Lisa Murkowski


Personal Information:

Name: Lisa Murkowski
Bar: Alaska
ID No: 8711098
Status: Inactive

Allegations:

Unethical Purchase of Kenai River-front Property

In 2006, Senator Lisa Murkowski purchased a parcel of river front property on the Kenai River,Alaska, from real estate developer and political contributer Bob Penney. Senator Murkowski paid Mr. Penney $179,400.00 for the property which was the 2006 assessed value of the property as determined by the Kenai Assessor’s Office. As shown by the known facts, Senator Murkowski, with the assistance of Mr. Penney, purchased this property for a price that materially – demonstrably – well below the true and actual fair market value of the property. Accordingly, her participation in this transaction is improper and unethical for a number of reasons.

A proper analysis begins with section (a) of AS29.45.110. Full and True Value which provides that

The assessor shall assess property at its full and true value as of January 1 of the assessment year, except as provided in this section, AS 29.45.060, and 29.45.230.

Section (a) then defines ‘full and true value’ as the value that

…is the estimated price that the property would bring in an open market and under the then prevailing market conditions in a sale between a willing seller and a willing buyer both conversant with the property and with prevailing general price levels. [Emphasis supplied.]

Accordingly, the Kenai Assessor’s Office estimated that, on January 1, 2006, the property would bring $179,400.00 in an arm’s length transaction in the then prevailing market conditions.

Brandon Loomis and Erika Bolstad report report in the Anchorage Daily News that Senator Murkowski provides the defense “that she believed she paid a fair price, $179,400, for 1.27 acres next to Penney’s river front home[,]” stating:

“By law in the state of Alaska, the municipalities are required to base their assessment on the fair market price,” Murkowski said. “That’s what our statute says. What we went off of, what we utilized as our transaction price, was the price that had been set by the municipality.”

This justification is half-hearted, unreasonable and baseless because Senator Murkowski fails to address the then prevailing market for Kenai River-front lots. At the time of the transaction, the prevailing market conditions at the time of the 2006 assessment, the date of the transaction and the 2007 assessment was in fact a strong seller’s market: Again from Loomis and Bolstad:

Real estate professionals on the Peninsula and beyond say sellers sometimes base property price on the assessed value, though they are not an accurate reflection of values in areas where prices are escalating rapidly. Kenai River lots have steadily increased in value, and the assessed value on the lot in question has more than quadrupled since 2001.

Little property on the world-class salmon river is available, and what has gone on the market rapidly rises in value, said Judy Cloud, a Kenai agent and president of the Alaska Association of Realtors. “If you are able to get it at assessed value, that’s a wonderful thing,” she said.

Cloud said such transactions happen at times, especially between friends, and if she had been in Murkowski’s place she would have bought the land. She said it’s unfortunate for Murkowski that she has a high profile and the deal is under scrutiny.

“If I had been offered that deal I probably would have taken it too,” she said. “A person would be pretty silly not to if they were offered something like that.”

Unfortunately for Ms. Cloud’s real estate portfolio, she is not the junior Senator from Alaska. This seller’s market is also confirmed by none other than Mr. Penney, the seller, in his testimony at an Alaska state hearing on the economic impact of the sport fishing for salmon on this particular stretch of the Kenai River:

The economic value of the land along the Kenai River privately held from Skilak to Ames bridge; three years ago the assessed value to the borough of only the privately owned land was three hundred and thirty-five million dollars. As Mr. Busey just said to you, it’s increased since then. Now, I know it’s well over five-hundred, but we haven’t seen what the borough’s assessed it. But gentlemen and ma’m [sic], all that assessment in value came from one reason; cause there’s fish in the river. And you put the fish in the river, and you put the fish in the inlet, and you give the opportunity for the public you’ll see the economic engine run hard. Penney Told Different Story At Sports Fishing Hearing, Laura McGann, TPMMuckraker, July 20, 2007

It was in this strong seller’s market that the Kenai Assessor’s Office determined the property’s 2007 assessment, estimating that the property’s value had appreciated from $179,400 on January 1, 2006 to a value of $214,900.00 on January 1, 2007, a $35,500.00 – or 20% – increase.

