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Emails show collaboration between legislator, developer on Anchorage office deal

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  • Updated: September 28, 2016
  • Published October 31, 2015

New documents in the citizen lawsuit challenging the Alaska Legislature's Anchorage office lease show that a lawmaker used his private email account to collaborate with the building developer and counter a legislative attorney who said the deal may not comply with state law.

The documents show Rep. Mike Hawker, an Anchorage Republican, trying to devise a strategy with developer Mark Pfeffer to make the deal for the renovated office space conform with state law. And they show Hawker openly mocking legislative staff who questioned the deal's legality and cost.

Emails obtained through the legal process by attorney Jim Gottstein show Hawker using his personal email account to correspond with the developer. Hawker received one message with a subject line that starts with: "BACK CHANNEL."

Hawker also congratulated Pfeffer two days after a legislative meeting for a "magnificent presentation" in a message that celebrated the deal's progress in spite of legal and cost concerns raised by a pair of legislative employees.

"I don't see anything that Pam or Gardner can do now to derail this," Hawker wrote in an email to Pfeffer, referring to Pam Varni, the director of the Legislative Affairs Agency, and Doug Gardner, the Legislature's chief lawyer. "Not that they will not try."

Hawker said in a brief interview this week that he was unfamiliar with the court filings but had been trying to work through legal concerns raised by two groups of lawyers. He declined to comment further.

"You just don't talk about that because it's in litigation," he said.

Varni and Gardner both declined to comment.

In a prepared statement, an attorney for the developers of the office space, Jeffrey Robinson, said that the court should bar Gottstein from "his continued attempts to shamelessly (and publicly) mischaracterize the facts and pending legal issues involved in this case."

"To selectively distribute and mischaracterize information, including the emails Mr. Gottstein routinely publishes, has all the appearance of a partisan political agenda, but does nothing to contribute to an honest resolution of a legal dispute," the statement said.

Robinson has also argued in legal filings that access to the developers' financial information should be limited in part because of Gottstein's role in a past case involving the antipsychotic drug Zyprexa. In that case, a judge found in 2007 that Gottstein conspired with a New York Times reporter and a doctor to obtain and publicize documents about the controversial drug, which has been linked to weight gain and diabetes.

No-bid lease extension

Gottstein, who owns a building adjacent to the legislative offices in downtown Anchorage, filed his suit in March. He says his building was damaged during the renovation, but he also argues that the Legislature's lease was illegal and too expensive and should be invalidated.

"The project was obviously illegal from the very beginning," he said in a phone interview this week.

Lawmakers considered canceling the lease earlier this year, but backed away and now are exploring a purchase of the Anchorage office space, which critics have mocked as the "Taj Mahawker" because of Hawker's role in promoting the deal. Pfeffer and Hawker negotiated the no-bid lease extension, which left the state paying $4 million in annual rent, up from $680,000 last year before the building was renovated.

Alaska law allows state leases to be extended for up to a decade, but only if they result in the state paying at least 10 percent below market value as established by an appraisal or a real estate broker's opinion of value.

Hawker has maintained that the Legislature's new rent is below market value. But that was based on an appraisal done by Timothy Lowe on behalf of the Alaska Housing Finance Corp., which lawmakers asked to evaluate the deal.

Lowe, whom Pfeffer suggested to AHFC and who has worked for the developer before, said the office space lawmakers needed was too specialized to compare to other buildings, much like a church or a courthouse. Lowe's appraisal ended up using the renovated office building itself as a reference point -- a method Lowe said was common -- and determined its lease was 13.5 percent less than market value.

However, a retired commercial broker, Larry Norene, determined in an analysis he prepared on his own that the state would pay more than $7 per square foot each month for its new space, compared to other high-end office spaces downtown that go for $2 or $3 per square foot. Norene's calculation of useable office space was 15 percent lower than the figure claimed in the lease, with Norene deducting the thickness of walls, mechanical spaces, and elevator shafts. (Gottstein cites an affidavit from Norene in support of his case.)

The new emails were produced as exhibits to a court filing Tuesday by Gottstein through his company, Alaska Building Inc. They're based on his review of 8,000 pages of documents he received during what's called the discovery process, in which the parties in a civil lawsuit can request evidence from each other.

Messages showing Hawker using his personal email address were included in documents provided to Gottstein by the developers' company, 716 West Fourth Avenue LLC. One showed Hawker forwarding an email from his legislative account to his personal account before corresponding with Pfeffer.

Under state policy, Alaska officials are required to use the state's email server, which archives messages as public records. It's unclear, though, whether legislators must follow the policy, which was established for executive branch employees. The use of private emails for official business has become a national issue, most recently over Hillary Clinton's use of her personal email account while she was secretary of state.

