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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Alaska Public Offices Commission v. Stevens (04/17/2009) sp-6363

Alaska Public Offices Commission v. Stevens (04/17/2009) sp-6363

     Notice:   This opinion is subject to correction  before
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) Supreme Court No. S- 13016
) Superior Court No. 3AN- 07-6861 CI
v. )
) O P I N I O N
BEN STEVENS, ) No. 6363 - April 17, 2009
          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Mark Rindner, Judge.

          Appearances:    Margaret  A.   Paton   Walsh,
          Assistant Attorney General, Anchorage,  Talis
          Colberg,   Attorney  General,   Juneau,   for
          Appellant.   James  E. Torgerson,  Andrew  F.
          Behrend,  Heller Ehrman LLP,  Anchorage,  for

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Carpeneti, and Winfree, Justices.

          WINFREE, Justice.

          The  Alaska Public Offices Commission (APOC) imposed  a
civil  penalty  against  Alaska State  Senator  Ben  Stevens  for
failing   to  report  certain  income  on  his  2006  Legislative
Financial  Disclosure  Statement (LFD) for  calendar  year  2005.
Stevens  appealed  to  the superior court, which  reversed  APOCs
decision.    APOC  now  appeals  the  superior  courts  decision.
Because  APOCs reporting requirements were ambiguous and must  be
strictly  construed in favor of Stevens, we affirm  the  superior
courts  decision that APOC may not impose a civil penalty against
          SEMCO  Energy,  Inc. owns Enstar Natural  Gas  Company,
which  provides natural gas to the Municipality of Anchorage  and
to  the Matanuska-Susitna Borough.  In December 2004 SEMCOs board
of  directors elected Alaska State Senator Ben Stevens to fill  a
vacancy  on that board beginning in January 2005.  At a May  2005
SEMCO shareholder meeting Stevens was elected to a two-year  term
on the board.
          When  Stevens joined the SEMCO board he chose to  defer
his  2005  director  compensation and have it invested  in  SEMCO
common  stock  for  distribution to him over a three-year  period
after  the  end  of  his  directorship.  Stevenss  2005  director
compensation was $37,000 plus shares of SEMCO common stock  worth
a similar amount.
          The  SEMCO  Deferred  Compensation and  Stock  Purchase
Agreement  for  Non-Employee Directors (Agreement) provided  that
SEMCO would establish a bookkeeping account . . . to evidence the
Companys  liability to the Director.  The Agreement stated  that:
(1)  the  decision  to defer income was irrevocable;  (2)  assets
allocated to pay Stevenss compensation would always be subject to
claims  of  [SEMCO]s  general  creditors  and  be  available  for
[SEMCO]s  unfettered  use; (3) Stevens  would  have  no  property
interest  in  [SEMCO]  assets whether or not  earmarked  to  make
payments pursuant to this Agreement; and (4) neither Stevens  nor
his  beneficiaries would have any right to transfer  or  encumber
any  right to receive any payment.  Finally the Agreement  stated
its  purpose   to  accomplish the deferral of  the  incidence  of
federal  income  tax . . . until such time as  [Stevens]  .  .  .
actually receives payment.
          Consistent with the terms of the Agreement, Stevens did
not  actually receive in hand any director compensation in  2005,
and SEMCO did not issue Stevens any IRS forms for 2005 reportable
income.   On  his  2006 LFD form for 2005 financial  information,
Stevens  disclosed his positions as director and  shareholder  of
SEMCO  on Schedule B, Business Interests.  He did not list  SEMCO
on Schedule A, Sources of Income Over $5,000.
          In  April 2006 APOC received a complaint alleging  that
Stevens  had violated AS 24.60.2001 and AS 39.50.0302 by  failing
to  disclose 2005 income from SEMCO.  APOC sent Stevens a copy of
the  complaint on May 1, 2006, and opened an investigation.   Two
days  later APOC mailed Stevens an LFD amendment form, explaining
that  if  he  had been paid by SEMCO in 2005 he was obligated  to
report  the  income on his 2006 LFD.  Stevens was  instructed  to
return  the amendment form within fifteen days to avoid a penalty
of ten dollars per day.
          Stevens  filled out the amendment form and returned  it
to  APOC by fax exactly fifteen days later, on May 18, 2006.  The
form  contained designated spaces only for Recipient and Name  of
Source; Stevens listed himself as the recipient and SEMCO as  the
source.   The  form  did  not contain a designated  or  otherwise
          obvious place to disclose the amount of income received; Stevens
did  not  provide any information about his deferred compensation
arrangement.  APOC staff did not notify Stevens that his  amended
LFD  form  was considered in any way insufficient to satisfy  the
reporting requirements.
          On  November 13, 2006, in anticipation of APOCs hearing
on  the  complaint, Stevens sent APOC a letter explaining why  he
had not originally listed SEMCO as a source of 2005 income:
          For  calendar year 2005, I received no income
