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Transcript - 11.23.07
BRANCACCIO: Welcome to NOW. Okay—Pop Quiz: How many politicians can you name who've been indicted for political corruption in the last few years? Tom Delay...Randy Duke Cunningham....William Jefferson...come immediately come to mind. It seems that nearly every time you open the paper there's another scandal. One politician or another is taking a wad of cash or a trip to a fancy resort in return for political favors. Tonight we take you to Alaska where the FBI has been watching oil executives and the state's old boy network. It's turning out to be the next big political corruption story. Senior Correspondent Maria Hinojosa and producer Kathleen Hughes take a look at just how big.
HINOJOSA: Juneau...the Capitol of Alaska and the place where our story begins...right here inside the Baranoff Hotel, suite number 604.
It's a non descript hotel room...but this is a room with a view...a view of the state legislature...and it was here, back in 2006, that the FBI hid a tiny camera—and began documenting a tale of corruption that's as petty as it is profound.
ALLEN: We've got to produce...
HINOJOSA: March 4, 2006 -10:50 pm. 70 year-old Bill Allen is meeting with his vice president Rick Smith...Together they run a multi million dollar oil services company called VECO. Bill Allen, that's him on the right, has got a foul mouth, and as you'll see in a minute, a wad of cash in his front pocket.
ALLEN: Right now. Right NOW. Right now, me and you have to produce.
SMITH: I know, I know ...
ALLEN: Me and you have to f—-ing produce.
HINOJOSA: Produce. What they're talking about producing is a tax package that would save the oil companies billions....and where they want to produce that is inside the state legislature...and now, thinking that no one is listening they talk about how to make it happen.
SMITH: You have to get dirty and you have to produce. I understand that.
ALLEN: Right here. Right here in this mother fucking place. I know.
HINOJOSA: Boozing it up here in suite 604, Allen and Smith plan on getting down and dirty with state legislators. They will be seen and heard bribing state lawmakers to do their bidding. On this day they're joined by then speaker of the state House, Pete Kott. He's joking about his illegal quid pro quo.
KOTT: I had to get it done. Cause I had to come back and face this man right there. I had to cheat, steal beg, borrow and lie.
SMITH: Well, that will stay in this room.
ALLEN: You got it boss.
HINOJOSA: But it didn't stay in this room. This along with hundreds of hours of audio tapes and video ended up with the FBI. One year later, It's not yet clear just how many officials sold their souls to the devil. But the unfolding scandal has already blown up the state's longstanding old boy network and threatens to bring down dozens of Alaska's politicos, both here and in Washington.
I came here to try and get a sense of the magnitude of this story.
My first stop, the Anchorage Daily News, Alaska's largest newspaper.
DOUGHERTY:—It's an earthquake. And we really don't, at this point, know the full dimensions of it.
HINOJOSA: Pat Dougherty is editor in chief.
DOUGHERTY: It is turning the established political power of the state inside out.
HINOJOSA: In the months since Bill Allen and his vice president pled guilty to conspiracy and fraud—and then started cooperating with federal prosecutors—Dougherty has had no fewer than five reporters covering the scandal full time.
The reporters have covered two trials so far. After two convictions, this week it's trial number three...inside the federal district courthouse in Anchorage.
Vick Kohring, a former Republican state representative stands accused of taking bribes from VECO. The Daily News' Lisa Demer is the courtroom reporter. As at the end of the day's hearings, Demer rushes back to the newsroom.
DEMER: I'm thinking about opening with a scene of ahh what the juror saw today in the courtroom when they watched the video from Suite 604, and Vic Corring, sometimes in these videos you can barely make the people out he's there, he's front and center. And it's really an amazing video.
ALLEN: Let me help you on that little uh -
KOHRING: Oh, thank you.
DEMER: You know they open up their wallets and they hand him cash.
HULEN: You can actually see cash being passed?
DEMER: You can see, cause it's black, you know it's a little bit grainy video, but you can see, you see bills, and he thanks them profusely.
KOHRING: What can I do at this point to help you guys, anything?
DEMER: So I was thinking about opening with that, is that...because it seems like that in a sense is the heart of the case....
HULEN: Okay.
HINOJOSA: In court, Demer reported, Kohring's defense attorneys tried to paint him as a little fish...a poorly paid representative who slept on his couch in the capitol building.
The paltry $2,600 dollars he took in "gifts" sounds small until you realize how little he makes serving the public—less than 25,000 dollars a year.
SMITH: Go on!
