ANCHORAGE—United States Attorney Karen L. Loeffler announced today that two former members of the Alaska legislature pled guilty and were sentenced in federal court in Anchorage on charges of political corruption.
Peter Kott pled and was convicted of bribery concerning programs that receive federal funds, in violation of 18 U.S.C. § 666(a)(1)(B). Pursuant to the plea agreement, Kott was sentenced to 17 months in prison, the time he has already served, and placed on three years of supervised release with a curfew for the first 12 months. He was also ordered to pay a $10,000 fine. Victor Kohring was convicted of conspiracy to commit bribery concerning programs that receive federal funds, in violation of 18 U.S.C. § 371, and similarly sentenced to time he had previously served (12 months in prison) and placed on supervised release for a period of 18 months.
Both Kott and Kohring admitted to taking money from former VECO Corporation CEO Bill Allen during the 2006 legislative session and using their positions as state legislators to push for the adoption of what was known as the 20/20 PPT legislation that VECO wanted passed. As a major oil field services company in Alaska, VECO stood to profit greatly if the legislature agreed to the 20/20 PPT legislation leading to the construction of a new gas pipeline from the North Slope of Alaska.
Beginning in about 2005, the State of Alaska was involved in negotiations with representatives of the three major oil producers in Alaska concerning the construction of a natural gas pipeline from Alaska’s North Slope. On or about February 21, 2006, the governor of Alaska announced that he had reached an agreement with BP, Conoco Phillips and Exxon regarding the construction of a gas pipeline. This agreement included a significant change to the manner in which the state taxed the producers on oil production. Under the new agreement, taxes on oil production would be based upon a percentage of the producers’ net profits (instead of gross profits), and producers would also receive a tradable tax credit for capital investments. This new tax system was referred to as the petroleum production tax, or “PPT,” and under the agreement reached with the producers, the formula would be a 20 percent tax with a 20 percent tradable tax credit. This became known as the 20/20 PPT tax rate.
Shortly after reaching an agreement with the producers, the governor’s administration proposed a bill to the Alaska State Legislature that would adopt the 20/20 PPT tax rate into law. This legislation was referred to as the PPT legislation, the 20/20 PPT, or the Governor’s bill, and it was initially considered by the Alaska State Legislature in 2006 as Senate Bill 305. If the Alaska State Legislature did not adopt this legislation and approve the new 20/20 PPT tax rate, then the agreement concerning the construction of the natural gas pipeline would not take effect.
On February 23, 2006, Kohring accepted $1,000 in cash from Bill Allen during a dinner at the Island Pub in Douglas, Alaska. Kohring knew that Allen was intending to influence his votes and other official actions, and Kohring took the money intending to be rewarded and knowing and understanding why Allen gave it to him. Kohring subsequently took steps to assist Allen and VECO VP Rick Smith reach the goal of the conspiracy, which was to have the legislature pass the 20/20 PPT legislation. He spoke to his fellow legislators about the 20/20 PPT, and provided information to Allen and Smith about how he expected people to vote.
On March 30, 2006, Kohring again met with Allen and Smith and asked if they could help him with a $17,000 credit card debt that he owed, and that he told them could hurt him politically if it was not paid and became public. During that meeting, Allen gave him additional money and he accepted it.
Between January and the end of August 2006, Kott corruptly solicited and agreed to accept over $7,900 in monetary payments and a promise of future employment from Allen, Smith and VECO. Specifically, Kott solicited and accepted $7,993 from Allen in the form of a false invoice and fabricated payment to Kott’s hardwood flooring business. He also solicited the promise of a future job from Bill Allen that he knew Allen and VECO could arrange. Kott solicited and accepted these things intending to be influenced and rewarded in connection with his official acts as a member of the State Legislature related to the PPT legislation, Allen and Smith also arranged for a political poll for Kott that was paid for by VECO at a cost of $2,700, and Allen gave Kott $1,000 in cash on another occasion. In exchange, Kott took direction from Allen and Smith on how to vote on various amendments to and versions of the PPT legislation that were considered by the State House in 2006, he lobbied his fellow legislators to do the same, and he provided Allen and Smith with information about the status of projected outcomes of House votes on various versions of this legislation.
With the conclusion of these two prosecutions, a total of six former State of Alaska legislators have been convicted as part of the Polar Pen corruption investigation, including former State Senator John Cowdery and former State Representatives Tom Anderson, Beverly Masek, and Bruce Weyhrauch. In addition, VECO executives Allen and Smith, businessman Bill Weimar, and businessman and lobbyist William Bobrick were also convicted of felony charges arising out of the investigation—a total of 10 convictions.
United States Attorney Karen L. Loeffler noted that a message has been sent, that Alaskan citizens deserve a clean and open political system. Corrupt politicians and those who seek to benefit from corrupt politicians will not be tolerated.
The prosecutions of Kott and Kohring were the result of an investigation conducted by the Federal Bureau of Investigation.
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