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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
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| ALASKA PUBLIC OFFICES | ) |
| COMMISSION, | ) |
| ) Supreme Court No. S- 13016 | |
| Appellant, | ) |
| ) Superior Court No. 3AN- 07-6861 CI | |
| v. | ) |
| ) O P I N I O N | |
| ) | |
| BEN STEVENS, | ) No. 6363 - April 17, 2009 |
| ) | |
| Appellee. | ) |
| ) | |
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
Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Carpeneti, and Winfree, Justices.
WINFREE, Justice.
I. INTRODUCTION
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
Stevens.
II. FACTS AND PROCEEDINGS
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
stocks.
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
39.50.030.
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.
II. STANDARD OF REVIEW
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
III. DISCUSSION
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
IV. CONCLUSION
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
(2002).
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
1974)).
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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