Claim Check will regularly examine ads through the 2014 Alaska election season
• The ad: "Alaska Teachers"
• Who's running it: Sullivan for U.S. Senate
• First aired: Sept. 4
• Spending: Campaign declines to say
In the ad, Anchorage teacher Leslie Moore said her pension took a big hit during the financial crisis, but she praises U.S. Senate candidate and former Alaska Attorney General Dan Sullivan for having "fought back" against Wall Street.
The Sullivan campaign says the statement about fighting back refers to a settlement that Alaska received for the state's retirement trust funds while he was attorney general.
But the settlement that Sullivan claims credit for was unrelated to the financial crisis and actually stems from a lawsuit over bad actuarial advice an insurance brokerage gave to Alaska more than a decade ago. Alaska's lawsuit seeking damages was filed in 2007, well before Sullivan's 2009 appointment as attorney general. And Sullivan's own role in that settlement is controversial as well.
In 2010, Sullivan settled that suit for $500 million, which after lawyers' fees and costs resulted in $403 million going into the retirement trust funds.
While Sullivan called the settlement "fantastic" when it was announced, not everyone thinks it is so fantastic. During the last legislative session Sen. Johnny Ellis, D-Anchorage, called it "scandalously low."
The state had originally sought $2.5 billion to $2.8 billion in compensation, depending on certain factors.
The "Wall Street" firm to which Sullivan's ad refers would be Marsh & McLennan Companies, whose Mercer Inc. subsidiary provided bad actuarial advice to the managers of the Public Employees' Retirement and Teachers' Retirement Systems.
That bad advice partially contributed to the state's billions in unfunded retirement liabilities that have plagued the state since the errors were discovered, state officials said.
And that advice was not just bad, but knowingly bad, Alaska lawyers said, because when Mercer discovered its own error they continued to provide flawed data the next year as well so as to not have to explain the previous year's errors and possibly be fired. Alaska later fired Mercer anyway.
As attorney general, Sullivan told legislators that the state's case was "amazing" and that the discovery of fraud on Mercer's part greatly strengthened the case. Alaska's New York law firm was "stunned" by what it found Mercer had done, he said.
Sullivan defended his use of the word "fraud" to describe Mercer's actions.
"I don't throw that word around lightly," he told legislators.
In addition to the state's original claims, punitive and treble damages related to fraud could have driven the claims against Marsh & McLennan higher, legislators were told.
But months later, Sullivan signed the settlement agreement for billions less than had been sought.
So, what exactly was Sullivan's role in the Mercer case? In discussing the ad on Juneau radio station KINY this week, Sullivan claimed credit and referred to "a half-billion dollar settlement that I got from one of the biggest Wall Street firms when I was attorney general."
Sullivan spokesman Mike Anderson said Sullivan personally negotiated the settlement.
Both the ad and Sullivan neglect to say who did the work on that case: Alaska Department of Law attorneys worked on the case for years before Sullivan became attorney general, and outside attorneys were later paid $90 million in fees on the case. The entire Department of Law budget, covering 572 employees, is $59 million this year.
And neither the actuarial errors nor the financial crisis cited by teacher Leslie Moore resulted in a "big hit" to her pension or threatened other teachers' pensions. In Alaska, public employee pensions, such as those for teachers, are contractual obligations protected under the Alaska Constitution.
If the retirement trust funds don't have enough money available to make pension payments, other state assets, such as budget reserves or the Alaska Permanent Fund, may be tapped for that purpose.
Contact Pat Forgey at pat@alaskadispatch.com.