Dermot Cole: Dunleavy bill on Russian ‘profiteering’ by financial companies is a slapdash campaign stunt

Reporting for Alaska

By Dermot Cole
For The Cordova Times

A new bill by Gov. Mike Dunleavy might appear to be an honest expression of indignation about private companies attempting to earn a profit in Russia despite the unprovoked attack on Ukraine.

But closer inspection shows that Senate Bill 235 is little more than a slapdash campaign ad, printed and promoted at state expense.

The Senate Finance Committee, which is to hear the fast-tracked bill Tuesday, is setting itself up to be complicit in this con job if the bill is not amended to deal strictly with Russian disinvestment.

Desperate as people are to do something about Russia and take a stand, a big part of this bill is as honest as a Putin press release.

The bill doesn’t mention oil and gas development in Alaska and the refusal of major banks to finance projects in the Arctic, the major factor in the Dunleavy drive to punish banks.

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Dunleavy has been complaining about the refusal of Goldman Sachs, JPMorgan Chase and other banks to finance Arctic oil and gas projects for years. He’s also been promising that he would do something, but hasn’t.

“We do a lot of business with Goldman Sachs. We’re gonna have to re-evaulate that, have a discussion with them,” Dunleavy said in December 2019 on Fox. “We are an oil state.”

He ordered the “removal of Goldman from business relations with the state” in cases where it would not cost the state money, according to a Dec. 20, 2019 letter from Mike Barnhill, then the acting revenue commissioner.

In February 2020, JPMorgan Chase joined the global campaign against bankrolling Arctic oil and gas investment.

JPMorgan, the biggest US bank, was the company that once employed Francis Dunleavy, the brother of Mike Dunleavy, who spent hundreds of thousands on the 2018 gubernatorial election.

On Feb. 25, 2020, Mike Dunleavy said that “Alaska has a right to not invest money in groups like” JPMorgan Chase.

Later that day, Jason Brune, Dunleavy’s commissioner of environmental conservation, complained about the Permanent Fund investing in JPMorgan and posted a photo on Twitter of the pieces of his JPMorgan credit card. “Speaking with my wallet, or rather, no longer with my wallet,” Brune said.

“Given the company’s recent actions, a change in the relationship should be expected going forward,” Dunleavy PR man Jeff Turner told the Anchorage Daily News.

Ten months later Dunleavy claimed he had a bill ready for the Legislature to get the state to stop doing business with any financial institution that refuses to finance oil and gas projects in Alaska.

“It makes no sense for Alaska to allow financial institutions to benefit handsomely from Alaska’s financial activities on one hand, while working against our interests on the other,” said Dunleavy on Dec. 14, 2020.

Refusing to do business with major banks as a political protest against private industry would force Alaska into more costly alternatives, but Dunleavy and his staff never admitted this in public.

It would also make state investments less profitable, another fact hidden from Alaskans. The governor would rather portray this as an attempt to punish banks, without providing any analysis of the real costs to Alaska.

Dunleavy never followed through on the big 2020 promise to introduce a bill targeting banks, probably because it would have meant that Alaska would no longer be doing business with any major U.S. or Canadian bank, all of which have joined the global campaign to refrain from Arctic oil and gas projects.

The Alaska Permanent Fund and the state’s retirement funds — which are where the real holdings of state money can be found — have hundreds of millions invested with the companies that oppose oil and gas investments in the Arctic and are on the Dunleavy enemies list.

So far, only the Alaska Industrial Development and Export Authority has taken steps to allegedly sever ties with companies on the enemies list, but the escape clauses built into the AIDEA plan include enough wiggle room to conceal the real impact and cost to Alaskans. It could all be a political show for the Dunleavy campaign.

That brings us up to the present and Dunleavy’s introduction of SB 235 last week.

On March 3, Bloomberg reported on Goldman Sachs and JPMorgan buying “beaten-down company bonds tied to Russia.” Based on this story, Dunleavy and his revenue commissioner, Lucinda Mahoney, concluded that both companies are “profiteering” off Russia and that Alaska should stop doing business with them.

Dunleavy’s bill defines profiteering as “taking advantage of the Russian Federation’s invasion of Ukraine to make an excessive or unfair profit, or otherwise seeking financial gain in the purchase or sale of Russian sovereign debt and the publicly traded securities of a Russian entity.”

What is “excessive or unfair profit”? The bill doesn’t say. The bill attempts to punish private companies, not for violating the law, but for behavior that the governor opposes.

Exactly how is the state going to enforce the profiteering provision? No one knows.

Another part of the Dunleavy bill calls for the state to unload its Russian investments as soon as possible. Those investments have lost about 95 percent of their value and can’t be sold because markets are closed.

If the state ever hopes to unload “publicly traded securities of a Russian entity,” it will have to find private companies to engage in the transaction, meaning that following one part of Dunleavy’s half-baked bill would require violating the purchase or sale provisions in the same bill. Unless, of course, Dunleavy expects that private financial institutions want to perform services for free.

There is also an escape clause in the bill that allows investment in Russia if the financial experts in state government conclude it’s in the state’s best interest.

The fiscal note for this bill is zero, not because there is a zero cost, but because no one knows how much it might cost the state to implement. That is something that should be nailed down in advance.

At times, Dunleavy admits that he wants to take aim at the banks for policies on climate change and Arctic oil development.

“Goldman Sachs and JP Morgan have stated they won’t invest in the Arctic, including in Alaska, but the companies are now pouncing on Russian corporate debt,” Dunleavy claimed on Facebook, attacking the companies for “trying to make a quick buck.”

Companies saying they won’t invest in Arctic oil and gas is not the same as saying they won’t invest in the Arctic, a distinction lost on Dunleavy.

Dunleavy’s bill would not apply to the Permanent Fund or the state retirement programs, presumably meaning that it’s fine for them to invest in companies trying to make a quick buck and engage in profiteering. This is a hypocritical position. If Dunleavy is serious about this bill, it needs to include those funds, which contain well in excess of $100 billion, and there must be a real analysis about the implications.

The bill says the state “may not conduct business with a financial institution that has been identified as profiteering from the Russian Federation’s invasion of Ukraine.” Excluding the major state financial holdings, of course.

Who is doing the identifying? Bloomberg News? NBC News? Dunleavy? Mahoney? Some guy on the street?

Goldman Sachs, the giant New York investment bank, is cashing in on the war in Ukraine by selling Russian debt to U.S. hedge funds — and using a legal loophole in the Biden administration’s sanctions to do it,” NBC News reported March 10.

Under the Dunleavy plan that identification should be sufficient for Goldman Sachs and JP Morgan to be banned from some state business—excluding the Permanent Fund or retirement plans—because they have been “identified as profiteering from the Russian Federation’s invasion of Ukraine” in news stories.

“There is nothing illegal about brokering Russian debt trades. In fact, the Biden administration gave investment firms a green light to trade in Russian assets,” NBC said.

Much of the language of this bill is more suited to a campaign press release than a state law. The Legislature should not treat this as a feel-good exercise to take a shot at Putin, but instead demand answers from the administration.

Reporting for Alaska is independent analysis and political commentary by Alaska reporter and author Dermot Cole. Cole wrote a daily column for the Fairbanks Daily News-Miner for 21 years and worked for the Alaska Dispatch News from 2013-2017. Support Cole’s independent column via PayPal or send checks to Dermot Cole, Box 10673, Fairbanks, AK 99710-0673.