EDITORIAL: Permanent Fund should divest from a bad investment bet

Once again, Alaska Permanent Fund Corp. trustee Gabrielle Rubenstein is making headlines for all the wrong reasons. After a disastrous turn promoting a private-equity investment plan that other members of the APFC board of trustees declined to back (and, while doing so, making a series of erroneous and misinformed statements before a global audience of financial professionals), a series of emails supplied to the Alaska Landmine political news website revealed further misbehavior by Rubenstein behind the scenes at the state corporation charged with managing the state’s nest egg.

The emails, by all appearances, look to be an intentional effort by APFC chief investment officer Marcus Frampton to document destabilizing and improper actions by Rubenstein related to the Permanent Fund’s management. Specifically, Frampton raised concerns about Rubenstein’s repeated urging for the fund to increase its investment with firms and figures with whom she had business or family connections, a massive red flag for potential conflicts of interest.

In fairness to Rubenstein, it would be difficult for her to avoid conversations with some of the people involved — one is her father David Rubenstein, co-founder of the massive Carlyle Group private equity firm. In addition, her experience with her own private equity firm, Manna Tree, brings her into regular contact with other financiers and investors, especially those with whom she has financial relationships. But it’s the tenor of those conversations and the fact that they specifically discuss APFC business that is troubling. As Frampton noted, Rubenstein regularly suggested that the Permanent Fund invest with firms or individuals with whom she had financial connections — which, while not necessarily illegal on its face, certainly smacks of the kind of self-dealing that anticorruption laws and the Alaska Executive Branch Ethics Act are designed to prevent. And as someone who has purportedly spent years in the world of finance, Rubenstein should be well aware that such actions are improper, and at the very least tarnish the reputation of Alaska’s signature sovereign wealth fund. It’s a reputation that has taken decades of ethical and professional management to build, and Alaskans should be very concerned about the potential for it to be torn down.

And Rubenstein’s antics don’t stop at conflicts of interest. Another communique indicated that she has — or at least believes she has — an inside line to the governor’s office, telling Frampton that current APFC board chairman Ethan Schutt will not be reappointed when his term ends this summer. That’s the sort of palace intrigue more suitable to reality TV shows than financial management, and it raises the question: Assuming Rubenstein is right about the governor’s plans, why is Gov. Mike Dunleavy more comfortable with her as a trustee than with Schutt, who has served credibly for his tenure on the board?

As we’ve noted before, as the Permanent Fund has grown and taken on greater significance in providing for the state’s budget needs, the process by which APFC trustees are selected — all by the governor, with no confirmation role for the Legislature — has revealed itself as a serious imbalance in the state’s power structure. It’s past time that we amended the laws related to the management of the Permanent Fund to add a requirement for legislative confirmation of all trustee appointments.

When the APFC board removed former CEO Angela Rodell, who oversaw the most successful investment period of the Fund’s history, legislators were rightly concerned and held hearings that helped bring to light the circumstances that led to Rodell’s ouster. They should do the same with regard to Rubenstein’s improper communications, in an effort to make clear what else has been going on out of public view that, if left unchecked, could damage the Permanent Fund’s credibility and investor confidence. Why doesn’t the Legislature do anything about this? And for his part, Gov. Dunleavy continues to exhibit a perplexing willingness to stand by Rubenstein as a trustee despite the difficult positions in which she continues to put the fund’s management professionals, repeatedly testing their ethical standards for dispassionate investing. Why does the governor continue to tolerate her silliness and impropriety on behalf of the state? There is no earthly reason for her to be a trustee of Alaska’s Permanent Fund — at least not as long as professional, competent management is desired.

The Permanent Fund Corp.’s personnel, by documenting Rubenstein’s behavior, are performing a service to Alaskans who depend on the revenue the Fund provides for essential services. But it’s an open question how long they can maintain their professionalism — or keep their jobs — if legislators and Alaskans alike don’t show them support by getting to the bottom of Rubenstein’s half-cocked antics.