Under these market conditions, it is also unfortunate for Senator Murkowski that Ms. Cloud is not the junior Senator from Alaska because the sale did not take place until December 29, 2006, nearly one (1) full year after the valuation date of the 2006 assessment on which Senator Murkowski bases her claim that she paid full value for the property. This is not a coincidence. December 29, 2006, is the very last business day of the year in which Senator Murkowski could delay the transaction and still close the sale before January 1, 2007, the date on which the Kenai Assessor’s Office would again estimate the property’s value.

In her half-hearted defense “that she believed she paid a fair price, $179,400, for 1.27 acres next to Penney’s river front home[,]” Senator Murkowski is asserting that she used the 2006 Kenai Assessor’s Office assessment to set the value of the property. In asserting this defense, Senator Murkowski’s is necessarily claiming that the she honestly believed, not only that the property was worth $174,000.00 on January 1, 2006, on December 29, 2006 and on each and every of the 360 days between those dates, but also that the value of the property, after 362 days of price stagnation, suddenly appreciated and that by January 1, 2007, a mere three (3) days after the sale, the value of the property dramatically spiked by 20% – an increase of $35,500.00 – to its 2007 assessed value of $219,900.00. Without suspending rational thought, this defense simply does not withstand legitimate scrutiny.

Although the Kenai Assessor’s Office’s 2006 and 2007 assessments while conclusively demonstrate that Senator Murkowski received an improper gift of $35,500.00, these assessments merely set the gift’s minimum value. Loomis and Bolstad continue:

Art Clark, a broker and president of the Anchorage Board of Realtors, said he advises clients not to base prices on assessed values. Assessments don’t generally reflect actual values, especially where prices are either rising or declining, he said.

“Assessed value in my estimation here in Anchorage is given marginal consideration. The actual value of the property is going to be above or below that, sometimes 10 to 20 percent,” Clark said.

“I try to discourage people from looking too closely at assessed value when they’re making a decision about what to ask or what to offer.”

Laura McGann, reporting for TPMMuckraker.com, explains that actual sales of comparable property along the Kenai River shows that the actual value of the improper gift is in excess of $100,000.00:

Based on the $179,400 Murkowski paid for the wooded lot versus the $300,000 locals and real estate agents say the land is worth, she received a gift of at least $120,000. An editorial in the Anchorage Daily News today said she could have only paid a third of what Penney could have fetched had he listed it. U.S. Senators, Just Like You and Me, Laura McGann, TPMMuckraker, July 19, 2007.

As further explained on the editorial page of the Anchorage Daily News:

Three days after the borough recorded the Murkowskis’ purchase, the assessed value went up to $214,900. So right off the bat, it looks like she got a discount of 20 percent.

In fact, her friendly political discount was probably far bigger. The online real estate listing service for Alaska has one Kenai river front lot. The parcel is only one acre — a quarter of an acre less than Sen. Murkowski’s — but the asking price is $399,000. Per acre, that’s almost three times what the senator paid for hers.

* * *

In the Kenai River land sale, Sen. Murkowski “paid what she thought was a fair price for it at the time, based on what the borough said it was worth,” according to spokesman Sweeney.

That defense just doesn’t wash. It’s well known at the Kenai borough that its assessments lag behind market prices. Anyone who sells Kenai River real estate at the assessed value is either a fool or doing somebody a favor. Anybody who buys it at assessed value knows — or should know — she is getting a sweet deal.

When discussions about the price of this deal began, Sen. Murkowski should have offered to pay the going rate. Instead, she accepted a personal favor worth tens of thousands of dollars. It’s a disappointing turn of events for a senator who had until this point served Alaska well.

