Prosecutors in the public corruption trial of former Rep. Pete Kott are giving a rare, close-up view of a good ol' boys club of insiders and deal makers that operated on the fringes of the Alaska Legislature.
Much of the action being detailed in the courtroom takes place in Suite 604 of Juneau's Baranof Hotel, where former Veco executives Bill Allen and Rick Smith plotted with Kott on how to get the industry's preferred version of a new oil tax and a gas pipeline proposal through the Legislature in 2006.
Scene after scene played out for jurors Tuesday in U.S. District Court as a federal prosecutor methodically introduced dozens of secretly made audio and video recordings.
Grainy videos captured through an FBI-planted bug in the Veco suite show the men chummy, drinking and boastful at times of seeming victory, then full of despair when legislation didn't go their way. Numerous calls intercepted on Allen and Smith's cell phones also were played for jurors.
Kott is accused of bribery, conspiracy, extortion and wire fraud. Prosecutors say he was paid off by Veco through a fake $7,993 invoice for his hardwood flooring business, a $2,750 political poll and $1,000 in cash.
Kott's defense lawyers say there's nothing illegal about working with lobbyists and others for a common end, and that's all Kott was doing.
Kott, a Republican and former House Speaker from Eagle River, lost power in a coup that put John Harris of Valdez in the speaker's chair, but still found ways to twist arms to help Veco.
On March 26, 2006, while the Legislature was considering a new oil tax system, Kott called Smith on his cell phone. Kott was about to head over to the Prospector Hotel for drinks to celebrate Kodiak Rep. Gabrielle LeDoux's birthday. He urged Smith to come too. Kott had been trying to win her support on the oil tax.
He joked with Smith that he was later going to the opera -- Conoco Phillips had bought 50 seats -- then admitted he wasn't that cultured.
Kott told Smith he was putting pressure on state Sen. Fred Dyson, another Republican from Eagle River. He had voted that day to hold up an anti-abortion bill sponsored by Dyson, who cares a lot about the issue.
"He wants my vote, he better square up on oil taxes," Kott told Smith.
Smith, who was a Veco vice president, and Allen, Veco's influential chief executive, both are awaiting sentencing after pleading guilty to bribery and other charges involving four former state lawmakers, including Kott and Rep. Bruce Weyhrauch, R-Juneau. They have resigned their posts and are cooperating with prosecutors. Veco last week was sold to CH2M Hill.
The tax rate they sought became intertwined with the proposed gas pipeline. Prosecutors say a gas line proposal, which never cleared the Legislature in 2006, could have been enormously profitable to Veco.
By May 7, 2006, the Legislature was reaching a climactic showdown over the Petroleum Profits Tax, known as PPT.
Allen was calling Kott on the House floor to give him instructions on how to vote, according to a court paper filed in Allen's case.
Just after 8:30 that night, Kott was on the phone with Smith. Weyhrauch had voted the wrong way on an amendment that would raise the proposed tax to 21.5 percent of profits, up from 20 percent.
The amendment passed, but barely, on a 21-19 vote. Kott told Smith they could ask for the vote to be rescinded.
An hour later, Kott reported back. The strategy worked. The tax rate was back at 20 percent.
"Way to go, partner," Smith told Kott.
At current oil prices, every 1 percent change in the tax rate means as much as $150 million more in taxes, according to Dan Dickenson, the state's former director of the oil and gas audit division, who testified Monday.
By 11:30 that night, Kott was in Suite 604, celebrating with Smith, Allen and others.
As the men drank and clinked glasses, Kott boasted that he told the minority leader, then-Rep. Ethan Berkowitz, that he had to have some of his Democratic votes. It was unclear what Kott said to Berkowitz or even whether Berkowtiz swung any votes. But Kott sure made out like it happened his way.
"I outsmarted the fox," Kott told the room. Later he said it was a "sucker punch" and said "I use 'em and abuse 'em."
Reached Tuesday, Berkowitz said he doesn't know what "sucker punch" Kott was referring to. "I counted my votes accurately that day," he said. "I knew where they were and I held them."
Kott played the tax rate battle like a hand of political poker, holding at 20 percent, which is what the oil companies wanted. He said on tape that if not for Allen, he'd be supporting a 30 percent tax.
The entire PPT oil tax measure died two days later at the end of the session, as the House and Senate failed to agree on the bill.
The final tax, at a rate of 22.5 percent, wasn't adopted until August 2006, after two special sessions.
Also on Tuesday, prosecutors played for jurors a secretly recorded July 12, 2006, cell phone call between Smith and former state Sen. Jerry Mackie.
Mackie, who became a lobbyist, at the time was also partner in the consulting firm Northwest Strategies, which was working on Kott's campaign.
They talked about a poll being done by Dave Dittman for Kott's campaign. Prosecutors say Veco paid for it.
In the phone call with Smith, Mackie said he had let Kott know that Smith and Allen had agreed to help out with the poll. Kott said that was great, Mackie told Smith.
Defense lawyer Jim Wendt protested that recording, and a couple of others, being played for jurors. But prosecutor James Goeke told U.S. District Judge John Sedwick that Mackie was an unindicted co-conspirator, which changes the rules on what evidence can be allowed.
Reached Tuesday evening, Mackie said he knew about the poll, but was not part of any bribery conspiracy with Veco. His lawyer, Jeff Feldman, said it was "an unfortunate label."
Mackie said the FBI interviewed him more than a year ago on general matters involving Allen and Smith and never even asked him about the poll.
Also part of the prosecution's case Tuesday was a conversation involving former state Sen. Ben Stevens.
Stevens was a paid Veco consultant at the same time he was a senator. Yet while Kott was claiming success with the oil tax in the House, Stevens was struggling to get an acceptable measure through the Senate.
Prosecutors played a recording of a March 5, 2006, phone call between Stevens and Allen in which they assessed various other legislators.
Stevens expressed disdain for Fairbanks Rep. Jay Ramras, who his old rival, Sen. Gene Therriault, helped get elected.
"One of those (expletive) salesman kind of guys."
"Amen, amen," Allen responded.
More secret recordings are expected to be played for jurors this morning. By afternoon, Allen could be on the stand.
Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390. Reporter Tom Kizzia contributed to this story.
Case at a glance
The Alaska political corruption investigation
• The trial of former Eagle River Rep. Pete Kott is part of a broad federal investigation into public corruption in Alaska involving state and federal officials, lobbyists and others.
• Kott is charged with bribery, conspiracy, extortion and wire fraud for taking money and the promise of a job from Veco Corp. in exchange for supporting an oil tax measure favored by the petroleum industry. He is fighting the charges.
• For more on the investigation, including an interactive timeline and overview, go online to adn.com/news/politics/fbi
By LISA DEMER
ldemer@adn.com