Anchorage Daily News

Two of Alaska's biggest politicians, now in the final days of a tight race for U.S. Senate, share more than a desire to win on Nov. 4.

Both Anchorage Mayor Mark Begich and U.S. Sen. Ted Stevens enjoyed financial ties to Alaska's biggest commercial real estate developers, Jonathan Rubini and Leonard Hyde.

Begich and Stevens have insisted they granted no political favors to the developers as a result of their financial relationships. The developers say the same. Yet both politicians have gone to bat for Rubini and Hyde, resulting in intense, sometimes unwanted scrutiny.

Their business dealings were vastly different.

Begich, a Democrat, represented Rubini and Hyde in 2002 as a real estate agent, before he was mayor or officially running. That same year, they gave him a small interest in two Midtown office buildings. All told, Begich made more than $75,000 from his dealings with the developers.

Stevens, a Republican now awaiting a jury verdict in an unrelated criminal case, began investing in Rubini and Hyde real estate ventures in 1997, the same year he became the powerful Senate appropriations chairman. The deals made him rich. By the time Stevens sold his shares in 2004, they were worth $1.038 million.

Still, Stevens invested before Rubini and Hyde had substantive dealings with the federal government, and his projects did not involve the feds, according to the developers.

Stevens' Senate spokesman, Steve Wackowski, and his campaign spokesman, Aaron Saunders, declined to comment for this story.

Begich said there's no comparison to his dealings and those of Stevens.

"There's never been a time that I, my family or anyone related to me has ever profited in any way from my service in public service from relationships that I have or did have with anybody. And that's a fact," Begich said in a recent interview.

Yet he continues to face questions over a stake in Midtown office buildings given to him by Rubini and Hyde. And his characterization of the deal has changed over the past year.

The dealings with politicians have been a "net negative" as far as Rubini and Hyde are concerned, said Kevin Bruce, their spokesman.

"I think they believe that they have a quality company which has done a lot of good development for the city and for the state. And that they've gotten most of the exposure not for those accomplishments but because of an association with public officials or wanna-be public officials," Bruce said.

The businessmen behind JL Properties are wildly successful. They have changed the face of Anchorage with projects that include hundreds of military housing units, the new Anchorage convention center, and attractive, well-designed Midtown high-rises that have become home to Alaska Native corporations and other entities.

Longtime partners Rubini and Hyde declined to be interviewed but provided a written statement. Jon Rubini is a lawyer who admirers say has a brilliant mind for putting together development deals; Leonard Hyde is a real estate broker. Both have been politically active campaign contributors who have supported both Begich and Stevens in the past. They are not making contributions to either candidate this year, Bruce said.

"Neither Senator Stevens nor Mayor Begich have any current connection to JL or to any JL project. JL Properties has never asked for or received preferential treatment from either Senator Stevens or Mayor Begich, nor has it, at any time, ever sought to gain a competitive advantage from or as a result of its past relationship with either of these public officials," the statement said.

TWO INQUIRIES

Two investigations are under way into projects that involved the politicians and the developers.

One project involves a piece of vacant Midtown land, site of a planned new U.S. National Archives and Records Administration center. Stevens secured earmarks for the land and Begich advocated, as mayor, for a rezoning that doubled its value for Rubini and Hyde.

The politicians didn't have a stake in that parcel but at the time both Stevens and Begich were business partners with the developers on other projects. The focus of the investigation, by the National Archives inspector general, isn't clear.

A second investigation is looking into whether Begich improperly received an interest in two Midtown office buildings as a belated real estate commission. It springs from a complaint to the Alaska Real Estate Commission by Bill Madsen, an Anchorage hostel owner who began examining Begich's business dealings after his Spenard business ran into zoning troubles in 2005.

Begich has been fending off accusations of one kind or another about his interactions with Rubini and Hyde for more than a year from Ray Metcalfe, his chief critic and rival in the August Democratic primary. Metcalfe also has leveled numerous accusations against other politicians, including Stevens and his son Ben.

Begich said the complaints against him have no substance.

