aware of this”

For other news stories & posts on this topic, see my bibliography on all things Sullygate.

Earlier today I wrote an update that covered several new developments in the Sullygate story.  Then I updated the update after a new article by Sean Cockerham was posted at 1:52 PM at the Anchorage Daily News website.  Now I must update again, as it appears that additional details were added to the story at 5:18 & 6:08 PM.  These details had to do with what former Mayor (now Senator) Mark Begich’s administration knew about the Sullivan “insurance.”

I’ll do this update by first pasting in the entirety of what I wrote about this story in my previous post, & then add additional comments based on the added details.  Clear as mud?

All quotations in this post are to this article (listed as reference #1 in my list references) unless otherwise noted.

What I wrote in my previous update

A new story has just been posted at ADN’s website:

• 3/10/2010. “Insurance deal draws increased scrutiny” by Sean Cockerham” (Anchorage Daily News).

The article discusses Harriet Drummond’s resolution and Assembly Chair Patrick Flynn’s decision to ask for further information from the municipal Department of Law:

Assembly Chairman Flynn said this week that not all the facts were known when the Assembly voted on Feb. 16 to appropriate the $193,000.

“I’ve heard from a couple of my colleagues who said, ‘We’re finding things out in the paper we didn’t know, and we’re getting questions (from the public) about things we didn’t get answers to previously, and we probably need a little bit more information,’” he said.

Flynn said he didn’t know, for example, that Mayor Dan Sullivan is the trustee. The city attorney’s Feb. 2 memo asked the Assembly to appropriate $193,000 “to the trustee of the George M. Sullivan Irrevocable Life Insurance Trust” but did not identify the trustee.

Flynn said the review he requested from Deputy City Attorney Rhonda Westover will describe why the city attorney’s office didn’t find that disclosure was necessary. He said it would also give more detail on how the administration determined the city was obligated to make the payout.

Flynn wants this review completed before making any decision on the resolution:

He said he didn’t expect to support Drummond’s call to hire an outside investigator before the review is completed. Flynn said he wants Westover’s report on a regular Assembly agenda, and that means it likely won’t be ready until early April.

But Drummond says that resolution should be taken up on March 23:

Drummond said her resolution should come up at the Assembly’s March 23rd meeting. It asks the mayor to return the money to the city “until the Assembly is assured by independent legal counsel that payment of $193,000 in public funds is legally appropriate.”

Here’s the part that really gets me:

Dan Sullivan said Tuesday that it wouldn’t possible for him as trustee to give the money back. “The funds have been disbursed…it would be violating my fiduciary responsibility to disburse it in any other means other that what is outlined in the trust.”

Here again we have the conflict of interest between Sullivan the trustee & Sullivan the mayor.  Especially since — still –  he has not produced a copy of the contract.

Sullivan will not list the beneficiaries of the trust, saying that it’s not public information.

Sullivan said all he did was fulfill his duty as fiduciary as trustee to file the paperwork to execute the terms of the trust, which completes an agreement with the city that’s been in place for almost 30 years. Sullivan said he never made it a secret he was the trustee, he paid premiums to the city on behalf of his father, and he disclosed his role to the city attorney’s office as well as the city department of employee relations.

How many times must it be said?  Where’s the contract?  Show us the contract! Nothing has yet been shown to us to indicate that the Assembly or the Commission on Salaries & Emoluments contemplated anyone other than a licensed insurance company — which the Muni is not — to cover George Sullivan’s life insurance.

Drummond is proposing that the Assembly spend up to $10,000 for an independent legal counsel to look at numerous issues surrounding the payout to the Sullivan trust. “Dan Sullivan is on both sides of this issue. He is the mayor of the City of Anchorage and he is the trustee of the trust that he’s asking the city to pay $193,000 to. I think there’s a serious conflict of interest there,” Drummond said.

No kidding.  Ethical confusion much?  Troubling appearance of possible public corruption much?

The investigator would examine whether it’s truly a contractual obligation, whether the mayor could request the money without disclosing a conflict of interest, and how the city’s Commission on Salaries and Emoluments had authority to grant a special life insurance benefit for someone who was no longer in public office, according to Drummond’s resolution.

The commission did so in 1982, after being asked by the Assembly to consider it in gratitude to George Sullivan and with the concern he wouldn’t be able to get private life insurance.

