A newly released legislative audit raises questions about whether former Revenue Commissioner Adam Crum met his statutory and fiduciary duties when he invested millions of dollars from the state’s primary rainy day account into a private equity fund last summer.
The report by the Division of Legislative Audit found that there’s a lack of evidence about whether Crum met his fiduciary duties.
That “brings into question” whether or not he complied with his “statutory obligations and the prudent investor rule,” says the audit, released Wednesday.
Sen. Bert Stedman, a Republican and co-chair of the Senate Finance Committee, said Friday after seeing the report’s findings that the committee would hold hearings on the issue next week, adding that he believes Crum should be “personally liable” for his actions.
Crum resigned in August and is now a candidate for governor.
He has said that the Constitutional Budget Reserve Fund had been underperforming and not addressing it would have been a breach of his fiduciary duties as commissioner.
In a statement from his campaign Friday, he said he had the authority to invest the funds.
He said the audit backs up a January report by national law firm WilmerHale, commissioned by Gov. Mike Dunleavy, that found no conflict of interest, self-dealing or criminal wrongdoing.
But that report also found that Crum’s “deviations from the non-routine investment protocol, overall lack of diligence during the investment process, and other issues raise significant concerns about whether he met his statutory fiduciary duties.”
As revenue commissioner last summer, Crum decided to invest up to $75 million from the Constitutional Budget Reserve into a digital infrastructure firm called DigitalBridge, for an investment period of at least five years, the audit says.
The commissioner has the legal authority to “invest and manage all state funds,” the audit says.
Crum’s investment involved directing staff to move money from the reserve into a subaccount designed for long-term investments that could make more money. The reserve currently holds $3 billion.
But the move came after the Senate Finance Committee had notified Crum that it was “highly likely” that the money in the reserve would be needed within two fiscal years to balance the state budget, the audit found.
The investment also came despite a requirement that the money couldn’t be moved from the reserve and into a subaccount unless it was not needed for five years, the audit found.
Crum also provided the reserve’s projected allocations in June 2025, at the request of the Senate Finance Committee, but did not notify the committee of his intention for the planned investment, or other investments he planned, the audit says.
Crum also “did not adhere” to several of the Department of Revenue’s investment procedures, including seeking guidance from the appropriate investment officer or expert to evaluate possible alternative investments, the audit found.
Crum has “stated that the non-routine long-term CBRF investment was in the best interest of the State,” the audit says.
“It is unclear why the commissioner did not follow DOR non-routine investment procedures,” the audit says. “A lack of formal oversight of the DOR commissioner’s investment functions contributed to the noted deficiencies.”
Dunleavy in January signed an administrative order to enact recommendations in the WilmerHale report to increase transparency of future investment decisions and protect Alaska’s constitutional rainy-day fund. Those steps must be implemented by July 1.
The newly released findings in the legislative audit about the investment are a small part of the division’s annual “single” audit, which reviews the state’s basic financial statements and compliance with the law.
Crum said in the statement from his campaign, “the Commissioner of Revenue has the authority to invest these funds for stronger, long-term returns. I took the time to study the options, then made the call to invest in infrastructure, one of the safest and most reliable investments out there.”
“The audit reinforces what the independent WilmerHale review already found: I had clear statutory authority, there was no evidence of conflict of interest or self-dealing, and the investment was made in the best interest of the State of Alaska,” he said in the statement.
“If this audit leads to clearer procedures for future commissioners, that’s a good outcome,” he said in the statement. “Conservatives believe in efficient, accountable government. That means building institutions that work well, not just for today, but for the next person in the chair. I support that process. That’s what oversight is for.”
The WilmerHale report had also found that Crum engaged an outside law firm to represent the Department of Revenue in the transactions, despite established statutory procurement procedures requiring that Alaska’s attorney general approve engagements for legal services.
“It’s pretty clear to me that the ex-Commissioner circumvented his fiduciary duties intentionally, did not follow the statutes and used outside counsel instead of the Department of Law, thereby breaching his fiduciary duty,” Stedman said Friday after the Division of Legislative Audit report was released. “And I think he should be personally liable.”
In the end, $20.6 million was invested. The state was able to recover most of that money, a letter from acting Revenue Commissioner Janelle Earls has indicated. Still, the state lost $860,000 while the money was invested, due to management fees and expenses.
The legislative audit includes a response from the revenue department, in which said it does not dispute the findings of the WilmerHale finding involving Crum’s missteps.
But the department indicated there’s a lack of clarity regarding Revenue policies and procedures.
“For example, the non-routine investment protocol is silent regarding the timing for notifying the Senate and House Finance Committees of an investment decision (in contrast to the timing requirement for notification of the Office of Management and Budget and the Division of Legislative Audit), and does not specify in detail how the commissioner should seek guidance from internal and external experts and document that advice,” the statement says.
Rep. Andy Josephson, co-chair of the House Finance Committee, said there’s likely not enough time in the current legislative session to address the issue.
But he hopes the Legislature will take action starting next year to prevent similar issues from happening in the future.
“To avoid this situation again, I’m hopeful that a thoughtful process occurs where legislators look at reforming the commissioner’s authority in this area,” he said.
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