KOHRING: Okay, I won't be shy here, for crying out loud, I'll take more of 'em!
HINOJOSA: While Kohring didn't make off with a lot of cash, he did get his hand in the candy jar—twice.
This round of prosecutions is just the start says Dougherty of the Daily News.
HINOJOSA: How many more government officials, here in the State of Alaska, do you think could be tainted?
DOUGHERTY: We're talking dozens, probably—doesn't—dozens—we're on our third trial.
HINOJOSA: Dougherty wouldn't be surprised if the scandal reaches all the way to Washington DC. For reporters here, the FBI sting has begun to answer questions that they've been asking about Bill Allen and VECO for a long time.
Reporter Rich Mauer has been on Bill Allen's trail for years.
MAUER: Journalists don't get to tap phones. Journalists don't get to—to place secret cameras. So, the FBI is listening in on conversations that we thought maybe were happening. But lo and behold they really were, and we're getting to—to hear these things.
HINOJOSA: More than 20 years ago...in 1984...Mauer wrote a series of stories asking why a relatively unknown pipeline company called VECO was sending what turned out to be illegal campaign contributions to senators who would vote against a tax on oil.
MAUER: At that point it was a lot of money, $15,000 for a—for five state senators, $12,000, $15,000 dollars.
HINOJOSA: After Mauer's report the state elections commission slapped Allen with a hefty penalty...But far from being deterred, Allen was on his way to becoming a big player in state politics.
MAUER: The senators certainly knew who was responsible for giving them the checks, and—and that helped Bill Allen establish himself in politics as a—as a political fundraiser. And that was my first story. That was 1984. So this is the VECO building. And very quickly, that corner up on the top there, that that was the big, VECO logo.
HINOJOSA: Allan's influence grew along with his company's. Before the scandal broke, VECO was the largest oil services operation in the state, with revenues worth about a billion dollars a year. It's biggest clients...companies like Exxon, BP and ConoPhillips, paid Veco to build and repair the crucial pipelines that kept oil flowing.
VECO's Fortunes rose and fell with the oil industry...And Allen made it his business to keep legislators in Juneau working on big oil's behalf. Over the years VECO became the biggest donor to the state's dominant party, the Republicans.
DOUGHERTY: I mean, VECO has been a money machine for the Republican Party in Alaska for 20-something years. So the Republican candidates for office could start their campaigns, as long as they were acceptable to VECO, with guarantees of tens of thousands of dollars in campaign contributions in support.
HINOJOSA: Allen demanded loyalty and his willingness to twist arms is legendary. Andrew Halcro was a Republican state representative from 1999 to 2003. Shortly after his election, he says he got an unexpected phone call from Allen.
HALCRO: He said, "I want you to support Pete Cott for speaker." And I said, "You know I'm sorry. I've already made up my mind." And he said, "Well, you know, we—we held a fundraiser for you. And we raised money for you. And I've donated a—lots of money to the Republican party." And—I—I just—I was—I was shocked.
HINOJOSA: Halcro says Bill Allen kept a tight leash on the legislative process, often spending more time in the capitol than the state legislators did.
HALCRO: And they were spending basically 12, 13 hours a day in the capitol. And—I would come to work at 8 AM and they would be there. I'd leave the capitol at 6PM, they'd be there. And what happened was everybody in the capitol realized that they were breaking a law, because the state lobbying laws said that you cannot lobby more than ten hours in a month. And these guys were lobbying ten hours in a day.
HINOJOSA: So Halcro and several others filed a complaint.
HALCRO: And what they did the very next year was they went back and they had the legislature change the law to allow them to do that.
HINOJOSA: It seems Allen and his cronies even took a perverse pleasure in their power to sway the law. VECO paid $900 to have baseball caps embroidered with the initials CBC - a little inside joke among legislators and Bill Allen...it stood for the "Corrupt Bastards Club".
It may sound like small town dirty politics, but Allen's reach stretched all the way to Washington DC. Take a look at these pictures. It's the late 1990s ...Here's Bill Allen on a fishing trip in Alaska with some of Washington's then most powerful Republicans. Senate Majority leader Trent Lott, House Speaker Dennis Hastert, Senators Phil Graham, Thad Cochran and yes, Larry Craig...
What did the vacationers have in common? All of them spent time with VECO chief Bill Allen and all are close political allies of Alaska Senator Ted Stevens.
You can't really talk about Bill Allen without talking about his relationship with Ted Stevens. Alaska's most powerful political figure in Washington is the longest sitting Republican in the US Senate - he's been there almost 40 years. The man who brings home the proverbial bacon. Alaskans have even come to call him Uncle Ted.