But let me say it one more time:

• In 1982, neither the Assembly nor the Commission contemplated the Municipality of Anchorage itself acting as a life insurance company.  They intended Sullivan to be included on the MOA’s group insurance plan with Aetna.
• In 1982, neither the Assembly nor the Commission contemplated the Municipality of Anchorage itself paying off a $193,000 claim from public monies.T hey intended Sullivan to be included on the MOA’s group insurance plan with Aetna.
• Nor has any evidence yet been presented that the Assembly or Commission since 1982 made any legal contract or legal agreement obligating the Municipality to act as an insurance company, authorizing it to accept premiums as if it were an insurance company, or obligating it to make a payout from public monies.

As has been suggested elsewhere — for example, by Shannyn Moore’s guests on last Saturday’s “Moore Up North” — this matter demands investigation not only by an independent counsel, by also by the Alaska Division of Insurance, which regulates the insurance industry in Alaska.

New detail & my comments thereon

When I came back to look at comments on the story this evening, I discovered new detail that I’m pretty darn sure I hadn’t seen before regarding the Begich administration’s knowledge of the Sullivan faux-insurance.

Sullivan said five administrations have been aware of this, including that of his predecessor as mayor, Mark Begich. Sullivan’s staff distributed e-mails on Wednesday showing Begich administration officials discussed in 2007 how the municipality would liable for paying the $193,000 when George Sullivan died. Sullivan’s spokeswoman said Begich and other previous mayors had the opportunity to challenge its legality or attempt to set up an alternative funding method, but didn’t take action as George Sullivan got older and his health declined.

Begich spokeswoman Julie Hasquet said “it was determined this was a commitment made by previous administrations and there was an obligation to fulfill it.” Hasquet said that ideally, it would have been transitioned into a private insurance policy when George Sullivan left city employment, but that didn’t happen. Dan Sullivan suggested Drummond was playing politics with her call for an outside investigator, but said he had no problem with Flynn’s request for a review by the deputy city attorney.

Let me begin here by focusing on one sentence in particular:

Hasquet said that ideally, it would have been transitioned into a private insurance policy when George Sullivan left city employment, but that didn’t happen.

By private insurance policy, I think she means an individual insurance policy, which according to a February 18, 1982 memo from Susan Lindemuth, then Manager of Records and Benefits, would have cost George Sullivan $961.00 per month in premiums [Ref #2, page 3] — pretty darn pricey. Therefore, the option explored by the Commission on Salaries & Emoluments in 1982 was to continue Sullivan on the Municipality’s group plan, even though he would no longer be a municipal employee.  In fact, according to the minutes for the Commission’s February 24, 1982 meeting,

There was still concern by the Commission whether the insurance company would allow someone who was no longer employed by the Municipality to remain part of the group plan and pay the month premiums out-of-pocket. [Ref #2, page 6 (page 2 of minutes)]

The minutes show that Susan Lindemuth, who at that time was Manager of Records and Benefits, responded to those concerns:

In response to questions by Mr. Lounsbury, Ms. Lindemuth stated there is no problem as far as the insurance company is concerned in continuing George Sullivan in the insurance program after his completion of service with the Municipality and has drawn his last paycheck.  She further stated that the Municipality would just add an amendment to the policy saying George Sullivan is eligible to continue participation. [Ref #2, page 6 (page 2 of minutes)]

With this reassurance, the Commission on Salaries & Emoluments passed its Resolution No. 82-1 , which provided that the Municipality would provide former Mayor George Sullivan “at the same rate and with the same coverage as in existence on January 1, 1982.” [Ref #2, page 9] The rate had earlier been established as being “$86.85 per month or $1,042.20 per year” [Ref #2, page 9] with the coverage being, of course, $193,000.  But very clear from the minutes was the Commission’s intent that the insurance coverage be provided via the Municipality’s group insurance policy with a legitimate, licensed insurance provider.

