Testy trustees: Permanent Board directors show signs of strained relationships over Rubenstein revelations

Wednesday’s Alaska Permanent Fund Board of Trustees meeting to discuss leaks of emails to the Alaska Landmine website devolved into chippy, barely concealed hostilities between two apparent factions: There are those trustees who seem upset with board behavior that has embarrassed the fund, and those upset with word about board behavior getting out to the public.

In one camp, it appears that trustees Ellie Rubenstein, Adam Crum, and Jason Brune are a posse, wanting to find the leaker and punish him or her. In the other camp, it appears board Chairman Ethan Schutt and former board Chairman Craig Richards are aligned in wanting to address the concerns that some have about Rubenstein meddling in the investment business of the Fund. Commissioner of Transportation Ryan Anderson appears to be Switzerland in this dustup, which has exposed trustee Rubenstein’s oversized and possible inappropriate role in the corporation’s operations.

The emails that were released into the wild show that Rubenstein, who has been on the board for two years and is now vice chair, was making Chief Investment Officer Marcus Frampton and others on staff uncomfortable with the pressure she was putting on them to create investment relationships with people and entities that have ties to her father, David Rubenstein, the founder of the Carlyle Group private equity corporation and one of the most powerful men on Wall Street.

Rubenstein is also the daughter of Alice Rogoff, former owner of the Alaska Dispatch (now again called the Anchorage Daily News) before running the organization into financial ruins.

Rubenstein has said she broke no ethical rules as a board member. In a statement last week, she defended her actions as above reproach.

“Serving on the Board of Trustees for the Alaska Permanent Fund Corporation is a great honor. This position has allowed me to serve my home state by bringing private sector investment expertise and perspectives to the Permanent Fund Corporation. Introducing and connecting Permanent Fund Staff to investment firms so that they can explore opportunities is an appropriate and valuable role and is common practice among state pension boards, endowments, and sovereign wealth funds. In this role, I have always followed the Permanent Fund Board’s ethics rules and disclosure requirements, and I was unaware of these concerns about my service on the Board. That someone leaked internal messages containing confidential information to the media is disturbing; it is a breach of policy and trust, and it distracts from the important work the Permanent Fund Trustees and Staff are doing for the State of Alaska.”

But during Wednesday’s meeting, held virtually, Rubenstein was quiet during the public session, even though the meeting was called because of her alleged behavior.

While she didn’t say anything, Crum and Brune pushed back against Richards and seemed interested in going after the person or persons who leaked the emails that raised the concerns about board interference in investment decisions.

Trustee Richards said he observed a growing trend of direct communication between trustees and staff over the past two years, including “indirect threats” that “increased in volume to a point that staff is obviously feeling uncomfortable, and that’s been communicated, yet the behavior still occurred.”

In other words, the behavior has going on long enough that it has been brought up as a concern before, but continued.

Trustees having direct communication with staff, outside the chain of organization command is still happening, Richards said, “at a level we’ve never seen before and I think that that, again, is having some negative consequences in the sense that it’s making some of the managers feel a little undermined.”

Some people in the corporation staff have even felt that their jobs were being threatened by board members, Richards said.

Brune punched back that those were “pretty broad allegations” and challenged Richards to expand on his inference. Richards said he didn’t want to point fingers and Brune replied that he was indeed pointing fingers.

“We really have four issues before us: We have the specific, ethical allegations against trustee Rubenstein, which I presume will ultimately be handled through the state’s ethics process. We’ve got, in my mind, some of the broader behavior of this board that has resulted in an atmosphere at the Permanent Fund, where we’re seeing the need of employees to do your standard cover-yourself behavior. That, in turn, has led to some leaks that seem to be what other people are more concerned about. In my mind, the key thing is, I’m less concerned about leaks than I am about fixing the behavior that caused the leaks,” Richards said.

“From my mind, the right way to go forward with this thing is after we get the information we have is to go through and do a positive, constructive way of looking at our own governance documents for the board and our staff that includes better and clear expectations around trustee behavior as well as plugging whatever might have been the source of some leaks. To me, as a stepping stone to getting to governance reform, that’s fine. But it’s ultimately governance reform that’s going to be necessary to solve the core, underlying problem here,” Richards said.

The board went into executive session for two hours and when it came back out into public session, Chair Schutt said there had been no breach of the IT system at the Fund by anyone from the outside, and that the board would continue to look at how emails flow, how trustees interact with staff, and the information trustees provide to staff about investment opportunities.

After the meeting, the board put out a statement, that read in part:

“The Board of Trustees of the Alaska Permanent Fund Corporation (APFC) held a special meeting to assess its information technology systems and potential solutions to strengthen APFC’s records process and document management systems.

“The meeting was held virtually on May 8, 2024. At the beginning of the meeting, the Board amended the agenda to allow for public comment. The public is welcome to submit additional comments to [email protected].

“The Board discussed and clarified executive session parameters, then voted to enter an executive session in accordance with Alaska’s Open Meeting Act to “discuss the security of APFC’s records systems and document management procedures for confidential information.”

“During the executive session, the trustees were informed that APFC’s information technology staff promptly performed a cybersecurity vulnerability analysis and intrusion detection protocol, and it was concluded that no external breach had occurred, thus giving reassurance to the Trustees as well as the Fund’s investors and the public that our IT and security systems are in place and working as designed.

“In addition, during the meeting, Chair Ethan Schutt confirmed that he, Executive Director Deven Mitchell, and other APFC senior staff, including APFC’s General Counsel, were informed in late January of the issues of perceived inappropriate communication between trustees and staff that has been the subject of recent media stories. Upon initial review, it was deemed that the existing governance process was followed, and no follow-up action had been taken or was deemed necessary at the time.

“The Board of Trustees is committed to reviewing its governance processes to ensure full and transparent disclosure of potential conflicts and ensure there are viable and secure channels for employee concerns to be raised and addressed. Reviewing and, if necessary, updating these processes will help build better staff–trustee relationships going forward, so APFC can continue to be a high-functioning, high-trust organization on which Alaskans and investors can rely. Trustees also committed to updating internal procedures to ensure confidence in its information technology data retention and external information sharing procedures.

“Our primary focus remains on the work that our Board and Staff do to manage and invest the Alaska Permanent Fund,” said Deven Mitchell, the Executive Director and Chief Executive Officer of the Alaska Permanent Fund Corporation. “We are committed to improving protocols that are currently in place to uphold our dedication to the integrity of the Corporation and Fund.”

“APFC’s mission is to deliver outstanding returns for the benefit of all Alaskans. We are dedicated to providing income and stability for current and future generations,” the statement said.

The next meeting of the Board of Trustees will be the quarterly meeting on May 29-30, in Utqiagvik and via WebEx.