          from  SEMCO  .  .  .  . [P]ayments  from  the
          Graduated  payout  plan I selected  begin  30
          days after my termination as a Member of  the
          Board  of Directors of SEMCO . . . .  I  have
          received no income from my 2005 compensation.
          The  LFD  form nor [sic] the LFD  Instruction
          Manuel  [sic]  do not mention  the  reporting
          requirements   for  a  deferred  compensation
          plan.  (Emphasis in original.)
          APOC held a hearing on January 11, 2007.  Stevens chose
not  to  participate,  relying on his  November  2006  letter  to
explain his position.  The hearing established APOC staffs belief
that  Stevens had failed to report SEMCO income for  2005.   APOC
staff  recommended  a  civil  penalty  of  ten  dollars  per  day
beginning the day Stevenss LFD was due (March 15) and ending  the
day  he filed his amended LFD (May 18).  APOC staff believed that
a  penalty assessed for the time after Stevens filed his  amended
LFD  would  be unfair because, although his amended LFD  did  not
provide   an   actual   dollar  figure,   Stevenss   compensation
arrangement  with SEMCO had been widely reported  in  the  media.
The recommended penalty period was comprised of sixty-three days,
leading to a recommended penalty of $630.
          APOCs   commissioners  voted  to   accept   the   staff
recommendations  for both the violation and  the  penalty.   They
also  voted to notify Stevens that his penalty could be increased
if  he  did not provide written disclosure of the amount of  2005
income he had received from SEMCO.  APOC issued a two-page  order
on March 30, 2007, echoing the oral decision.
          A  factual finding in the APOC order detailed  Stevenss
SEMCO compensation:
          In  May  2005, SEMCO Energy increased board member
          compensation from $12,000 per year and $1,000  per
          meeting  to $35,000 per year plus 7,000 shares  of
          stock  (valued at $38,605).  Senator  Stevens  was
          also  entitled to $2,000 per year for  serving  on
          the   Boards  Budget  and  Audit  Committee.   The
          revised compensation plan was retroactive for  the
          entire 2005 calendar year.
A  separate finding of fact acknowledged:  Upon joining the SEMCO
Energy Board, Senator Stevens opted to defer all compensation and
          The  APOC order concluded that because Stevens received
[in  2005]  the unqualified right to payment of compensation  and
stock, etc., valued over $5,000 at a future date, he received  an
asset  having substantial value during the reporting period  that
he  was  obligated to report, and that by failing to  report  the
receipt of that asset, Stevens had violated AS 24.60.200  and  AS
          Stevens  sought  judicial review of  APOCs  order.   In
January  2008  the superior court reversed APOCs  order,  holding
that  Stevenss failure to disclose his deferred compensation  was
not a statutory violation.
          APOC appeals.
          When  the superior court acts as an intermediate  court
of  appeal  in an administrative matter, we independently  review
and  directly  scrutinize  the merits  of  the  agencys  decision
without giving deference to the superior courts decision.3   When
reviewing  an  agency decision involving statutory interpretation
and   determination   of  legislative  intent,   we   apply   the
substitution of judgment standard.4
          APOCs  interpretation  of  the  relevant  statutes  and
regulations  is reasonable, but difficult to ascertain  from  the
instruction  manual provided as guidance for filing  2006  LFDs.5
Under Definitions of Frequently Used Terms, income was defined as
money or anything of value received, but there was no instruction
that  anything  of  value  covered both tangible  and  intangible
items.6   The  text  of  relevant statutes  was  set  out  in  an
appendix,  and  although anything of value was  defined  for  the
purposes  of AS 24.60 as including all matters, whether  tangible
or  intangible,7 the definition of income in that section did not
include  the  phrase  anything of value.8  This  section  of  the
manual  instead defined income as assets that are  received,  but
neither assets nor received was defined.9
          We thus look outside APOCs instruction manual.10  Blacks
Law  Dictionary defines asset as [a]n item that is owned and  has
value.11  Websters Dictionary similarly defines asset as an  item
of  value  owned.12  As APOC staff reasoned, Stevenss contractual
right  to deferred compensation became a valuable asset  when  he
performed  the  services in 2005 that entitled  him  to  be  paid
later.13   He  received that asset in 2005  when,  by  performing
compensable services, the right to deferred compensation took  on
significant monetary value.  That asset was therefore  income  as
defined  in AS 24.60.990, which then treated all assets that  are
received  as subject to the disclosure requirements of former  AS
24.60.200.  APOC staff did not necessarily err in concluding that
this was an asset subject to disclosure as income.

