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Guilty pleas end Alaska corruption probe

Richard Mauer
Pete Kott, a former state legislator, waves to members of the media as he gets into an elevator at the Federal Building in Anchorage on Friday, October 21, 2011. Kott pleaded guilty to corruption charges and was sentenced to 17 months that he already served. MARC LESTER

With the guilty pleas of two former legislators Friday, the seven-year federal investigation of corruption in Alaska came to a close, leaving some of the original targets off the hook but 10 others with criminal records, including six state legislators.

"With these two convictions and the sentences today, this brings to an end the largest and most successful corruption investigation ever in Alaska," U.S. Attorney Karen Loeffler said after former Reps. Pete Kott and Vic Kohring were sentenced Friday morning. "Six legislators who were sitting at the time (of the investigation) were convicted of corruption charges, five of those were felonies, one was the misdemeanor. That's 10 percent of the Alaska Legislature."

Despite the unraveling of an 11th case -- prosecution errors that resulted in the 2008 conviction of former U.S. Sen. Ted Stevens being thrown out -- Loeffler said the investigation sent a strong message.

"Alaska citizens expect clean government, and they expect government in the open," she said. "We're not a third-world country -- we're the United States of America, and we will prosecute these cases and pursue them wherever and whenever necessary to support the citizens and what people expect here."

Kott and Kohring pleaded guilty to accepting bribes, officially waiving their rights to redo their 2007 trials on corruption charges. They were sentenced to the time they had already served before their convictions were tossed on appeal -- terms that in both cases were substantially less than federal guidelines would impose.

For Kott, it amounted 17 months served, a $10,000 fine, and three years probation, the first year with a curfew set by his probation officer. Kohring got 12 months, no fine, and 18 months probation.

U.S. District Judge Ralph Beistline said it was time for everyone to move on. Paraphrasing President Gerald Ford after taking the oath of office upon the resignation of Richard Nixon, Beistline said, "I recognize the need to put this long state nightmare to an end."

Kott, 62, a former House speaker from Eagle River had the first hearing.

"The decision to plead guilty to count four, is that something you're doing freely and voluntarily?" Beistline asked.

"Yes," Kott replied.

"You understand that for the rest of your life you cannot possess a firearm, and that for a period of time you can't vote or serve in office," Beistline said.

Kott acknowledged the restrictions.

'HE TOOK ORDERS FROM ALLEN AND SMITH'

Assistant U.S. Attorney Kevin Feldis explained the factual basis for Kott's plea. It all started with the deal Gov. Frank Murkowski negotiated with the state's three major oil producers to change the way oil was taxed in Alaska.

Murkowski hoped the deal would provide incentives for the industry to build a gas pipeline, Feldis explained. So did Bill Allen, the chief executive of Veco Corp., the oil-field contractor that stood to make hundreds of millions of dollars building such a line. Allen and a Veco vice president, Rick Smith, were regular lobbyists in Juneau, working out of Suite 604 in the Baranof Hotel.

Unbeknownst to all but a few investigators, prosecutors and judges, the FBI had secretly wired the suite for sound and video.

"In 2006, Mr. Kott regularly met with Bill Allen and Rick Smith," Feldis said. He took orders from Allen and Smith and worked to get the Legislature to adopt the tax formula sought by Veco and reject amendments that would increase the tax, Feldis said.

In return, Kott received "monetary benefits and a promise of future employment," Feldis said.

Allen paid a "fabricated" invoice that inflated the cost of a flooring job Kott did for Allen by $7,933. He later gave Kott another $1,000 in cash.

"Mr. Kott violated the public trust for his personal gain in doing these things," Feldis said, and sat down.

"Did you hear all that?" Beistline asked Kott.

"Yes, your honor," he said.

"Is it true?"

"Yes, your honor."

"How do you plead, guilty or not guilty?"

"Uh, guilty," Kott said.

Before Beistline imposed the sentence, he offered Kott the opportunity to speak.

"I said when I was first sentenced (in 2007) that I was certainly sorry for my actions, and I want to reiterate that again today," Kott said from his seat at the defense table. "In my head, I thought my actions in the Legislature were for the best in interests of the people of the State of Alaska. Outside of the Legislature, perhaps they were wrong."

Kott said that as a 62-year-old now, his priorities have changed from when he was serving in the House.

"My priority is my family. I want to rebuild my time with them and continue moving forward. I want to close this chapter of my life and start afresh and be a contributing member of society," he said.