"There's a big difference between what Ted Stevens is going through and me running this race," Begich said on Oct. 16. "I'm not under all these investigations ... I'm not in court.

"I know some like to draw these comparisons. There is no comparison. Zero. Because there is nothing wrong I have ever done."

If anything, Begich said, his administration has been tough on Rubini. For instance, Rubini, whose garbage business, Alaska Waste Management, serves most of town, offered to provide curbside recycling in exchange for taking over the city-owned garbage service that serves the rest. The city refused. He wanted the city to pay for a road project that would have benefited his Midtown projects. The city said no.

And as one of the developers of the new Dena'ina Civic and Convention Center, Rubini had to agree to pony up $2 million for any cost overruns. The city says the convention center was completed on budget, so didn't collect. Begich said he had no saying in picking Rubini, Hyde and their convention center development partners, who together will collect $3 million in fees on the project.

THE PARK SERVICE HEADQUARTERS

Begich has been a force in Anchorage politics for 20 years, since he was first elected to the Anchorage Assembly in 1988 as a baby-faced 26-year-old.

Early on, Begich made his money mainly off his vending machine businesses and East Anchorage apartment buildings that catered to low-income renters. After he became a real estate agent in the 1990s, his clients included friends, family, nonprofits, the Alaska Democratic Party -- and JL Properties.

Sometime around May 2002, in between stints in public office, Begich says one of the JL principals contacted him about buying real estate.

Rubini and Hyde were looking to buy land downtown to build a new Alaska headquarters for the National Park Service that they would then lease to the federal government.

Begich said he researched zoning, financing and other particulars for a number of downtown parcels but none of them worked out. Rubini and Hyde turned to a prime block at Fifth Avenue and C Street owned by an Anchorage businesswoman, Samantha DeLay-Wilson.

Begich said he was familiar with that parcel, across C Street from the Fifth Avenue Mall, and helped the developers put together the agreement to buy the land. Real estate agents must work under licensed brokers; Begich's broker was Dena Nading at Realty Executives.

Koniag Development Corp., the business arm of the regional Native corporation for Kodiak, joined with Rubini and Hyde to buy the then-vacant parcel, which was subdivided a few months later, with Koniag ending up with the southern half, state records show.

In the end, Begich said, the deal almost broke down. He said that was because the seller, DeLay-Wilson, wouldn't pay a commission to his broker at Realty Executives.

Neither DeLay-Wilson nor her agent in the deal, Clayton Halverson, remember that being a sticking point or a surprise.

DeLay-Wilson paid a commission of nearly $110,000 to the broker for her agent, according to a settlement statement and the people involved.

Rubini and Hyde eventually agreed to pay what Begich considered to be a reduced commission of $50,000 to his broker, Realty Executives.

Of that, Begich says, he was paid $22,500. He says he normally got a bigger share from his broker, but took a hit because of the lower commission. He contends that had he gotten what he expected, he would have made $77,000.

A SHARE OF THE CALAIS BUILDINGS

Some of the most serious questions about Begich's relationship with the developers arise from what happened next.

In December 2002, four months after the Park Service deal closed, Begich says JL Properties gave him an interest in a partnership that owned two Midtown office buildings, Calais Office Center and Calais Office Center II.

At the time, Begich wasn't in office but was debating whether to run for mayor the next spring. He had tried twice before and lost, including in 2000 to George Wuerch, the incumbent who was seeking a second term in 2003.

Begich says he really didn't know what he was going to do. He and his wife had just had a baby. She was busy with the retail shops she owns. He said he didn't make up his mind to run until days before the February 2003 filing deadline.

So why did the developers make Begich -- a former Assembly chairman and soon-to-be mayoral candidate -- a minority partner in the Calais buildings?

Built in the 1970s, they were once Anchorage's fanciest office buildings and still are considered premium space.

Begich put no money in, but was given a small interest in the partnerships: 1.153 percent interest in Calais, and 1.5408 percent in Calais II, according to documents he filed with the Alaska Public Offices Commission in 2005.