In his lawsuit, Gottstein quotes from the new documents in an argument opposing a request by the developers' company to block his claims for punitive damages, which can be awarded with proof of "outrageous" behavior or "reckless indifference to the interest of another person." He's also asking for a whistleblower reward: 10 percent of any savings to the state if the lease is ultimately invalidated.

The company and the Legislature, citing Gottstein's own sworn statements, say in their filings that the attorney has "literally no legal support for this novel claim" for the 10 percent, which could amount to $2 million.

The U.S. False Claims Act, dating back to Civil War profiteering, allows whistleblowers to claim up to 25 percent of an award or settlement when the federal government wins a fraud lawsuit against a contractor. The law has no legal effect in state court, but Gottstein, in his sworn statement, said that the award of 10 percent savings is "a way to make real the citizen taxpayers' right to bring actions on behalf of the government to stop government -- illegal government action."

Gottstein's filing argues that Hawker and Pfeffer pressured Varni and Gardner, the two legislative employees, to accept the project in spite of their objections, and it asserts that Pfeffer's company knew the lease extension was illegal.

The emails cited include a series of messages from July 2013. An attorney working with the building's developers, Don McClintock, began by describing a conversation with Gardner, the Legislature's lead attorney, that was "a little rocky."

Gardner, McClintock said, was "quite dug in with his theory" that the lease extension must be 10 percent below market value. McClintock wrote that he and another attorney for the developers "fundamentally are not confident" that the deal could be done under the law that sets the 10 percent standard.

The developers' lawyers were instead pushing a deal that relied mainly on approval from the full Legislature and that sidestepped the section of state procurement law that Gardner was focused on -- a vote of the Legislature can override other laws. But Gardner was skeptical because he thought Hawker's colleagues had only given him authority to negotiate the deal if it came in 10 percent below market value.

Pfeffer forwarded McClintock's email to Hawker, writing, "Let's discuss."

"Crap," responded Hawker. "I need to get back and deal with him again," Hawker said, referring to Gardner. "Double crap. I hate lawyers."

The next day, Pfeffer forwarded Hawker an email from another attorney describing the same conversation with Gardner. Gardner, Pfeffer wrote in his cover note, is only looking at one aspect of the deal -- the 10 percent rule -- "but he needs to be brought along other ways."

"Anyway, don't stress out over this," Pfeffer said. "We'll get there."

Gottstein's court filing cites more emails over the following two months that show Hawker still working with Pfeffer to respond to the legislative employees.

Criticism and defense of the lease

In August, Varni, the legislative affairs director, sent Hawker her comments on a proposed lease extension. She noted that as written, it would be the most expensive state lease in Anchorage and would be "by far the most expensive of any previous proposals" over three decades.

She included a previously unpublicized legislative report showing four other Anchorage sites with cheaper legislative office space, including one that would have cost less than a fourth of the proposed cost of the renovated building on Fourth Avenue.

The costs of the other spaces were based on when the Legislature was considering them during earlier searches.

Hawker has maintained the no-bid lease extension was necessary because the Legislature's existing lease expired in May 2013 and lawmakers hadn't received any suitable responses to a public request for information about available real estate.

According to the excerpts in Gottstein's filings, Hawker first forwarded Varni's email from his state account to his personal account, then he appears to have sent it to Pfeffer. Pfeffer responded that he would "dig into" Varni's comments, identify all the "math errors and bad assumptions," then consult with an employee at AHFC.

If the AHFC employee agreed with him, Pfeffer wrote, "they can produce the memo that settles up the issues. Jeez! And double Jeez!"

"I'm a little bit pissed off that I am having to spend several hours responding to a work product that is frankly 'GARBAGE,'" Pfeffer wrote in another email the next day.

In a subsequent series of messages in early September, Hawker, Gardner, Pfeffer and an AHFC employee exchanged notes on proposed revisions to the lease.

After a message from Gardner with comments on a draft lease, Hawker emailed Pfeffer and one of the developers' attorneys, as well as an AHFC employee, to ask: "How are we doing with Gardner?"

"This note made me worry a bit," Hawker said. "Do we need to plan another sit down?"

"Standby on this Mike," Pfeffer responded. "I'm working on it."

A few days later, Hawker responded to another series of emails addressing revisions to the lease.

"Thanks all for the extra hours," he wrote Pfeffer and two AHFC employees. "I apologize for the obstructionist on my side of the table."

— Alaska Dispatch News reporter Lisa Demer contributed to this story.

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