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Originally published July 9, 2007 at 12:00 AM | Page modified July 9, 2007 at 6:02 PM

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Alaska's Stevens says he's worried about corruption probe

Ted Stevens, the longest-serving Republican senator and once the chief power broker for dispensing federal dollars, says he's worried that...

The Associated Press

WASHINGTON — Ted Stevens, the longest-serving Republican senator and once the chief power broker for dispensing federal dollars, says he's worried that a corruption investigation "could cause me some trouble" in running for re-election next year.

The 83-year-old Alaska Republican has drawn Justice Department scrutiny over a renovation project in 2000 that more than doubled the size of his home in a resort town surrounded by glaciers.

The remodeling was overseen by Bill Allen, a contractor who has pleaded guilty to bribing Alaska state legislators. Allen is founder of VECO Corp., an Alaska-based oil field services and engineering company that has reaped tens of millions of dollars in federal contracts.

Allen is cooperating with the FBI, and investigators appear to be looking at whether VECO got anything in return for the home improvement help.

Sen. Stevens, who has served since 1968, has been caught up in a larger probe that included FBI raids last summer at offices of six Alaska legislators — including Stevens' son, Ben, who was then the president of the state Senate.

"The worst thing about this investigation is that it does change your life in terms of employment potential," Stevens said in an interview with The Associated Press. "It doesn't matter what anyone says, it does shake you up. If this is still hanging around a year from November, it could cause me some trouble.

"I'm working to get this concept out of my mind that someone is trying to make something illegal out of all this, That's what's really disturbing."

Stevens is a powerful insider in the clubby U.S. Senate.

Prior to the Democratic takeover this year, Stevens' longevity made him president pro tempore, a mostly symbolic title but one that made him third in line for the presidency after the vice president and speaker of the House.

He's known for wearing cartoon ties with characters that signify his mighty image, like the Incredible Hulk.

The senator who once described himself as "a mean, miserable SOB" was chairman of the of the Appropriations Committee from 1997 to 2005, except for 18 months when Democrats controlled the Senate.

That meant every senator was beholden to him for federal funding of projects in his or her state, and Stevens was known for the money he sent back home. It's hard to find a major Alaska business that he hasn't helped and that hasn't donated to his campaigns and political committees.

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Over the past six years, VECO executives and the company itself contributed more than $119,000 to Stevens' political organizations, according to tracking by Political Money Line, an Internet database. Of that amount, Allen contributed $20,000. Stevens and Allen also are longtime friends and partners in a race horse investment.

The remodeling job at Stevens' home was fraught with problems at the start. He estimated it would cost about $85,000 and told city building officials he would be his own contractor.

The plan was to raise Stevens' single-level home and, beneath it, construct a new first floor with two bedrooms, a game room and sauna. Complete with a wraparound porch, the completed project would be twice the size of the original, modest house in the town of Girdwood. Building records don't indicate how things went wrong, but somehow the framing was botched and help was called in to fix it.

Carpenter Augie Paone has said he was hired by an employee of VECO. Rather than submit his bills to Stevens, Paone said he submitted them to VECO founder Allen.

Paone told a federal grand jury that he didn't find anything unusual about the project, people close to the case said.

Once Allen approved the work, Stevens paid for it with a series of checks, according to two people close to the investigation. They spoke on condition of anonymity because grand jury matters are secret by law. Stevens would not discuss the details of the investigation, including why the checks were drawn on an apparently new account and where the money came from.

The carpentry bill alone exceeded $100,000, and contractor Tony Hannah said Stevens paid an additional $3,720 to have the house jacked up. The FBI has those records, and agents recently examined Stevens' building permits, which do not mention VECO or any of the contractors who worked on the job. They also have begun questioning Stevens' former Capitol Hill aides.

Nestled at the base of the Chugach Mountains, Girdwood is a haven for skiers who love the wide-open trails and colossal snowfalls. It also attracts some of Alaska's well-heeled professionals.

For his first three decades as a senator, Stevens was poor by Senate standards.

In 1997, his largest assets were his savings in the Senate Credit Union, worth between $100,001 and $250,000 and three $50,001-$100,000 investments. One was in JLS Properties, which owned two properties in Alaska.

But after 1997, the year that Stevens became chairman of the Appropriations Committee, he began to leave the Senate's poorhouse.

Stevens' business partners in JLS were Alaska developers Jonathan Rubini and Leonard Hyde. The partnership initially invested in an office park near the Anchorage airport and a two-story office building.

Late in 2000, the year of the home renovations, Stevens showed he was willing to intervene for a business partner. He helped Rubini keep a $450 million contract with the Defense Department for housing on Elmendorf Air Force Base near Anchorage.

Stevens said he got involved only when the project stalled because of the military's concerns about the contractor's financial backing by local lenders.

"It was a competitive bid and I don't get involved in competitive bids, that's for sure," Stevens said. "But I did get involved in raising a question of whether (the lenders had) a sufficient surety for a bid by an Alaska contractor on a federal contract."

While Stevens says he was a passive investor in JLS, his assets — including high-rise office buildings — soared.

In 2004, Stevens made a change that hid many of his assets. He sold JLS investments and other assets, and placed most of them in a blind trust worth between $1 million and $5 million.

The senator was granted an extension to file his disclosure report for 2006. It will be made public in mid-July.

VECO has been a powerhouse in Alaska for years. It was the primary cleanup contractor following the Exxon Valdez oil spill in 1989 and won lucrative federal airport construction contracts. After a lull in federal business in the early- to mid-1990s, VECO landed several major government contracts at the end of the decade.

That growth corresponded with Stevens' ascension to chairman of Appropriations Committee. Since 1997, when Stevens took the helm of the committee, VECO won more than $65 million in federal contracts — more than three times what it earned in the prior nine years.

VECO won Navy engineering contracts, oil industry maintenance deals and office repair agreements and became the National Science Foundation's exclusive provider of logistical support for Arctic researchers.

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