See also Senator’s land deal scrutinized, Brandon Loomis, Anchorage Daily News, July 19, 2007.

Finally, Senator Murkowski herself recognized the impropriety of this transaction:

Murkowski’s husband, Verne Martell, ran through how he and his wife came to buy the property from millionaire real estate developer Bob Penney with radio show host Rick Rydell last Wednesday. Martell said that when it came time to sign the paperwork, Murkowski still had some reservations about it.

“But yeah, when we signed the loan, Lisa signed on it and said, you know, this might come back to bite us. Well, you know, we’ll deal with that when it comes,” Martell said.

Murkowski’s Husband Fears Ethics Investigation, Laura McGann, TPMMuckraker, July 23, 2007.

In addition to admitting the impropriety of the transaction to her husband, Senator Murkowski tried to conceal the true nature of this transaction by omitting the transaction from disclosure reports required by §102 of the Ethics in Government Act of 1978. See On Land Deal, Murkowski takes the Personal out of Financial Disclosure, Richard Allison, Sunlight Foundation, July 16, 2007 and Complaint to U.S. Senate Select Committee on Ethics, National Legal and Policy Center, July 24, 2007.

Supporting Links:

AS29.45.110. Full and True Value

U.S. Senators, Just Like You and Me, Laura McGann, TPMMuckraker, July 19, 2007

Lisa’s deal, Editorial, Anchorage Daily News, July 19, 2007

Senator’s land deal scrutinized, Brandon Loomis, Anchorage Daily News, July 19, 2007

Sen. Murkowski defends price paid for Kenai land, Brandon Loomis and Erika Bolstad, Anchorage Daily News, July 20, 2007

Murkowski Sticks To Story On Land Price, Laura McGann, TPMMuckraker, July 20, 2007

Penney Told Different Story At Sports Fishing Hearing, Laura McGann, TPMMuckraker, July 20, 2007

Murkowski’s Husband Fears Ethics Investigation, Laura McGann, TPMMuckraker, July 23, 2007

Ethics complaint targets Murkowski land deal, Richard Mauer and Brandon Loomis, Anchorage Daily News, July 26, 2007

Rule Violated:

Rule 8.4. Misconduct, sections (a)-(c)

Failure to Properly Report Transaction on Senate disclosure forms

“A few weeks ago, Murkowski’s spokeswoman shared a similar sentiment when explaining why the transaction was no where to be seen on her Senate disclosure forms.” TPMMuckraker

In addition to allegations of unethical conduct due to the well-below-market sales price, Senator Murkowski’s involvement in this transaction has also spawned a complaint to the United States Senate Select Committee on Ethics, by Ken Boehm, chairman of the conservative-leaning National Law and Policy Center of Falls Church, Virginia,

also charge[s] that Murkowski filed false information about the land deal on her [2006] annual financial disclosure and obtained special treatment on a mortgage from the Ketchikan bank where her sister serves as a director.

* * *

Murkowski’s office had said the purchase didn’t have to be disclosed on her 2006 financial report because it was exempt personal or recreational property. Boehm said Murkowski might be correct that she didn’t have to list the land as an asset, but she still had to disclose the transaction separately, yet failed to do so.

The mortgage for the property is yet another issue, Boehm said Murkowski and Martell took out a loan for 80 percent of the purchase – $136,561 – from First Bank in Ketchikan. The Murkowski family has long been associated with that bank. Lisa once sat on the board, and her sister, Eileen Van Whye, is a shareholder and director.

A deed of trust filed with the Alaska recorder’s office securing the note doesn’t expire until Jan. 1, 2046 – a 39-year term. When Murkowski listed the mortgage in her 2006 disclosure, she described it as a 15-year note. The president of the bank, Bill Moran, said in an interview Wednesday that it was actually a two-year note. Citing privacy, he declined to provide the document.