MAUER: He certainly, is responsible for a lot of things that take place here—whether—whether it's—it's federal funds to—to build airports, roads, tunnels, bridges—bridges to nowhere and bridges to somewhere,
DOUGHERTY: He has really become like a godfather who is able to go in and say, "I want some money for these people in Alaska."
DOUGHERTY: And, "I want some money for these people in Alaska." And it's a lot of money. I mean, it's more money than we can tally. It's so much money you can't keep track of it.
HINOJOSA: It would only make sense that Alaska's most powerful Republican and the biggest donor to his party would have a close relationship. Ted Stevens and Bill Allen go way back. At one point, along with a group of investors, they even bought a $40 thousand dollar thoroughbred race horse named So Long Birdie...
Over the years, VECO contributed hundreds of thousands of dollars to Stevens political allies. In recent years, VECO has been the recipient of more than 150 million dollars worth of federal contracts.
Still last summer even seasoned Daily News reporters were stunned when the FBI did what was once unthinkable...they descended on the senator's home in Alaska and raided it.
MAUER: This is—really, is the first time the FBI has raided a sitting U.S. Senator's home.
HINOJOSA: The FBI, Mauer reported, is investigating whether VECO and Bill Allen paid to expand the senator's house.
MAUER: It was originally a—a one-story house that they jacked up and—and inserted another first story underneath the s—now, the second story. So basically doubled the size of the house.
HINOJOSA: So far Senator Stevens has not been charged with anything, but questions about his relationship with Bill Allen, the man who is now talking to the FBI, follow him everywhere. Stevens maintains his innocence and his office has not responded to our requests for an interview.
The senator has also maintained his silence about his 48 year old son, Ben Stevens, who until last year was president of the Alaskan State Senate. Like his father, he has not been charged, but while Ben Stevens was serving in the Alaskan senate VECO was actually paying him what they called consulting fees: 50,000 dollars a year almost $250,000 in total. In fact, Ben Steven's name comes up frequently on the FBI's tapes from room 604.
SMITH: And we better figure it out, cause Ben's got an agenda, and Ben does not keep him informed like he should, k? Listen, I think the world of the little mother—er, okay? I love 'em, k? Smart, genius, all that bullshit, da da da da.
HINOJOSA: Ben Stevens never shows up on the tapes, but from the way they speak of him it sounds like he's a member of Corrupt Bastards Club.
SMITH: I was talking to him about you know we gotta get this mother——ing thing done.
SMITH: How we gonna do it? What did Ben say?
ALLEN: Uh, if he has to he'll put another... conference.
DOUGHERTY: Here's—here's Ben Stevens. He's being—being paid $250,000—by VECO as a consultant. What's he doin' for that money? And—and—you know, unlike his father, Ben Stevens has really done virtually nothing for the State of Alaska.
HINOJOSA: Bill Allen has testified for the prosecution in the Federal corruption trials. It was during the second one that he dropped the bomb about Ben Stevens.
MAUER: What Bill Allen has said on the witness stand was that, "I paid Ben Stevens to essentially to be a state Senator, and work for me as a state senator." And that's a potential crime under state law, (UNINTEL) crime under federal law.
HINOJOSA: And as a reporter when you hear that?
MAUER: I say there you go. Let's get that in the paper
HINOJOSA: The political scandal rocking Alaska has done something that was inconceivable just a couple years ago—it has unhinged the state's old boy network and opened the door for reformers.
Into the breach.....an unexpected figure. Sarah Palin, Alaska's new governor.
PALIN: Good morning central Huskies.
HINOJOSA: The former beauty queen, small town mayor and mother of four is a conservative Republican who ran for office last year and won, promising to clean up corruption—in her own party.
Before the elections, Palin was considered a long shot. But her plain spoken style and willingness to be tough on the oil industry has made her wildly popular here. With the VECO case constantly in the headlines Palin has already forced sweeping ethics reforms on the legislature in Juneau.
Can she, in fact, really create change in terms of the ethics of the politics here?
DOUGHERTY: I mean, she is a very different kind of governor than we've had. And she comes in at a time when almost the entire rest of the political culture is discredited. And—you know, she doesn't speak to the chairman of the Republican Party. Because she turned him in for ethics violations when they both served on—the state commission that regulates the oil industry.