          On  the other hand APOC offers no evidence that it  had
ever  made its interpretation explicit prior to the due  date  of
the   2006   LFD,  and  the  instruction  manual   contained   no
instructions or examples for reporting deferred income  or  other
expectation of future income.14  Although Stevens was required to
report  income  items  in  excess of  $5,000  received  in  2005,
received  was  not  defined  in the  instruction  manual  by  any
reference  to  a  statute  or  regulation.   Websters  Dictionary
          defines receive to mean take possession or delivery of, come into
possession  of, or acquire.15  Because received is  in  the  past
tense, the requirement of reporting income received could be read
as  applying only to income already possessed or acquired, not to
income deferred into the future.  Given the language of the SEMCO
Agreement   and  the  APOC  instruction  manual,  Stevens   could
reasonably have believed that his deferred income did not need to
be  reported until distributed and actually received in hand  for
his unfettered use.
          In 2007 two of the reporting-requirements statutes were
amended  to  specifically address deferred compensation.   Alaska
Statute  24.60.200 was amended to require reporting of income  or
deferred  income  in  excess  of $1,000  earned  or  received  as
compensation.   (Emphasis added.)  Alaska Statute 24.60.990(a)(7)
was  amended  to include income that one receives or  expects  to
receive.   (Emphasis  added.)  The 2007  amendments  undisputedly
make deferred compensation subject to mandatory disclosure.16
          Stevens  contends that these statutory changes indicate
a  material  change in the previously unambiguous 2006  reporting
requirements.17  APOC contends that the statutory changes were  a
mere  endorsement  of  its interpretation of  the  existing  2006
reporting requirements.18  Even if APOC is correct, the need  for
legislative  clarification supports  the  notion  that  the  2006
reporting requirements were indefinite and ambiguous and could be
read as either Stevens or APOC advocates.
          In  light  of the foregoing, we conclude that the  2006
LFD  reporting  requirements  were  ambiguous  with  respect   to
reporting deferrals of 2005 income.
          In  Veco  International, Inc. v. Alaska Public  Offices
Commission,19   we   considered   whether   statutory   reporting
requirements   for   political   campaign-financing   might    be
unconstitutionally vague, stating:
          The   basic   element  of  the  doctrine   of
          vagueness  is  a requirement of fair  notice.
          Laws  should  give the ordinary citizen  fair
          notice of what is and what is not prohibited.
          People  should  not  be  required  to   guess
          whether  a certain course of conduct  is  one
          which  is apt to subject them to criminal  or
          serious civil penalties.[20]
We  need not decide whether the reporting requirements here  were
unconstitutionally vague.  It is sufficient to hold, as  we  have
for  criminal penalties, that imprecise, indefinite, or ambiguous
statutory  or regulatory requirements must be strictly  construed
in favor of the accused before an alleged breach may give rise to
a  civil  penalty.21  Under this standard APOC may not  impose  a
civil   penalty   against  Stevens  based  on   the   facts   and
circumstances of this case.22
          We  AFFIRM  the superior courts reversal of  the  civil
penalty assessed against Stevens by APOC.
     1      The   version  of  AS  24.60.200  governing  Stevenss
reporting of 2005 income required legislators to report income in
excess  of $5,000 received as compensation for personal services,
and directed that the amount of income should be disclosed if the
source  is  known  or  reasonably  should  be  known  to  have  a
substantial interest in legislative, administrative, or political
action.  AS 24.60.200(a)(2) (2006).  There does not appear to  be
a  dispute  that  SEMCO was within the class  of  income  sources
contemplated by the statute.

     2      The   version  of  AS  39.50.030  governing  Stevenss
financial  disclosure  required  public  officials  to  make   an
accurate  representation  of the [officials]  financial  affairs,
including the source of all income over $5,000 . . . received  by
the person. AS 39.50.030(a) - (b)(1) (2006).

