The National Education Association Advocacy Fund released an ad on Wednesday, attacking GOP Senate candidate Dan Sullivan, for his role in a settlement that Alaska received for the state’s retirement trust funds while he was attorney general. Sullivan has touted his role in negotiating the settlement, which some have criticized as being too low. His campaign ran an ad recently, featuring a school teacher who said that the settlement helped Alaska teachers. Hence the NEA’s involvement on Sen. Mark Begich’s behalf and its pushback.
Also on Wednesday, the National Association of Teachers- Alaska (NEA-Alaska), the Alaska Professional Fire Fighters Association (AKPFFA), and Alaska Public Employees Association (APEA), held a press conference, criticizing the settlement.
A Begich campaign press release about that event included quotes from union members criticizing the deal. It also included a picture of a fake check for $91 million made out to a New York Law Firm with Dan Sullivan’s signature on it. The memo line of the fake check reads, “Money that should have gone to hard-working Alaskans.”
However, Alaskans from both sides of the aisle question whether the criticism is fair.
The backstory: Mercer Inc., a financial actuarial firm, knowingly gave bad actuarial advice to the managers of the Public Employees’ Retirement and Teachers’ Retirement Systems. The state’s suit was filed against the Wall Street firm in 2007. The Department of Law asked the Legislature in 2008 for $12 million to sue. It refused. Some members of the Legislature, including Rep. Mike Hawker and Sen. Bert Stedman weren’t sure that the state had a case. It’s like “suing the weatherman for a bad forecast,” Hawker said at the time. Both urged the Department of Law to hire a lawfirm on contingency.
Mike Barnhill, who was the assistant attorney general at the time and managed the case, hired the New York law firm who took it on contingency. This was before Sullivan’s tenure as AG.
Barnhill settled on the contingency terms. Initially, the lawyers were to get 25 percent. Eventually that was whittled that down to 18.5 percent, which was considered a good deal for Alaska at the time.
Sullivan, according to Barnhill and others, was also in charge of negotiating the final settlement of the suit in 2010. The state originally had been asking for $2.5 billion to $2.8 billion. After lawyers’ fees, the state got about $400 million, which went into the retirement trust funds. According to The American Lawyer, a nationally renowned legal publication, it was the largest actuarial malpractice settlement in U.S. history.
The Alaska Retirement Management Board, (ARM Board) which oversees the funds, was kept abreast of the settlement, and ultimately approved it. The ARM Board included members of unions, including Sam Trivette, who is on the national executive board of the American Federation of Teachers retirees and represented public employees. The chair of the board, Gail Schubert, is the head of the Bering Straits Native Corporation.
Mike Barnhill, the assistant AG who managed the case, declined to say what was talked about during executive session, when the details were revealed to the board in June, 2010. However, he said that the Department of Law treated the ARM Board like any other client, and that he “can absolutely assure the public that consensus was reached,” as it is with all clients.
Pat Galvin, a Democrat who was the Department of Revenue Commissioner at the time, also was a member of the board. He said in an interview on Wednesday that the case was complicated, not the least because it was a new area of law.
He said that he didn’t think the criticism leveled by Begich and the unions about the settlement is fair. “The ARM Board was the most affected by it and was the state entity that was in the position to object if they wanted to object. They could have come back and opposed it. They didn’t. We got more out of it than we ever expected to,” he said.
Galvin also noted that those who are criticizing the settlement now didn’t say anything about it then.
Years later, Sen. Johnny Ellis, D-Anchorage, called it “scandalously low.” However, shortly after it was settled, Sen. Hollis French, also a Democrat from Anchorage, called it “gratifying.”
Here’s the NEA ad:
Correction: The story originally said that the state got $500,000 after lawyers. The number was about $400,000.
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