'YOU SOLD YOUR SOUL'

Beistline, who was born and raised in Fairbanks, said the 24th Alaska Legislature, from 2005 to 2006, "was truly a dark moment in the state's political history."

"With these shenanigans we've seen in the 24th Legislature, hopefully we've seen the exception and not the rule," Beistline said. He described the victims of Kott as "the citizens of the State of Alaska. They are unique, good people -- they deserve to have honest and hardworking, conscientious legislators."

Looking down at Kott, Beistline said, "I'm troubled by this whole mess." He noted that by 2006, Kott had served 14 years in the Legislature.

"You were tired of it, you were financially struggling and you wanted out, but you needed financial help and financial security, and the governor's bill became your ticket," he said.

Bill Allen and Rick Smith were desperate to get the bill passed, Beistline said. "You agreed to do their bidding and in the process, you sold your soul."

In his career on the bench, Beistline said, he learned from all the drug dealers who passed before him that "there is no honor among thieves," and the same held true for Allen and Smith, he said.

"They were just as quick to turn on you when it would save their own hides," Beistline said, referring to the plea deals made by the executives that got each less time in prison than the original six-year sentence for Kott.

In agreeing to cut short Kott's prison sentence to the 17 months he served, Beistline said he was also thinking about the expense and difficulty of a trial, "especially when you have the shadowy and shady Bill Allen as the government's chief witness."

Nearly 100 people attended Kott's hearing in Beistline's spacious courtroom. Among a small contingent of FBI agents sitting off to one side was Mary Beth Kepner, the onetime special agent in Juneau who opened the investigation as Operation Polar Pen in 2004. Often working on her own, sometimes without much support from bureau officials in Anchorage, she was eventually removed from the case when a fellow agent complained that she got too close to Allen.

$1,000 IN CASH

Arriving in the courtroom with mop-top hair, Kohring, 53, said he was mostly unemployed despite having a master's degree in business administration. He sometimes worked on construction projects, he said.

He told Beistline he was taking painkillers for a bad neck and back, and anti-anxiety medication "to deal with the stress of my situation." Neither affected his ability to understand what was happening in the courtroom, he said.

With Kohring, Feldis told the judge, it started at a meal at the Island Pub in Juneau on Feb. 23, 2006, when Allen gave him $1,000 in cash.

"Mr. Kohring accepted that money. Mr. Kohring knew that Mr. Allen was intending to influence his votes. Mr. Kohring took the money knowing why Mr. Allen was giving it to him -- he knowingly became part of a conspiracy to bribe elected officials," Feldis said.

Kohring went on to ask Allen to pay off the $17,000 debt on a credit card, and took other payments, Feldis said.

"Did you hear it all?" Beistline asked Kohring.

"Yes."

"Is it true?" Beistline asked.

"Yes, it is," Kohring said.

"Every bit of it?"

"Yes."

Kohring proceeded to plead guilty.

Speaking on Kohring's behalf, his attorney, Michael Filipovic, a Seattle public defender, said Kohring admitted wrongdoing, but his role in the conspiracy wasn't nearly as central as that of such legislators as Kott and Senate President Ben Stevens, Ted Stevens' son and his one-time heir apparent.

Watching the videotapes from Suite 604, Filipovic said, it was clear that whenever significant strategy sessions were held, "it's either Kott or Stevens that is present -- it's not Kohring."

"We're asking the court to allow him and the State of Alaska to move forward from this mess," Filipovic said.

'THEY FELT LIKE BIG PEOPLE'

With Kohring, Beistline again took an opportunity to take a swipe at Allen and Smith.

"They thought they were above the law, that they were the law," Beistline said. "But they were only successful because people like you catered to their egos, willing to do their bidding, so they felt like big people."

Ben Stevens, named in several of the indictments and by witnesses as having accepted illegal payments from Allen, was never prosecuted. In August, he received a letter from the Justice Department that he was off the hook.

Asked during the press conference why that was, Loeffler, the U.S. Attorney, said the decision to not prosecute was made by the Justice Department in Washington and she couldn't comment on what happened there. Though Justice Department officials were willing to transfer the Kott and Kohring prosecutions to her office after the first-round failures, they held on to jurisdiction of the Ben Stevens investigation, she said.

Reach Richard Mauer at rmauer@adn.com or 257-4345.


By RICHARD MAUER
Anchorage Daily News
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