HINOJOSA: Now make no mistake, like most Alaskans, Palin is not anti-oil. The industry accounts for more than 85 percent of the state's tax revenues..... Thanks to oil, Alaskans pay no income or sales tax. Instead, they get money from the oil companies... every year every single resident gets a check from oil industry royalties - just for living here.
HINOJOSA: Can you, in fact, Governor, in a State like Alaska, can you in fact—really take on the power of the oil companies?
GOVERNOR PALIN: The oil companies don't own the resources. They have leases and the right to develop our resources for us. And we share a value, we're partners there, because they do the producing for us. But we own the resources.
HINOJOSA: Palin gave legislators 30 days to debate her tax proposal.
During committee hearings,—Palin's opponents—argued that higher taxes may ultimately force big oil to cut back on investments in Alaska, especially as some of the oil fields here are beginning to get tapped out.
Democrats like Representative Les Gara from Anchorage, aren't buying the industry's argument.
GARA: Their bluff, every, single day, is that if you tax and get your fair share for the people of the state of Alaska, we'll just leave the state. As oil companies will go somewhere else. We know that's a bluff.
HINOJOSA: If they are bluffing, the VECO scandal has, for the first time in decades, given lawmakers like Gara the political capital to call them on it. Bill Allen and his men may be gone Gara says, but the oil industry is still wields a lot of power in these halls.
And Gara says, big oil still has questions to answer about the VECO scandal He pointed to this phone call—taped by the FBI—between Bill Allen and the president of Alaska ConocoPhillips Jim Bowles.
ALLEN: We want to just see if we can't stop this thing, don't we?
HINOJOSA: The two oil executives are talking about stopping last year's tax bill.
BOWLES: If there's any way we can get this thing stopped, that's the best possible outcome.
ALLEN: "Okay I got work—and it's just between me and you, but I got Pete Kott and uh, Jim, I mean Ben, Ben doing it, and hopefully we—they're gonna to try."
HINOJOSA: This past October, Palin proved she means business. She called law makers back to Juneau for a special session. She demanded they vote for the tax increase on big oil that they failed to pass while Bill Allen was handing out bribes in suite 604.
We caught up with Palin as the session was getting underway.
Her proposal—increase the oil profits tax rate about two and a half percent. It doesn't sound like much but with oil selling at more than 90 dollars a barrel it adds up to more than a billion and a half dollars a year.
GOVERNOR PALIN: This is a big darn deal for Alaska. That non-renewable resource, of course, is so valuable it's being sold first at a premium by Exxon, BP, Conoco Phillips. And of course they're fighting us every step of the way when we say, "Well we wanna make sure, especially as it's being sold for a premium, that we're receiving appropriate value."
HINOJOSA: At the time of this recording Pete Kott was the speaker of the Alaskan house and Ben Stevens was the President of the senate.
ALLEN: Maybe-maybe they can't get it done but they think that—they told me that they thought they could.
BOWLES: Okay, well that's good news. Bill I tell ya what, I think if we can this killed this time we can come back and package up something that works better for the governor and for ourselves.
GARA: That makes you ask the question—what did the folks at Conoco know? What did the folks at Bill Allen tell them about this little scheme they had to defraud the Alaska public?
HINOJOSA: Gara and fellow democrat senator Hollis French recently wrote this letter to all three of the state's big oil companies, demanding that they come clean about their relations with VECO.
FRENCH: It's a question. And it's a fair question. And it—and—and as I'd said before, it's a question in the minds of—of tens of thousands of Alaskans.
HINOJOSA: All three oil companies have denied knowing about VECO's illegal activities. Conoco Phillips wrote back to the lawmakers saying "there is no indication that ...Conoco Phillips was involved in, or had any knowledge of the illegal acts...." But ultimately Bill Allen may have cost the oil industry—billions. Late last week Governor Palin got what she wanted. The Special Session ended with legislators voting to increase the tax rate on big oil.
Back in the newsroom, the Anchorage Daily News reporters consider the fall out.
Can you ever have a situation where Alaska politics—can be independent from the oil industry and the money and power that they wield here?
DOUGHERTY: I would say history suggests not. Because I don't think that there has been a time in—Alaska in the last 25 years, 30 years, in which the state was not—really being pushed around by the oil industry.
HINOJOSA: VECO has disappeared, bought up by a multinational conglomerate. But the scandal is not going away.
Are we at the beginning of this story? Or at the end?
DOUGHERTY: I think we're closer to the beginning than we are to the end.
BRANCACCIO: And that's it for NOW from New York, I'm David Brancaccio. We'll see you next week.
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