Administration struggles to explain no-bid contract to grandson of key Dunleavy donor

Last week, Rep. Zack Fields said AIDEA Executive Director Tom Boutin declined to appear in front of the House State Affairs Committee to answer questions about a sole-source, no-bid contract awarded to the grandson of big-time donor to Gov. Mike Dunleavy’s election.

After Tuesday’s performance in front of the House Finance subcommittee on the Department of Commerce, Community and Economic Development, it was clear why.

Both Boutin and DCCED Deputy Commissioner John Springsteen struggled to explain exactly what Clark Penney was doing for the state’s economic development efforts through a $441,00 four-year contract that was inked outside of the state’s normal competitive public procurement process.

Boutin, however, rejected the notion that the contract with Penney Capital, Inc., was made at the request of Gov. Mike Dunleavy as political payback for the more than $300,000 that Bob Penney made to an independent expenditure group backing Dunleavy’s election.

“My name is on both the contract and the sole-source finding,” Boutin said. “I certainly wasn’t directed to do so by the governor. I never talked with the governor about either Clark Penney or the Clark Penney, Penney services contract. Not once, not ever.”

Asked by Fields if it didn’t come from the governor or someone in his office, if it was Boutin’s call to pursue the sole-source, no-bid contract with Penney.

“Exactly, that’s why the name is on the contract,” Boutin said. “The buck stops at AIDEA, right in my office.”

It was unclear how the Penney Capital, Inc., which was formed less than two months before inking the contract with the state, came across Boutin’s radar. He offered shifting explanations about how Penney’s name came up in conversations and how he was well-regarded.

While the appearance of potential political impropriety has been the focus of the contract, other legislators sought to find out what exactly Penney is doing for the state, who’s overseeing his work and whether the no-bid process was ever really justified.

Though Springsteen was clear that he didn’t personally supervise Penney, he offered that Penney was helping develop several new “economic engines” in Alaska—several of which happened to be initiatives that began before the Dunleavy administration took office—including the mariculture industry.

“You mentioned mariculture and Mr. Penney’s work with mariculture. As you know, his name is coming up a lot in this committee because there’s not been a conclusive answer from the administration of who he reports to or to, some extent, what he does,” said Rep. Jonathan Kreiss-Tomkins. “You mentioned he’s been involved with mariculture. If I were to talk to members of the mariculture task force, would they be able to tell me that he’s been present and involved in their work?”

Springsteen pointed to a pro-mariculture editorial that mentioned Penney.

Kreiss-Tomkins said that wasn’t answering his question and asked it again to only be given another indirect answer. Frustrated, Kreiss-Tomkins said that it didn’t appear that Penney was as involved in mariculture development as Springsteen had initially indicated.

“I haven’t asked any members of the mariculture team, but you just mentioned in your verbal testimony earlier that Clark Penney had been involved. I’m interested in what his scope of work actually is or what he is actually doing, so I took that data point as, ‘Ah! Clark Penney is doing mariculture work,'” Kreiss-Tomkins said. “If he were, in fact, doing mariculture work, I would trust that I would be able to reach out to them and say, ‘Clark Penney has been an active, positive, proactive force in the mariculture industry development,’ but I take your answer to my previous question is that if I asked that question of mariculture people, no, they would not be able to tell me that he’s an active, involved person.”

Springsteen replied, “I would say he’s a catalyst and a facilitator working towards the benefit of the mariculture sector as well as other initiatives we have underway.”

Fields jumped in to note that mariculture and the other initiatives mentioned during the hearing were initiatives that got a start under the previous administrations. Little in the hearing, he said, appeared new.

Kreiss-Tomkins said he saw little of focus in the state’s broader economic development efforts, which has been an apparent priority of the Dunleavy administration.

“It seems like it’s a mile wide and infinitesimally thin,” he said.

As to what Penney is doing, Boutin admitted that he doesn’t talk with Penney every day. He also acknowledged that he had little knowledge about what economic development team that Penney’s contract was supposed to be a part of.

Kreiss-Tomkins continued to press Boutin on how the contract came together, noting that it was particularly concerning that Boutin chose to pursue a sole-source, no-bid contract that didn’t allow other Alaskans to offer a competitive bid on the process. Kreiss-Tomkins asked if Boutin understood that the whole thing “can easily cause one to think of ulterior motivations.”

Boutin defended the process saying, without evidence, that no one else would have done it for so little.

“For this kind of money, I understand that people want to pay can we go out there to any of our existing, ongoing contractors that we’d use. I was told that they’d laugh at you for that kind of money,” he said. “I know that to be true.”

Several legislators were skeptical of Boutin’s claim. Kreiss-Tomkins asked if Penney is so talented and there was actually such a lack of interest, then why skirt the public procurement process in the first place? Boutin said it was critical to deliver on the Dunleavy’s “open for business” campaign promises in a timely manner.

Boutin also deflected, saying that the contract is so miniscule compared to the state’s sizable financial management contracts as to not warrant scrutiny.

“I sign invoices to contractors that make me lose sleep at night,” Boutin said. “This isn’t one of them. This one, we’re getting the worth out of it.”

Boutin, however, couldn’t point to specific deliverables that made the contract an apparent bargain. He said that it was helpful to the state to have an independent agent working on business development, noting that Penney’s notes often keep the details of the companies he’s working with limited to initials.

He repeatedly returned to the size of the contract—paid out as $8,000 per month—as reason not to worry about it.

“To be honest, I mean somebody getting paid $8,000 a month and then they pay social security, the self-employment tax, and the federal income tax, this is a very small amount of money,” he said.

But the administration apparently isn’t quite as nonchalant about the whole thing as Boutin represented. According to Alaska Landmine editor Jeff Landfield, who was in the room for the hearing, a member of the Dunleavy administration made an appearance during the hearing:

“During the hearing, Brandon Brefczynski, a Special Assistant to Governor Dunleavy, came in and had a note given to Representative Colleen Sullivan-Leonard (R – Wasilla). Later, Sullivan-Leonard called a point of order and said the hearing had turned into ‘political theater,’ and added that this is not a Clark Penney committee.”

Why it matters

Of course, there’s the questions of political payback that headlined the meeting but there were many, many other things said during Tuesday’s hearing that ought to raise concerns about the state of the state’s economic development efforts. On the whole, the update presented little new action since Dunleavy took over and there was little concrete justification for a request of an additional $3 million for the economic development team.

The attention paid to Penney is understandable, but the contract appears to be more of the tip of the proverbial iceberg of what was vague and deflecting presentation about the state’s overall economic development efforts. It’s not just unclear whether the state’s getting its money’s worth for the Penney contract, it’s unclear if it’s getting its money’s worth with the Dunleavy economic development team.

Unfortunately, the attention to Penney ran out the clock on any of those other concerns on Tuesday. Other high-priority issues like Singapore-based Caracol Petroleum’s failure to make payments on a $70 million loan from the state in the Mustang oil project went unmentioned.