This intent was further underscored by a memorandum to the Commission from Susan Lindemuth on November 10, 1982, which read in part:

The provisions of Resolution 82-1 of the Salary and Emoluments Commission state that George Sullivan will be allowed to continue his life insurance coverage under the Municipality’s group plan at his expense for the remainder of his life.  The amount of coverage will be that in effect on January 1, 1982 ($193,000) and the premium rate will also be that in effect on January 1, 1982 ($77.20).  The resolution is to take effect January 1, 1983. [Ref #2, page 14]

No explanation was made of the difference between the premium rate Lindemuth gave the Commission on February 18, 1982 — $86.85 per month, or $1,042.20 per year — & the rate given in November of $77.20/month, which calculates to $926.40 annually. The Commission later clarified via a memo from its recording secretary Judy Flitter on November 22, 1982, that George Sullivan would be required to pay the full premiums on his life insurance even if the rates went above the rate in effect on January 1, 1982.

So the record makes clear that as of November 1982, the Commission on Salaries & Emoluments, which had acted at the behest of the Assembly, both intended & understood that George Sullivan’s life insurance would continue through the MOA’s group plan with the MOA’s insurance provider.

But at some point after that, someone learned that Aetna would not in fact cover Sullivan because he was no longer employed with the Muni.  The Assembly was apparently never informed of this, or not at least that we have so far been informed.  On February 2, 2002, Kate Giard, the city finance director during the Wuerch administration, wrote to the others Wuerch administration officials who were trying to understand the Sullivan “insurance” situation:

Folks,

We had better get together on this issue. We just can’t make payments of this nature from the self insurance or any fund without assembly approval. Mr. Sullivan had an insurance policy, apparently, for the last several years for which he paid premiums. The policy in effect was an illegal commitment unless the Assembly approves it…. [Ref #3, page 12; emphasis added]

But the Wuerch administration did not inform the Assembly.  Nor, apparently, did the Begich administration in 2007.

Which indicates the Mayor’s office through city attorney Dennis Wheeler’s memorandum AM 76-2010 was mistaken — or possibly even committing fraud — when it characterized the “policy in effect” as a “life insurance contract” [Ref #4, page 1].

Nor has anyone yet explained why the so-called “premiums” suddenly went down to $555.84 in November 1995 (per Wheeler’s memo) when the Salaries & Emoluments Commission had specifically stated that the Sullivan’s premiums would be at the same rate as existed on January 1, 1982.

Given that there was no actual insurance company covering Sullivan, just who set the rate of these so-called “premiums”?  Must’ve been someone in the Mystrom administration, which was in office at the time the “premiums” took their sudden nosedive.

Show us the contract. If neither the Muni nor the George M. Sullivan Irrevocable Life Insurance Trust can produce copies of legal contracts signed by people legally empowered to sign them — having been duly authorized by the Anchorage Assembly — then it’s all a fiction. And a fraud upon the taxpayers of Anchorage.

Per today’s ADN article,

Sullivan said five administrations have been aware of this, including that of his predecessor as mayor, Mark Begich.

If that is in fact true, and none of those five administrations informed the Anchorage Assembly that George Sullivan was not, contrary to the Commission’s Resolution 82-1, covered by MOA’s group insurance plan — then I suggest that Dan Sullivan’s & Dennis Wheeler’s purported “contract” is a fiction, and that every one of those administrations may be guilty of malfeasance.

Show us the contract.

Update: The Begich administration emails

Okay, an update on an update on an update… this is endless.

Now the ADN has the Begich administration emails up.  These are probably as the ADN received them from the Municipality; as I did before, I’ve downloaded, placed in chronological order, & added bookmarks to add as a table of contents. Thankfully there were only five pages — made it easy:

• Sullygate 4: 2007 Begich administration emails.

The major thing here is an email dated January 23, 2007 from Joanne Hanscom which includes a timeline.

The MOA will have to payout $193,000 to the estate of Mayor George Sullivan upon his death. Mr. Sullivan has continued to pay the monthly premium costs. This cost was based on the amount of the premium at the time of his leaving office, and was to include any changes to that premium.  This is according to Resolution 82-1 that was adopted on January 19, 1982. [Ref #5, page 1]

This is incorrect: Resolution 82-1 did not in fact say anything about changes to the premium, but rather specifically said that Sullivan was to pay the same rate that was in force on January 1, 1982.  A later clarification in November 1982 clarified to say that if the premium went up, Sullivan still had to pay the full amount.  The Commission said nothing about lowering the premiums.