His explanation has changed over the last year. He first described the Calais interests as part of his commission for the earlier deal on the Park Service land, but more recently said he misspoke and that Rubini and Hyde gave him an interest because he's a "go-getter" who could attract tenants and bring them other deals.

And there was another misstep. For two years, he failed to list his interest in the Calais buildings on financial disclosure forms that are required for public officials and candidates.

So the public didn't know about his Calais shares when he was running for mayor in 2003 or for most of his first two years in office, including a point where he advocated for a rezoning sought by Rubini and Hyde.

Begich says the lapse was a simple oversight. He listed JL Properties twice as a real estate client on his 2003 disclosure, which covered the preceding year, but realized later, he said, that he should have also included his Calais interest. When he filed his 2005 report in February of that year, he sent in amendments to the two previous reports.

"There was nothing mysterious about it. There was no, you know, hidden reason. I just missed it," Begich said in a recent interview.

The deal became an issue in the summer of 2007, as Metcalfe and Begich each considered a run for U.S. Senate.

Metcalfe began circulating a document that raised questions about Begich, Stevens and Rubini. It touched on the National Park Service commission, a rezoning that doubled the value of land Rubini and Hyde were selling for a National Archives center, and a property tax break for military housing operated by the developers.

The missive led to a scolding letter from Rubini's lawyer, Jeffrey Feldman, to Metcalfe.

"The purpose of this letter is to advise you that this communication contains a great number of factual and legal errors, and is highly defamatory. On behalf of Jon, request is made that you refrain from further disseminating or publishing this material."

Metcalfe didn't stop. Both he and Begich ended up on the airwaves in 2007 talking about the various deals.

In an August 2007 interview with the Daily News, Begich tried to address the questions. He described the Calais shares as a belated commission for his work on the downtown National Park Service parcel.

"It was ... Calais I and II. The way those worked is that investment -- as I got it from Jon Rubini and Leonard Hyde, the basis of the value -- was given to me as part of my fee for my work for them. And I got it -- the value was around $25,000, when I originally got it," Begich said in the 2007 interview.

Daily News: They gave you ... a share of those two buildings as payment?

Begich: As part of it.

Daily News: Payment for what?

Begich: For working the deal. The block downtown.

Daily News: The Park Service deal?

Begich: Right. Remember, the Park Service deal -- we were just buying a lot.

A resulting Daily News post on the ADN politics blog marked the first time the Calais stake had ever been described as a belated commission.

In a Daily News story published a couple of days later, Bruce, the Rubini and Hyde spokesman, said the developers gave Begich the Calais shares because he was a go-getter, the same way Begich now explains it.

Under Alaska law, licensed real estate sales people can only accept commissions or other fees paid through a broker -- it is a criminal misdemeanor to accept payments directly.

'A POOR CHOICE OF WORDS'

This summer, Madsen, a friend of Metcalfe's who donated $1,000 to his Senate campaign, went before the Anchorage Assembly with a variety of concerns about Begich and his relationships with developers.

Madsen also filed a complaint with the Alaska Real Estate Commission contending the Calais deal amounted to an illegal commission because it didn't go through Begich's broker. Investigators there said they could not tell a reporter whether they had opened an investigation. Madsen said he's been told an investigation is active, but on hold while investigators work more pressing matters.

Begich said he was aware of what he calls a review by the Real Estate Commission, but thought Metcalfe made the complaint. At any rate, he said, anyone can bring such a complaint, even if they know nothing about what happened.

Metcalfe seized on Begich's depiction of the Calais deal too. During the primary campaign this summer, he began offering three-hour bus tours of alleged dirty deals around the city. He asserted the Calais stake was a masked bribe.

"Ray Metcalfe has been trying to destroy Mark Begich for two years," Begich's campaign spokeswoman, Julie Hasquet, said Friday.

In July, she defended the Calais arrangement as legitimate and said the commission went through Begich's broker, as required.

"Dispel my suspicions of bribery," Metcalfe challenged Begich in August on the KAKM-Channel 7 debate.

