Alaska News

Ethics complaint killed senator's Kenai land deal

More than three years after a land deal with a political supporter blew up in her face, Sen. Lisa Murkowski said there's little she would change about the real estate transaction.

The controversy began when Murkowski and her husband, Verne Martell, in 2006 bought Kenai riverfront property from Bob Penney, a longtime friend and major contributor to Alaska political campaigns. After a watchdog group filed an ethics complaint and the purchase caused an uproar, she sold the land back to Penney for its $179,400 purchase price.

At the time, Murkowski called her decision to give it back a heart-wrenching one, because she, her husband and their two sons are avid fishermen who had long sought a place on the Kenai River.

"I guess I've always known that I live in a glass house as a public figure, but I guess I'm not going to be living in a glass house on the Kenai River," she said in 2007.

Others weren't so sympathetic ­- many in real estate thought the price was well below market value and was a sweetheart deal for a 1¼-acre, undeveloped lot on the famed river. Just weeks after the purchase, the borough issued a 2007 assessment of $214,900. Local real estate experts said the land was actually worth even more, and would continue a steep appreciation.

The land deal was brought to light in July 2007 by the website Talking Points Memo, which raised questions after seeing unusual notations on Murkowski's financial disclosure forms.

Murkowski said she still doesn't think she did anything wrong in buying the property, saying only that it was the perception of the deal that damaged her.


"Hindsight is 20/20, and knowing the outcry, it was not something I would do again, knowing there are those who believe the public trust had been compromised," she said in a recent interview. "It's not worth it to be engaged or involved in something that causes a distraction from the real work at hand. That's what we learned from the whole distraction."

Murkowski critics have continued to raise questions about the deal throughout the campaign, and rival candidate Joe Miller himself brought it up during KTUU's televised debate on Sunday.

"You absolutely received, at a very much submarket price, a piece of property. You didn't disclose it on your federal disclosure," Miller said to Murkowski. (Murkowski didn't directly answer, but responded that Miller failed to turn in his own candidate disclosure form on time).

Penney, a real estate developer and sportfishing advocate, offered Murkowski and her husband land adjacent to his own property when he heard in 2006 they were looking for a place on the river. He said in an interview at the time that he sold them the land because they were among a select group of people he wouldn't mind having as neighbors. Penney was a longtime friend and occasional business partner with former Sen. Ted Stevens - they were partners in a Utah land deal that netted Stevens a handsome profit, and owned racehorses together along with other influential Alaskans.

The two also were heavily involved with the Kenai River Classic, a sportfishing event and political fundraiser that drew defense contractors, lobbyists and CEOs looking for an opportunity to mingle with Stevens and other senators.

Penney agreed to sell his land to Murkowski and Martell for $179,400, a purchase price based on the 2006 value assessed for tax purposes by the Kenai Peninsula Borough. Initially, Murkowski and Penney refused to disclose the purchase price or other details, but that changed as the controversy escalated - Martell even called a talk radio program to defend the purchase.

Murkowski said at the time that she had some trepidation about buying land from an old friend: "I remember saying, 'Oh yeah, but I can't buy a lot from you. I know you,' " she said in 2007. "And he said, 'Lisa, you know everybody in the state.' "

Murkowski had until then remained unscathed by the political scandals surrounding other Alaska political figures, but a watchdog group filed an ethics complaint against her after the land deal came to light. Nothing ever came of the ethics complaint, which Murkowski said was dropped after she explained it.

The land sale had other consequences. Murkowski decided to self-audit her past financial disclosure forms, and in 2008, Murkowski revised her financial disclosures going back to 2004 to clarify income from a building sale and to disclose income from the sale of her husband's pasta company. The Kenai resale was reflected on her 2007 financial disclosure form. She also filed an amended 2006 form describing the original mortgage on the Kenai land as a liability.

The same website that first uncovered the land deal later investigated $6 million in federal earmarks that Murkowski and the rest of the Alaska congressional delegation landed for a road near the Penney property. The investigation concluded that there was a community effort in place to get the road dating back to 2002, four years before Murkowski's purchase. It also found she would get no direct benefit from the road, since it didn't go directly from the property she and her husband bought to the main highway.