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Thursday, October 18, 2007 - Page updated at 12:00 AM

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Oil tax at heart of corruption probe in Alaska

The Associated Press

JUNEAU, Alaska — The Alaska Legislature reports back to work today to review the state's year-old oil tax, which is at the heart of federal investigations in Alaska.

Under pressure from the oil industry, notably former executives of VECO, lawmakers passed the tax last year.

Since then, two of VECO's top executives have pleaded guilty to bribing Alaska lawmakers, and three members of the body that passed the tax have been convicted or await trial on bribery charges.

In addition, U.S. Sen. Ted Stevens and Rep. Don Young have come under increased federal scrutiny since the Legislature last adjourned in June.

Stevens is under federal investigation because VECO employees helped renovate his house; Young is under investigation for campaign-finance practices, according to a federal law-enforcement source. Young reported to the Federal Election Commission on Monday that he's spent $446,845 on legal fees this year.

Gov. Sarah Palin said the tax passed at the urging of former VECO executives is tainted.

She says it's also not bringing in enough money. The state has projected a shortfall of $800 million from it, at a time when North Slope oil is fetching record prices, around $85 a barrel.

Palin wants lawmakers in this special session to raise the tax on the net profits of oil companies from 22.5 percent to 25 percent.

"Oil is being sold at a premium to hungry markets around the world," Palin said last month after she rolled out her plan. "Now more than ever the state needs to make sure an appropriate value for the state's share is received."

Republican state House Speaker John Harris, of Valdez, said he understands this session comes with perhaps the greatest scrutiny the Legislature has faced but that Palin's proposal will be debated like all legislation.

"The governor feels like it didn't get a fair and complete hearing the last time, and there could be some truth to that," Harris said. "So, we do it all over again."

Three former Republican state representatives were charged in May, accused of trading their votes for the tax in exchange for money or the promise of a future job with VECO, an oil-field-services company recently sold to CH2M HILL.

Vic Kohring goes on trial Monday in Anchorage. Pete Kott was found guilty of bribery and he awaits sentencing. The trial for Bruce Weyhrauch has been delayed.

Former Republican state Rep. Tom Anderson, of Anchorage, was sentenced Monday to five years in prison on unrelated bribery charges. He was accused of accepting money from a prison lobbyist, who actually was working undercover for the FBI.

One current lawmaker will be absent from this special session: state Senate Rules Chairman John Cowdery.

Cowdery said last month that he would not take part in the special session after former VECO Vice President Rick Smith testified in Kott's trial that the company relied on Cowdery in the state Senate to advance their pro-oil-industry agenda.

Cowdery's office was searched last year by the FBI, but he has not been charged in the corruption probe. He's denied any wrongdoing.

Some lawmakers are concerned about corruption being the driver and focal point of the special session.

Republican state Rep. Jay Ramras, of Fairbanks, said it's creating an unhealthy legislative environment. He also questioned the timing of a special session amid Kohring's corruption trial and Anderson's sentencing.

"It makes a difference to those of us who attend the special session," Ramras said. "It's an inappropriate climate.

"This is bellwether economics that we are engaging in and this should not be a populist lynch mob beating on the oil industry."

Republican state Sen. Charlie Huggins, of Wasilla, said he understands the corruption backdrop is inevitable, but still agrees with Ramras.

"This is about the fiscal destiny of the state," he said. "To beat around the periphery on the politics is disconcerting, and not in the best interest of the state."

Democratic state Minority Leader Beth Kerttula, of Juneau, said that many lawmakers backed the current system without illegal influence but that the state still is being shortchanged.

"There are people who believed in it and supported it, and I disagree with them completely," she said. "But they weren't all bought off. They are wrong but not corrupt."

Copyright © 2007 The Seattle Times Company

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