DeSmogBlog has obtained hundreds of documents portraying the blurred lines between North Dakota’s government, the oil and gas industry and the private equity world. They also offer one of the first looks inside the professional life of former CIA Director Gen. David Petraeus after he resigned from the agency in 2012.
The documents revealย Kohlberg Kravis Roberts (KKR)ย โ a private equity firm where Petraeus now works at theย KKR Global Instituteย โย wrote a press release for North Dakota’s State Treasurerย announcing the Petraeus visit,ย meticulouslyย counseled the state treasurer’s office on media strategy andย hosted the state treasurer on its company plane.
A large part of Petraeus’ visit centered around a tour of the state’s Bakken Shale basin, where upwards of 1 million barrels of oil are extracted each day via hydraulic fracturing (โfrackingโ). The Bakken pumped out its billionth barrel of oil during hisย stay.
KKR, with $87 billion in assets,ย owns two major Bakken entities: The Ridge in Williston, ND, and Samson Resources.
The Ridge is a KKR-owned housing complex for Bakken oil and gas workers, while Samson Resources is a major companyย fracking for oil and gas throughout the U.S., including in the Bakken.ย ย
With over $4 billion sitting in an energy investment fund as of June 2012, KKR also owns over $950 million in oil and gas industry assets. Marc Lipschultz, head of energy and infrastructure for KKR, called the firm a โmini oil and gas companyโย in an April 2013 interview withย Privcap.
โWe have our own technical abilities attached to the firm we have our own back officeย [and]ย we can manage the daily flows of oil and gas in drilling wellsย and managing our own hedges,โ saidย Lipschultz.ย
KKR‘sย Stage-Managing
At face value, the Petraeus visit seemed rather banal, garnering no national press attention and little local mediaย coverage.
Amy Dalrymple, a reporter for the Oil Patch Dispatch, was the only one to cover it.ย Her short piece devoted but a single paragraph to Petraeus’ KKRย connection.
โPetraeus has a tie to the Bakken through private equity firm Kohlberg Kravis Robertsโฆwhich is partnering with other investors on a 164-acre housing development in Williston,โ Dalrymple wrote. โPetraeus works for KKR as chairman of the KKR Globalย Institute.โ
But e-mails reveal KKR stage-managed the entire event from start to finish, doing so quietly and behind theย scenes.
According to the emails, planning began on March 18, when Ari Barkan, director of KKR‘s client and partner group, reached out to treasurer Kelly Schmidt to share aย draft agenda for the forthcoming Petraeus visit. In a March 24 email, Barkan explained to Schmidt the rationale behind Petraeus’ย visit.
โGen. Petraeus would ideally like to learn as much as possible about realities on the ground connected with development of our shale gas/oil resources, including a sense of the challenges that operators, local/state governments, business leaders, and other community leaders are experiencing,โ Barkan wrote.ย
โThe development of these resources is one of the key underpinning (sic) of the nation’s renaissance, in his view, and he would be delighted to gain additional insights into what the benefits (sic) as well as the issues people are facedย with.โ
Photo Credit: Office of North Dakota State Treasurer, obtained via ND Open Recordsย Statute.
The draft and final agenda included a tour of a Bakken Shale oil field and a meeting with North Dakota community leaders at KKR‘s The Ridge, as well as a Petraeus speaking event hosted by the North Dakota National Guard and otherย meetings.
KKR facilitated how these events would unfold, breaking down the Petraeus visit minute-by-minute. And North Dakota’s government was pleased to facilitate KKR‘sย plans.ย
Photo Credit: Office of North Dakota State Treasurer, obtained via ND Open Recordsย Statute
Mediaย Management
On April 24, Schmidt e-mailed Barkan and Huller about best practice responses to media queries if anyone were to hear about the events planned for April 29 before sending out the official mediaย advisory.ย
โPerhaps a solution may be to have any press inquiries referred to my office,โ Schmidtย wrote.
From then on, after KKR agreed with Schmidt’s proposal, the treasurer’s office became the go-to place for press calls. But there were road-bumps along theย way.
โMy staff just received a press call from the Fargo Forum reporter in Williston calling to confirm the Petraus (sic) visit on Tuesday,โ Schmidt wrote in an April 25 e-mail to Barkan and Huller. โ[We] didn’t confirm or deny but took Amy’s number. How would you like me toย respond?โ
Huller responded by advising her against returning Amy Dalrymple’sย calls.
Amyย Dalrymple; Photo Credit: Twitter
โIf possible, I would not return the call. This is a result of me trying to arrange a Q&A with them,โ Huller wrote. โI have told her about everything off the record so she has no story until/unless it is confirmed by someoneย else.โ
The treasurer’s office responded accordingly, telling Dalrymple that anyone who could potentially confirm or deny was out of the office. That, in turn, putย Dalrympleย out of luck on getting a pre-event breaking newsย scoop.ย
Two days later, on April 27, Huller e-mailed a final copy of the press release written by KKRย โ but released by the treasurer’s office โ toย Schmidt.
โThe attached has room for your seal and media contact,โ Huller wrote. โThanks for everything. I am so upset I cannotย join.โ
Metadata from the attached Word document obtained by DeSmogBlog confirms the release originated from Huller’s workย computer.
That press release was distributed toย Dalrymple and other reportersย on the afternoon of April 29, e-mails show. It went up that same day on the treasurer’s office website.
On April 30, Schmidt e-mailed Huller a thank-you note, exclaiming โit was a greatย day!โ
Huller responded, โI’m so glad to hear that. I have seen a little of the media coverage and photos. Thanks so much forย everything!!โย
State Treasurer Schmidt Flies in KKR Privateย Plane
After the April 29 tour of Bakken oil country in Watford, ND, state treasurer Schmidtย accompanied Petraeus โย along with KKR‘s Ari Barkan andย Vance Serchukย โย on a private plane to Bismarck, ND. They were off to a Petraeus speaking engagement with the North Dakota National Guard.
