Former revenue commissioner deviated from state law when investing Alaska’s savings, review finds

Former Alaska Revenue Commissioner Violated State Policy in $50 Million Private Equity Deal

Former Alaska Revenue Commissioner Adam Crum failed to follow state protocols when committing $50 million from Alaska’s primary rainy-day fund to a private equity firm, according to an independent investigation ordered by Governor Mike Dunleavy.

The investigation, conducted by Washington D.C.-based law firm WilmerHale, raised “significant concerns” about whether Crum met his fiduciary duties under state law when investing funds from the Constitutional Budget Reserve with DigitalBridge. Investigators discovered that Crum bypassed necessary due diligence procedures and engaged outside lawyers without the attorney general’s approval, violating state regulations.

“Mr. Crum’s process for selecting the DigitalBridge fund and the two other private funds in which he intended to invest did not involve rigorous due diligence, and Mr. Crum did not follow Department of Revenue protocols designed to assist him in meeting his fiduciary duties,” the report states.

The controversial investment came to light shortly after Crum left his position to run for governor. Although the investigation found no evidence of criminal wrongdoing or self-dealing, it highlighted numerous procedural violations that ultimately cost Alaska taxpayers. The state eventually sold the investment to an Israeli insurance company at a loss of approximately $859,000, though this was partially offset by $325,000 in interest earned on uninvested portions of the funds.

Senator Bert Stedman, a Republican from Sitka, didn’t mince words about the situation: “Clearly, this was an unsuitable investment for the Constitutional Budget Reserve. No question about it. The ex-commissioner broke his fiduciary duty to execute it.” Stedman has since introduced legislation that would prohibit the state from conducting business with DigitalBridge in the future.

The investigation, which cost Alaska an additional $350,000, noted that while Crum technically had the authority as revenue commissioner to direct investments, this authority was contingent upon conducting proper due diligence – a requirement investigators believe he failed to meet.

Particularly concerning was Crum’s decision to circumvent established safeguards. According to the report, he chose not to inform the governor’s budget office, the legislative auditor, or members of the Legislature as required by state policy. On a checklist for “non-routine investments” – a protocol created after a previous state investment failure in 2015 – Crum wrote that “Treasury must not abdicate its statutory authority,” seemingly justifying his bypass of standard procedures.

In a phone interview, Crum defended his actions, characterizing the issues raised in the investigation as merely “procedural.” He claimed the investment was intended to both boost returns for the state savings account and stimulate investment in Alaska, and that he maintained communication with the Department of Law and the governor’s office throughout the process.

“I actually had multiple communications with the Department of Law, even with Treasury staff, trying to actually figure out what — I would send emails and ask the questions that say, have we met all of the legal duties in order to actually fulfill this?” Crum explained.

However, the investigation revealed that Crum failed to specifically inquire whether the investment met his fiduciary obligations under state law. Crum downplayed his responsibility for technical details, stating, “It’s not about being technically proficient on all that stuff. It’s knowing the overall concepts. Making sure that you actually are the expert on the actual delivery of that thing — no, that is not the case. That’s why you have staff.”

In response to the investigation’s findings, Governor Dunleavy has issued an administrative order implementing several recommendations aimed at preventing similar situations in the future. The order places additional checks on the revenue commissioner’s authority to invest in unconventional assets and aims to “enhance the transparency of investment decisions.”

The incident highlights the importance of oversight and accountability in managing public funds, particularly in a state like Alaska where resource-based revenues form a crucial part of the economic landscape. The investigation and resulting policy changes represent an attempt to restore safeguards around investment decisions involving the state’s financial reserves.

This story was originally published by Alaska Public Media and distributed through a partnership with The Associated Press.