     3     Alyeska  Pipeline Serv. Co. v. DeShong, 77 P.3d  1227,
1231 (Alaska 2003).

     4     See Alyeska Pipeline Serv. Co. v. State, Dept of Envtl
Conservation,  145 P.3d 561, 564 (Alaska 2006) (citing  State  v.
Dupier, 118 P.3d 1039, 1044 (Alaska 2005)).

     5     Alaska Public Offices Commission, Instruction  Manual:
Legislative   Financial  Disclosure  AS  24.60.200  -   24.60.260
(January 2006).

     6    Id.  at ii.

     7    Id. at A-5 (quoting AS 24.60.990(a)(2)).

     8    Id. (quoting AS 24.60.990(a)(7)).

     9    Id.

     10     See  AS  01.10.040(a) (Words  and  phrases  shall  be
construed  according  to the rules of grammar  and  according  to
their common and approved usage.).  APOCs instruction manual does
not reference this statute.

     11    Blacks Law Dictionary 125 (8th ed. 2004).

     12    Websters Third New International Dictionary 131 (2002).

     13     This would be consistent with how courts have treated
deferred   compensation  plans  in  divorce  proceedings.    Many
jurisdictions  view these plans as marital assets to  the  extent
the right to deferred compensation was earned with marital labor,
i.e.,  accrued during the marriage.  See, e.g., Parry  v.  Parry,
933  So.  2d 9, 13 (Fla. App. 2006) ([A]n award that  is  in  the
nature  of  deferred compensation and that is granted during  the
marriage  is  usually a marital asset because it is  compensation
for past marital labor.); Coffman v. Coffman, 215 S.W.3d 309, 312
(Mo.  App.  2007) (holding that portion of benefits  received  by
husband after he reached sixty-five years of age were intended as
deferred  compensation  and  were  consequently  marital  asset);
Gardner  v. Gardner, 748 P.2d 1076, 1078-79 (Utah 1988) (A  right
to  deferred  compensation  acquired  during  marriage,  or  that
portion  of  ones right to deferred compensation acquired  during
marriage,  should  not be entirely ignored  in  dividing  assets,
irrespective of when the vested funds are payable.).

     14     This is not to be taken as a criticism of APOC or its
instruction  manual.  Financial reporting rules  are  complicated
and  APOC obviously goes to great effort to explain these  rules.
APOC  cannot be faulted for failing to identify and explain every
possible  situation  requiring  disclosure.   But  we  must  also
recognize that financial reporting requirements are imposed on  a
broad   swath   of   public  servants,  some   more   financially
sophisticated and knowledgeable than others.

     15     Websters  Third  New  International  Dictionary  1894

     16    AS 24.60.200(2) (2007); AS 24.60.990(a)(7) (2007).

     17     See Torkko/Korman/Engineers v. Penland Ventures,  673
P.2d  769,  773-74 (Alaska 1983) (An amendment to an  unambiguous
statute is generally presumed to indicate a substantive change in
the law.).

     18     See  Laborers & Hod Carriers Union, Local No. 341  v.
Groothius, 494 P.2d 808, 811 (Alaska 1972) (Although there may be
a  presumption  that  an amendment is intended  to  change  legal
rights rather than to interpret the preexisting law, the fact  of
amendment itself does not indicate whether the change is  one  of
substance or of form.  Since the amendment was enacted during the
controversy which arose as to the interpretation of the  original
act,  it  is  just  as  logical to  regard  the  amendment  as  a
legislative  clarification of the original  language  and  not  a
substantial change.).

     19    753 P.2d 703 (Alaska 1988).

     20     Id. at 714 (citing Gottschalk v. State, 575 P.2d 289,
290  (Alaska  1978)  and Stock v. State, 526 P.2d  3,  8  (Alaska

     21     See State v. Bernard, 625 P.2d 311, 313 (Alaska 1981)
(It is axiomatic that a vague, imprecise, indefinite or ambiguous
regulation,  the  breach  of which carries  a  criminal  penalty,
should  be strictly construed in favor of the accused.   (quoting
Theodore  v. State, 407 P.2d 182, 189 (Alaska 1965)));  Higginson
v.  Westergard, 604 P.2d 51, 55 (Idaho 1979) (relying on Theodore
v.  State and other cases to hold that ambiguities found  in  any
statute,  rule, or regulation imposing civil liability should  be
resolved in favor of the adversary).

     22     We  therefore  need not address Stevenss  alternative
argument  that APOC may not impose a penalty against him  because
he  cured  any deficiencies in his original LFD filing by  timely
filing the LFD amendment in accordance with APOCs instructions.

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