State extends no-bid contract to company belonging to grandson of major pro-Dunleavy donor

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The state extended a sole-source contract to the company owned by the grandson of a top financial supporter of Gov. Mike Dunleavy’s election, despite questions from two lawmakers who say the deal smacks of political payback.

The one-year extension on July 1 allows Clark Penney, 34, a financial adviser with California-based Cypress Wealth Services, to continue providing economic development advice supporting the governor’s plan to grow investment in Alaska.

The Alaska Industrial Development and Export Authority contract pays Penney Capital, owned by Penney, $8,000 monthly, with a monthly travel allowance. It can be extended through mid-2022, with additional one-year extension options. The total cost was capped at $441,000.

Clark’s grandfather, Bob Penney, contributed more than $350,000 to a political group that supported Dunleavy’s election last year.

State officials say politics did not play a role in the contract.

“It is my understanding there is no connection between any election campaign and this Penney Capital, Inc. contract,” said Karsten Rodvik, spokesman with AIDEA.

The authority’s executive director, Tom Boutin, signed the contract on March 20, for an initial term ending June 30. Boutin extended the agreement one year because Penney’s company is meeting requirements and to “provide continuity of service," Rodvik said. Either party can terminate it with 10 days of written notice, Rodvik said.

Political blogger Jeff Landfield first reported on the contract in early May. At that point, at least some members of AIDEA’s board may have been unaware of the deal, according to emails obtained by the Anchorage Daily News through a public records request.

“This contract was not taken to the board for approval nor did it need to be, so you have not seen the contract,” Boutin told board members in a May 9 email, two days after the story broke.

The governor, Clark Penney and Boutin declined to be interviewed for this article. Boutin and Penney were two of several people listed as deputy treasurers on the governor’s election campaign.

Bob Penney said he had nothing to do with the contract.

“I knew nothing about it," he said. “It was written by others. That’s all I have to say."

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A variety of state projects

Boutin worked with staff at the Department of Commerce, Community and Economic Development to identify Penney as the appropriate contractor, Rodvik said. Commerce officials were involved in the contract creation and its extension, internal emails show.

The governor has made economic development a thrust of his argument for large budget cuts, asserting that a balanced budget and restricting taxes will help attract new investment.

Penney is providing consulting services to the governor’s New Industry Development Team, housed in Commerce, said John Springsteen, Commerce deputy commissioner.

The multi-agency team, comprised mainly of state officials, is working on the governor’s “Alaska is Open for Business” mission, he said in an email to the Anchorage Daily News.

Members include Springsteen, Amy Demboski, assistant Commerce commissioner; Shawn Williams, associate director at Commerce; Nelson San Juan, deputy commissioner at the Department of Labor and Workforce Development; and Greg Samorajski, deputy commissioner at the Department of Revenue.

The team is meeting with business groups and other organizations to find ways to attract investment, grow jobs, and remove barriers to doing business, said Springsteen, the AIDEA executive director until Boutin took the job in February.

Penney Capital “brings acumen in finance and economics, an investor network, diligence in providing services, and a background in matching sources of capital with growth-oriented ventures,” Springsteen said in the email.

Penney has worked in the financial services industry for 10 years, including with Morgan Stanley and Merrill Lynch.

Projects Penney has worked on since landing the contract include a plan connecting the Alaska and Canadian railroads, improving Internet services in Alaska, and drone manufacturing development, according to activity reports filed with AIDEA.

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He’s attended business conferences and been involved in “developing and expanding” a web site and videos highlighting the state’s lifestyle, among other tasks, the reports show.

Penney’s activity reports suggest he has played a leading role in the team. He calls himself the team’s managing director in those reports.

What led to Penney’s selection?

Commerce and AIDEA officials began creating the contract for Penney well before a waiver allowing the sole-source deal was sought, internal emails show. The contract was created with Penney’s input.

The waiver allowed AIDEA to avoid procurement procedures that typically require work to be advertised, allowing companies to compete.

The waiver justification asserted there’s an urgency to pursuing the governor’s economic development plans. Penney has rare and extensive experience connecting investors with business opportunities, it said.

Reps. Zack Fields and Jonathan Kreiss-Tomkins, Democrats co-chairing the House State Affairs Committee, have pressed the agency to explain the rationale for awarding the non-competitive deal.

The House committee has jurisdiction over the procurement issue, Fields said.

In a letter to Boutin and Julie Anderson, Commerce commissioner, the lawmakers said their concerns about the contract’s sole-source status are amplified by the Penney family’s relationship to Dunleavy’s election effort.

“The whole thing smells, but we’re still getting information," Kreiss-Tomkins told the Daily News.

Boutin said he has no “specific knowledge” about the "financial relationship” the lawmakers reference, according to a May 20 reply. He said he never met Bob Penney, and met Clark Penney earlier this year.

Boutin, in a June 6 reply to another letter from the lawmakers, said AIDEA could not identify another financial management company with the required abilities and such extensive credentials and contacts that could immediately start.

Fields said he wonders how the agency decided that, if it never advertised the work.

“There’s a lot of people in Alaska with economic development or investment sector expertise,” Fields said.

Weeks after lawmakers began pressing for answers, a Commerce budget official asked AIDEA if the contract had been extended yet, emails show.

Michele Hope, a contracting officer with AIDEA, said she thought AIDEA was going to let the contract expire on June 30, according to an email.

“I would imagine that we are to extend it but it is not my call," Boutin said in a June 27 reply to Hope, before later signing off on the extension.

Working before the contract was signed

Penney did some work before the deal was signed on March 20, and Boutin had originally proposed starting the contract on March 1, emails show.

Penney reports making “introductions” to venture capitalists at CERAWeek, an energy conference held March 11-15 in Houston, Texas, according to his April 1 activity report filed with AIDEA. Dunleavy also attended the conference, meeting with oil company officials and others.

“Given the fact that time was of the essence, the contractor began work prior to the contract being executed,” Rodvik said. “He did so, however, at his own risk knowing that he would not be paid if a contract was not executed. It is our standard practice to inform contractors of this risk.”

According to Penney’s disclosure report with the Securities and Exchange Commission, he worked with the Dunleavy administration in December, for 15 hours providing consulting services and fostering new relationships with the business community.

Penney did not have a contract with the governor’s office, said Lauren Giliam, a deputy press secretary for the governor.

Though Penney’s contract did not start until almost the third week of March, the state paid him for a full month’s work, at $8,000, records show.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.