The attachment continues,

There has been no life insurance policy in place since he left municipal employment. [Ref #5, page 1]

A timeline is then given, which fills in some details we didn’t previously have, including:

August 4, 1982 — Letter to Mr. Sullivan from Susan Lindemuth telling him how much he is entitled to ($193,000) and that the annual cost was $1,042,20….

January 9, 1984 – Letter to Susan Lindemuth from James Hickey (Aetna) regarding the group policy number 392680 and George Sullivan. I do not think anyone at MOA informed Aetna that Mr. Sullivan was no longer employed by the municipality.  However, he was kept on the census and Mr. Sullivan kept making the annual premium payments. [Ref #5, page 1]

If that’s correct, it seems that despite what the Commission had been told about amending the group insurance policy to include Sullivan, that MOA did not in fact amend the policy or inform Aetna.  This evident failure took place, by the way, during the Knowles administration.

Now a big chronological jump in the timeline, which continues with two items relating to reductions in the “premium” — which, because it was not being paid to any insurance company, was not of course really a premium.

January 7, 1992 – Letter to Mr. Sullivan from Christine Kendrick, MOA Records and Benefits employee, informing him that his new premium was $833.76 per year.

November 29, 1995 – Letter to Mr. Sullivan from Pamela Barbeau, MOA Records and Benefits employee, informing him that his new premium amount is $555.84 per year. [Ref #5, page 1]

Question question question: Who authorized those so-called “premium” reductions? The first reduction took place during the Fink administration, the second during the Mystrom administration.

The next timeline items bring us into the Wuerth administration, during the time that Wuerth staff were busily trying to figure the whole shebang out:

March 21, 2002 – Letter to Karen Moore from Melissa Deitrick (Aetna) informing the MOA that Aetna does not have an individual policy on Mr. Sullivan and that because of Mr. Sullivan’s age he is not eligible for an individual policy and is not eligible for the group policy because is is not an active employee.  Aetna also recommended that the MOA return all of the premium payments paid to the MOA by Mr. Sullivan.

March 27, 2002 – E-Mail from Kate Giard (CFO) to Cheryl Frasca (OMB) on how the MOA needs to handle this situation. When the unfortunate happens the MOA should get assembly approval and then take the money out of reserves. [Ref #5, pages 1-2]

But the Wuerch officials decided to ignore Aetna’s advice, and the Assembly was not informed.

Were the Sullivans?  What did they know & when did they know it?  Did they have any connection with the decisions of someone in the Fink and/or Mystrom administrations to lower the so-called “premiums”?  Or were the Sullivans as innocent as the pure driven snow?

Which yesterday, as all of us in Anchorage experienced, just got deeper & deeper.  Kinda like some darker-colored stuff we could name.

References

1. 3/10/2010. “Insurance deal draws increased scrutiny” by Sean Cockerham” (Anchorage Daily News).
2. Sullygate 1: 1982 Municipality of Anchorage documents relating to former Mayor George M. Sullivan’s life insurance. Contains the same documents provided in a PDF by the Anchorage Daily News, except that I’ve placed them in chronological order & provided bookmarks (table of contents).
3. Sullygate 2: 2002 Wuerch administration emails relating to former Mayor George M. Sullivan’s life insurance. Contains the same documents provided in a PDF by the Anchorage Daily News, except that I’ve placed them in chronological order (as best I could) & provided bookmarks (table of contents).
4. Sullygate 4: 2010 Assembly Resolution & memorandum relating to a payout of $193,000 to a trust in the name of former Mayor George M. Sullivan. Contains the same documents provided in a PDF by the Anchorage Daily News, except slightly reordered & provided with bookmarks (table of contents).
5. Sullygate 4: 2007 Begich administration emails. Contains the same documents provided in a PDF by the Anchorage Daily News, except slightly reordered & provided with bookmarks (table of contents).

Related posts:

1. Sullygate: My letter to the Anchorage Assembly in support of Assembly Resolution AR 2010-92
2. Sullygate: MOA Dept. of Law analysis; Ethics Board rules against Mayor Sullivan
3. Sullygate: The Lindemuth/Crawford relationship
4. Talking about Sullygate on the Shannyn Moore radio show
5. Sullygate update: A bibliography, Shannyn Moore’s guests, & Drummond’s resolution