Begich shot back. He said Metcalfe's facts were wrong, the claims were outlandish, and that he was an open book.

"These questions, I've answered more than 100 times it seems," Begich told a public television audience on Aug. 20. He sounded matter of fact, even bemused, chuckling at one point when Metcalfe accused him of lying.

Then the story began to shift.

The next day, with the primary less than a week away, Begich wouldn't directly answer a Daily News reporter's "yes or no" questions about whether his Calais stake was a commission. He finally said, "It was a separate deal."

This month, in response to questions from the Daily News, Begich talked at length about the deal, and campaign officials provided documents.

Describing it earlier as a commission "was, in hindsight, a poor choice of words, owing, in part, to the fact that, as real estate agent, he had tended to refer to all compensation or income he received generically as 'commissions,' " the campaign said in written answers to questions. "While his use of the word commission and reference to the NPS sale may have generated some confusion, the way he has described the details about the two transactions always has remained the same."

In an e-mail, Hasquet said she also misspoke about the commission going through Begich's broker.

Begich said in an interview that he just assumed his Calais shares related to his hard work on the National Park Service real estate deal.

"Later I learned from them that basically, yeah, you're capable, go-getter, doer. They saw opportunity as having me as a ... small owner to the (Calais) building, that I would drive clients to it."

Last year, Begich said his Calais interest was worth $25,000 at the point he received it in 2002.

He now says it actually had no value when given. That's because it was a "deemed equity interest," not an ownership interest, he said. It wasn't a gift, he said. He hasn't explained why he previously said it did have value.

As Begich describes it, the arrangement could pay off in two ways: increased value as the buildings appreciated, and as income from the properties' cash flow.

He said he made a few thousand dollars a year off his Calais shares, until he cashed out.

A California retirement fund bought into the Calais buildings in 2006 and Begich and other small interest holders were bought out, he said. He made $53,430, according to check stubs from March 2006 that he provided.

He said he reported the money from Calais to the IRS as "unearned income" and paid taxes on it, and the IRS has never questioned it.

Begich never did bring in any tenants. He said he stopped practicing real estate when he started running for mayor in early 2003. His license is inactive.

Metcalfe's complaints didn't resonate with voters. On Aug. 26 , Begich pounded Metcalfe in the Democratic primary with 85 percent of the vote.

'I WOULD DO THIS FOR ANYBODY'

Just as Begich was a business partner of Rubini and Hyde, so was U.S. Sen. Ted Stevens. In fact, they both had financial ties at the same time, though in different real estate ventures.

Stevens' business and political connections to Rubini and Hyde are not secrets. His investments with the developers have been listed in Stevens' financial disclosures and he has talked about them in interviews. The ties were detailed in investigative stories by the Daily News, the Los Angeles Times and Anchorage Press in 2003.

During this year's campaign, however, other issues have overshadowed the connections. Stevens, once third in line to the presidency, is trying for his seventh full Senate term. But he's spent the past month in a Washington, D.C., courtroom, defending himself against charges of lying on Senate forms. He's accused of failing to disclose tens of thousands of dollars in gifts, mainly from Veco Corp.'s Bill Allen. The jury is still deliberating.

The criminal case doesn't involve any gifts related to Rubini. But prosecutors have been interested in the connection. In September, prosecutors subpoenaed records from the D.C. law firm that employs Stevens' wife, Catherine. They sought, among other things, any documents regarding Rubini or his Centerpoint LLC, which Stevens invested in.

Stevens used to say he was embarrassed by his meager assets compared with his millionaire colleagues. He once complained that voters didn't appreciate the financial sacrifices he made.

Then in 1997, his brother-in-law, Bill Bittner, suggested he invest with a friend, Rubini, who was creating a new real estate venture, the Daily News reported in 2003. Rubini and Hyde often brought in other investors as "a way of kind of sharing our success," Rubini once said. Rubini, Hyde, and real estate broker Stuart Bond each put in $200,000 to form JLS Properties. Stevens put in $50,000, according to news reports.