Quoting from media reports, Boehm said the bank would normally write a mortgage of a maximum seven years for that kind of transaction. “It appears that Sen. Murkowski received loan terms not available to the general public,” Boehm charged.

See Ethics complaint targets Murkowski land deal, Richard Mauer and Brandon Loomis, Anchorgage Daily News, July 26, 2007

As reported at the Sunlight Foundation by attorney Richard Allison, Senator Murkowski’s failure to report the transaction

However, as Ken Boehm of the National Legal and Policy Center notes in McGann’s piece, the rules for transactions don’t seem to exempt undeveloped pieces of property held for recreational or personal purposes:

The purchase or sale of property used solely as a personal residence (including a secondary residence not used for rental purposes) of the reporting individual or spouse and transactions solely by and between the reporting individual, spouse, or dependent children need not be disclosed. Likewise, the opening or closing of bank accounts, the purchase or sale of certificates of deposit, and contributions to or the rollover of IRAs and other retirement plans need not be reported.

I decided to take a look at the provisions of the Ethics in Government Act of 1978 itself (the relevant portion of which is online here), which tells us, relative to transactions:

§ 102. Contents of reports

(a) Each report filed pursuant to section 101 (d) and (e) shall include a full and complete statement with respect to the following:

***

(5) Except as provided in this paragraph, a brief description, the date, and category of value of any purchase, sale or exchange during the preceding calendar year which exceeds $1,000—

(A) in real property, other than property used solely as a personal residence of the reporting individual or his spouse; or
(B) in stocks, bonds, commodities futures, and other forms of securities.

Reporting is not required under this paragraph of any transaction solely by and between the reporting individual, his spouse, or dependent children.

That would seem to indicate a pretty air tight requirement to report the sale — even if Murkowski is living in the woods, I don’t think that would qualify as a personal residence.

On Land Deal, Murkowski takes the Personal out of Financial Disclosure, Richard Allison, Sunlight Foundation, July 16, 2007

Supporting Links:

On Land Deal, Murkowski takes the Personal out of Financial Disclosure, Richard Allison, Sunlight Foundation, July 16, 2007

Complaint to U.S. Senate Select Committee on Ethics, National Legal and Policy Center, July 24, 2007

Ethics complaint targets Murkowski land deal, Richard Mauer and Brandon Loomis, Anchor gage Daily News, July 26, 2007

Rule Violated:

Rule 8.4. Misconduct, sections (a)-(c)

Grievance Information: Alaska

Bar Home Page: Alaska Bar Association

Main Grievance Page: Alaska Bar Association Ethics & Discipline

Ethics Rules: Alaska Rules of Professional Conduct

Alaska Bar Rules Part II – Rules of Disciplinary Enforcement

Complaint Form: Attorney Grievance Form – Alaska Bar Association (.pdf)

Attorney Search: Alaska Bar Association Membership Directory

Updated 10-30-08 to correct title of second allegation.

Text of, and selected comments to, Rules of Professional Conduct Violated by Lisa Murkowski:

Rule 8.4. Misconduct

It is professional misconduct for a lawyer to:

(a) violate or attempt to violate the rules of professional conduct, knowingly assist or induce another to do so, or do so through the acts of another;

(b) commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects;

(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation;

(d) state or imply an ability to improperly influence a government agency or official; or,

(e) knowingly assist a judge or judicial officer in conduct that is a violation of applicable rules of judicial conduct or other law. (SCO 1123 effective July 15, 1993)

ALASKA COMMENT

Paragraph (d) of the ABA Rules was omitted because it is too vague. See the ABA Legal Background Section. All improper conduct is already regulated under the other rules.

