Murkowski still sees no problem with 2006 Kenai land deal

It's a story familiar to most Alaska voters: In late 2006, U.S. Sen. Lisa Murkowski bought a 1.27-acre plot of land overlooking the salmon-rich Kenai River from Bob Penney, a developer and longtime friend of Murkowski's who gives heavily to congressional candidates. Though Murkowski and her husband paid $179,400 for the land, its appraised value according to the Kenai Peninsula Borough, critics said the sale was a "sweetheart deal" between a powerful lawmaker and a businessman looking to buy influence.

Sen. Lisa MurkowskiThat transaction would turn out to be a public relations nightmare for Murkowski -- one that continues to trail her nearly four years later as she faces an uphill (some say unwinnable) battle for re-election as a write-in candidate. Despite persistent criticism, Murkowski still insists she did nothing wrong -- but the incident has had a lasting impression on the way her critics portray her.

The Kenai land deal, which is the source of the most persistent criticism Murkowski has faced since she was elected to her first full term in 2004, became a symbol of her ties to the "good old boy" network, a perception that originated with her appointment to the Senate in 2002 by her father, then-Gov. Frank Murkowski. It also provided ammunition to her political rivals and fueled the anti-corruption sentiment that helped Sarah Palin beat Lisa's father, Frank Murkowski, in the 2006 race for governor. In a 2007 interview with the Anchorage Daily News, Palin distanced herself from Sen. Ted Stevens and Lisa Murkowski: "I am not buddies with Bob Penney. I don't go to that Kenai classic fishery thing, you know, I don't go hunting and fishing with Bill Allen. That's not my world."

The problem with the deal, and the reason it started making headlines in the summer of 2007, was that soon after Murkowski bought the land in December 2006, its 2007 appraisal came in at $214,900 -- an increase in value of nearly 20 percent -- and local realtors said since appraisals lag behind true market values, even that figure was laughably low. State and national press reported on the deal, and on July 25, 2007, a government watchdog group filed an ethics complaint against Murkowski accusing her of basically accepting a gift from Penney worth between $70,000 and $170,000 when she bought the land.

So on July 26, 2007, just four days before the FBI and the IRS raided the Girdwood home of U.S. Sen. Ted Stevens in search of evidence about his relationship with VECO Corp. CEO Bill Allen, and just as U.S. Rep. Don Young was facing questions about his $10 million Coconut Road earmark, Murkowski sold the land back to Penney. The land is currently worth $231,300.

Murkowski: Media ‘generated' controversy

But Murkowski said she still sees nothing wrong with the deal. She said she has known Penney, a major donor to her 2010 re-election campaign, "ever since (she) was a little girl living in Wrangell," and maintains the sale was just a private transaction between friends. The only reason she had to sell the land back, she said, was the ensuing media uproar. She also said she sees no similarities between her purchase of the Kenai land and Stevens' decision to have Allen renovate his home.

"You have to ask yourself the question if anything you're doing is worth the maelstrom in the press," Murkowski said in a telephone interview Monday afternoon. "In that respect, selling it back to Mr. Penney after we purchased it was the smart thing to do because it was not worth the controversy that was generated in the media."


Now Murkowski is in the midst of a re-election battle like no other. Defeated in the GOP primary by a surging Joe Miller, Murkowski is now running as a write-in candidate against Miller and Democrat Scott McAdams. Miller and McAdams supporters have repeatedly brought up the Kenai land deal in online discussions, blog posts and talk radio conversations as evidence that Murkowski can't be trusted.

McAdams declined to comment for this story, while the Miller camp didn't respond to a request for comment.

Penney, who attended the Senate ceremony at which Murkowski took the oath of office in January 2003, co-founded the Kenai River Sportfishing Association, which organizes a king salmon tournament that draws senators, lobbyists and businessmen from across the country. In 2003 Penney hosted the tournament's welcome dinner at his riverside home, which is directly upriver from the plot he sold (and then bought back) from Murkowski.

Members of the Penney family also contributed at least $7,500 to Murkowski in 2010, $11,700 in 2007, and $10,000 in 2003 and 2004, according to Federal Election Commission filings. And after VECO sold to CH2M Hill in 2007, Penney's Penco replaced the oilfield services company as Alaska's top congressional contributor.

Penney also had a relationship with Stevens. In 1998 the senator invested $15,000 to develop a Utah project with Penney, but by 2004 Stevens had grown so frustrated with the media's reporting on the deal that he sold his investment and put the proceeds in a blind trust. At the time Stevens told reporters his share had brought $150,000. In a January 2005 story about the sale, the Anchorage Daily News quoted Stevens as saying, "There's just no possibility of having any kind of investment of mine at home without bringing the wrath of the media on anyone that was involved in those investments."

Critics maintain Murkowski's deal with Penney was suspect

Ken Boehm is the co-founder of the National Legal and Policy Center, the nonprofit that filed the July 2007 ethics complaint against Murkowski. Boehm still thinks the sale smelled extremely fishy, though the Senate Ethics Committee decided not to pursue the complaint.

"The Murkowski land deal is a textbook example of a sweetheart deal between an elected official and special interests," Boehm said. "She bought the property for half its market value and promptly sold it back as soon as the sweetheart deal was exposed."

Boehm said Penney's connections to Stevens and the Utah investment strengthen his feeling that there was something untoward about the transaction between Penney and Murkowski.

"The person who had offered her this sweetheart deal had been involved with questionable dealings with Sen. Stevens for many, many years," Boehm said.

Murkowski was criticized in 2007 -- and continues to take flack to this day -- not only for buying the land, but for the way she handled the press and public reactions after the deal made headlines. The week before Murkowski sold back the land, her husband, Verne Martell, called a radio talk show host to defend the transaction. On air, he said that when they were considering the deal, Murkowski warned him, "This might come back to bite us," and he replied that they would deal with that when it happened. An Anchorage Daily News story that ran around the same time quoted Murkowski as saying she told Penney she couldn't buy the land from him because she knew him -- but he replied that she knew everybody in the state.

Anchorage Daily News columnist Michael Carey said he sees Murkowski's comfort with contributors like Penney as a sign of her comfort with the kind of good old boy politics practiced by Stevens and her father.

"If Lisa Murkowski loses this election, the biggest losers will be the lobbyists who have had routine access to her," Carey said. "Joe Miller has said 'I'm not business as usual,' and Lisa Murkowski is business as usual."

Murkowski repeated Monday that she doesn't think there was anything wrong with her buying the land from Penney or the price she paid him.

"If I felt that, I would not have moved forward with the purchase originally," Murkowski said.

The only problem with the sale, she said, was the way the media latched onto the story.

Contact Joshua Saul at jsaul(at)alaskadispatch.com.