In 2000, with his investment already doing well, Stevens helped Rubini and Hyde with a problem. Another JL-led venture -- different from the group Stevens invested in -- was trying to win a bid to develop housing on Elmendorf Air Force Base. But after being told the group had won the bid, the Air Force got skittish about financing and the project stalled.

So Rubini called on Stevens for help, according to stories from 2003 that examined the relationship. In interviews then, Rubini said he was asking the senator to do what he'd do for any Alaska business.

Stevens said he saw it that way too.

"I would do this for anybody, anybody that was an Alaska concern that was treated this way," he told the Daily News in 2003.

Stevens said at the time that he urged the Air Force to move forward on something -- he thought the housing improvements would help shield Elmendorf from base closures. If JL's private project couldn't work, he said, the Air Force should go for conventional military housing.

Ultimately, Rubini and Hyde found a partner with experience in military housing, Hunt Building Corp., and won the bid.

Stevens had no investment in the military housing venture but his brother-in-law, Bittner, an Anchorage attorney, was one of the partners as of 2005, according to the last corporate filing available.

BEGICH'S ROLE IN BASE HOUSING

Begich also became involved in the same project -- in his case, with a property tax issue.

The JL-led military housing group protested its Anchorage tax bill in 2004 for the base housing. It also pushed a measure that year before the state Legislature to exempt private housing on a military base from local property taxes. Backers said that the military took care of roads, police and other essential services, and that without the exemption, needed private housing wouldn't be built on base.

An amendment to Senate Bill 136 by then-Sen. Gretchen Guess ensured local governments wouldn't be cut out altogether. It provided for "a payment in lieu of taxes."

Begich said he supported that compromise, which became part of the final bill.

"All I knew was that they weren't going to get away with paying nothing," Begich said.

Records show that municipal lawyers were concerned that if the city didn't accept a negotiated, lower payment, the JL-led group would likely challenge its property tax bill in court and had a 50-50 chance of winning.

In July 2004, Begich urged the Anchorage Assembly to sign off on such an arrangement with Rubini and Hyde's group.

The group now pays about half of what it would have in property taxes on the military housing. The settlement will save it hundreds of thousands a year and tens of millions over the 50-year life of the housing venture.

Stevens' initial investment allowed him to become a shareholder in other projects: Centerpoint, which soon included the gleaming green 10-story headquarters for Arctic Slope Regional Corp., and Centerpoint II, where Chugach Alaska Corp. now has its headquarters but which was vacant land when Stevens was part of it.

In 2004, tired of the scrutiny, Stevens sold his interest in all those ventures as well as in Jillian Square apartments, a Rubini and Hyde project in Fairbanks that he bought into in 1999.

His $50,000 investment in Rubini and Hyde's Anchorage projects swelled 17-fold in seven years, to $872,000, according to his financial disclosure form. His $50,000 interest in Jillian Square more than tripled in five years, to $166,000.

Stevens put the proceeds into a blind trust.

After the Los Angeles Times story in late 2003, Stevens asked the Senate Select Committee on Ethics to conduct a fact-finding inquiry into his dealings with Rubini and Hyde, the newspaper reported later.

The developers cooperated with the inquiry, providing documents during the spring and summer of 2005 , said Feldman, who represented JL Properties and its affiliates in the matter. In response to a request from the committee, the developers shipped the panel numerous bankers boxes of documents concerning Elmendorf housing and the Centerpoint ventures, he said.

The legal bill was in the tens of thousands, and about half was for copying expenses, he said.

The committee never took any public action regarding Stevens.

Rubini and Hyde also have cooperated with requests for documents involving Stevens from various federal agencies, Feldman said.

"Between the Senate Ethics Committee, the federal agencies, the Anchorage Daily News and the Los Angeles Times, there's been no small amount of scrutiny applied to these business affairs," Feldman said. "I kind of think if there's anything amiss, someone would have figured it out by now."

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Daily News reporter Kyle Hopkins contributed to this story. Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390.

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TOMORROW: A Rubini-Hyde project that involved both Stevens and Begich -- the unfinished National Archives facility in Midtown Anchorage.

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