COMMENT

Many kinds of illegal conduct reflect adversely on fitness to practice law, such as offenses involving fraud and the offense of willful failure to file an income tax return. However, some kinds of offense carry no such implication. Traditionally, the distinction was drawn in terms of offenses involving “moral turpitude.” That concept can be construed to include offenses concerning some matters of personal morality, such as adultery and comparable offenses, that have no specific connection to fitness for the practice of law. Although a lawyer is personally answerable to the entire criminal law, a lawyer should be professionally answerable only for offenses that indicate lack of those characteristics relevant to law practice. Offenses involving violence, dishonesty, or breach of trust, or serious interference with the administration of justice are in that category. A pattern of repeated offenses, even ones of minor significance when considered separately, can indicate indifference to legal obligation.

A lawyer may refuse to comply with an obligation imposed by law upon a good faith belief that no valid obligation exists. The provisions of Rule 1.2(d) concerning a good faith challenge to the validity, scope, meaning or application of the law apply to challenges of legal regulation of the practice of law.

Lawyers holding public office assume legal responsibilities going beyond those of other citizens. A lawyer’s abuse of public office can suggest an inability to fulfill the professional role of attorney. The same is true of abuse of positions of private trust such as trustee, executor, administrator, guardian, agent and officer, director or manager of a corporation or other organization.

Rule 9.1. Definitions

(a) “Belief” or “believes” denotes that the person involved actually supposed the fact in question to be true. A person’s belief may be inferred from circumstances.

(b) “Client” denotes a person, public officer, or corporation, association, other organization or entity, either public or private, who is rendered professional legal services by a lawyer, or who consults a lawyer with a view to obtaining professional legal services.

(c) “Consult” or “consultation” denotes communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question.

(d) “Firm” or “law firm” denotes a lawyer or lawyers in a private firm, lawyers employed in the legal department of a corporation or other organization and lawyers employed in a legal services organization. See Comment, Rule 1.10.

(e) “Fraud” or “fraudulent” denotes conduct having a purpose to deceive and not merely negligent misrepresentation or failure to apprise another of relevant information.

(f) “Knowingly,” “known,” or “knows” denotes actual knowledge of the fact in question. A person’s knowledge may be inferred from circumstances.

(g) “Matter” includes any judicial or other proceeding, application, request for a ruling or other determination, contract, claim, controversy, investigation, charge, accusation, arrest, negotiation or other particular matter involving a specific party or parties.

(h) “Partner” denotes a member of a partnership and a shareholder in a law firm organized as a professional corporation.

(i) “Reasonable” or “reasonably” when used in relation to conduct by a lawyer denotes the conduct of a reasonably prudent and competent lawyer.

(j) “Reasonable belief” or “reasonably believes” when used in reference to a lawyer denotes that the lawyer believes the matter in question and that the circumstances are such that the belief is reasonable.

(k) “Reasonably should know” when used in reference to a lawyer denotes that a lawyer of reasonable prudence and competence would ascertain the matter in question.

(l) “Substantial” when used in reference to degree or extent denotes a material matter of clear and weighty importance. (SCO 1123 effective July 15, 1993)

ALASKA COMMENT

The section entitled “Terminology” in the ABA Model Rules has been replaced with new Rule 9.1.

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5 Responses

  1. […] Lisa Murkowski […]

  2. […] to report the ethical violations of other attorneys, such as Alberto Gonzales, Kyle D. Sampson, Lisa Murkowski, Harriet E. Miers, Mark Everett Fuller, John Yoo and Michael B. Elston and Esther Slater McDonald, […]

  3. […] Previously, I have written about the conduct of Alberto Gonzales, Kyle Sampson, Harriet Miers, Lisa Murkowski, John Yoo, Mark Everett Fuller, Monica Marie Goodling, Thomas W. Hartmann and Michael J. Elston. I […]

  4. […] of a feather. Which is probably why one of my first posts at The Grievance Project detailed Sen. Murkowski’s purchase of prime Kenai River-front […]

  5. […] rules of professional responsibility, including Alberto Gonzales, Kyle Sampson, Harriet Miers, Lisa Murkowski, John Yoo, Mark Everett Fuller, Monica Marie Goodling, Thomas W. Hartmann, Michael J. Elston, […]

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