Insurance deal draws increased scrutiny

Harriet Drummond, who was the lone Assembly vote against appropriating the money, has introduced a resolution calling for an independent counsel to investigate its legality.

Assembly Chairman Pat Flynn, meanwhile, asked the city attorney's office to put together a report providing more details on how it all happened.

The Assembly voted 9-1 last month to pay $193,000 to the George M. Sullivan Irrevocable Life Insurance Trust. George Sullivan, who was mayor of Anchorage for 14 years and the father of the current mayor, died last September at the age of 87.

His son's administration recommended to the Assembly that the money be paid, with City Attorney Dennis Wheeler describing it in a memo to the Assembly as a contractual obligation. The city had directed shortly after George Sullivan left office in 1982 that he should get life insurance through the city for the rest of his life, with the same premiums and coverage as when he was mayor. It's a deal no other city official has received.

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.

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.

CAN'T GIVE MONEY BACK

Drummond said her resolution should come up at the Assembly's March 23 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."

Dan Sullivan said Tuesday that it wouldn't be 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 than what is outlined in the trust."

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

Sullivan said all he did was fulfill his fiduciary duty 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.

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 be 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.

CONFLICT OF INTEREST?

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.

"This clearly was an extraordinary item done really for an extraordinary person and so I think having more of the history of how it came out is not a bad thing," Sullivan said.

Drummond is proposing 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.

Drummond said the city had no business collecting the $19,663 in premiums and then paying out $193,000, and the investigator would look at the "public purpose" behind it.

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 salaries 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.

Assembly member Dan Coffey said the Assembly should take it one step at a time, and first see what the deputy city attorney says in her review of what happened.

"If that's not satisfactory, then let's do what (Drummond) suggests. If there are big holes that aren't answered then we should get them answered. But, like everything else, let's not go nuts and let's just do this in a straightforward, rational, logical manner," he said.