North Dakota Treasurer Kelly Schmidt (center) and David Petraues (front right); Photo Credit: North Dakota Nationalย Guard
In anย April 17 e-mail, Barkan relayed that KKR‘s legal counsel requested for Schmidt to obtain legal clearance to ride on KKR‘s private jet from Watford to Bismarck with the rest of the KKR team. Sans clearance,ย Barkan said it could potentially be perceived as a legal conflict ofย interest.
โIt would our preference if we have something in writing from legal counsel outlining the facts (i.e. use of private plane to visit x,y,z provided by KKR who has/may have business before her, etc.) citing the statute/rule that permits her to accept the plane ride along with [their legal counsel’s] opinion that it does not violate any conflict of interest or fiduciary responsibilities,โย wrote KKR‘s legal counsel.
Photo Credit: Office of North Dakota State Treasurer, obtained via ND Open Recordsย Statute.
Thirty minutes later, Schmidt forwarded the requestย to North Dakota Assistant Attorney Generalย Janilyn Murthaย and asked her for help. Just over two hours later,ย Murtha sent out a one-page legal clearance for Schmidt.
โGiven that KKR does not have any current or pending business relationship with the [North Dakota State Investment Board] the conflict of interest provisions of the aforementioned code of conduct and associated fiduciary responsibilities are not implicated by the benefit described herein,โย Murtha wrote.
โIf in the future the NDSIB considers entering into a business relationship with KKR, and Treasurer Schmidt is then an acting board member, she may bring the prior contact with KKR to the attention of both the board and legal counsel and determine at that time if a conflictย exists.โ
Ten minutes later,ย Schmidt replied to Murtha via email,ย joking about Murtha’s verbosity.ย โLooks good to meโฆitโs a good thing you Lawyers are not paid by the word!ย lolโ
Petraeus Offers Businessย Partnership
Not discussed in Murtha’s legal memo, but well known to KKR: on April 30ย โ the day after Schmidt flew in a private jet with KKR officialsย โย Petraeus and his KKR colleagues had aย meeting with the investment director and the land commissionerย of theย North Dakota Department of Trust Lands.
Schmidtย sits on the board of the Department of Trust Landsย and an e-mail showsย she received an invitation to that same meeting with KKR.
Trust Landsย Investment Directorย Jeff Englesonย told DeSmogBlog that Schmidt did not end up attending that meeting, nor did they discuss prospective business deals with KKR duringย it.
Jeff Engleson; Photo Credit:ย North Dakota Retirement and Investmentย Office
โThere was no agenda for the meeting, nor was any specific business deal discussed,โ said Engleson in an e-mail. โOur discussion was general in nature and covered what this office does, some of the investments KKR manages for entities like us, the booming oil industry in ND, and some of Petraeus’ experiences at war and as the director of the CIA.โ
But on May 6, about a week after the meeting,ย Petraeus sent a letterย to North Dakota Trust Lands Commissionerย Lance Gaebe.
In the letter, Petraeus invitedย Gaebe to visit KKR‘s Manhattan office. Why? To talkย business.ย
Lance Gaebe; Photo Credit:ย North Dakota Department of Trustย Lands
โOn the business side, we could very much welcome the opportunity to partner with you and explore how we might be supportive, whether that is in the credit space or another area,โย Petraeus wrote. โI would also be delighted to host you on a future visit to New York. I hope you will let me know when that might beย possible.โ
Engleson told DeSmogBlog that Gaebe has no plans to take Petraeus up on theย offer.
Conflict of Interests in Conflicts of Interestย Review?
Also unspoken of in Murtha’s legal clearance: she serves asย legal counselย for the North Dakota Retirement and Investment Office’s Teachersโ Fund for Retirement’s board of directors, an arm of the North Dakota State Investment Council about which she wrote the conflicts of interestย review.
Schmidt sits on both the state investment board’s board of directorsย and theย fund for retirement’s boardย โ the latter alongside Murthaย โย by legalย mandate.ย
ND Treasurer Kelly Schmidt; Photo Credit:ย ND State Investmentย Council
Theย North Dakota Attorney General’s Office denied a request for comment on whether Murtha had a conflict-of-interest in giving Schmidt legalย clearance.
Questioned about these ties and potential conflicts of interest, Schmidt avoided offering a direct answer. But she did provide a statement about Petraeus’ย visit:
It was an honor to host General Petraeus during his visit to North Dakota. The people he met helped him better understand the challenges and opportunities that have come with the stateโs robust economy. In North Dakota we are known for extending our legendary hospitality to everyone. We believe we all can learn from public-private dialogue, especially from a great American leader like General Petraeus, who has such a significant professional background in infrastructure development and publicย safety.
Kristi Huller,ย KKR‘s director of communications for the Americas, alsoย provided a response when asked about this set ofย circumstances.ย
โWhen we visit a state, it is customary to visit with investment staff to improve our understanding and knowledge about the things they are focused on and share ideas on global developments,โ said Huller. โThis was widely publicized and the invitation, travel and events were done in accordance with applicable state and federalย rules.โ
Butย Tyson Slocum, director of theย Public Citizenย Energy Program, believes the e-mails and letters raise red flags and push the boundaries of ethicsย laws.
Tyson Slocum; Photo Credit:ย Twitter
โThe documents appear to reveal a collusive relationship between public officials and the oil industry, raising questions about whether the public interest is being served in North Dakota. KKR‘s efforts to influence North Dakota officials appear to violate ethics laws,โ Slocumย said.
Rolling out the Redย Carpet
Don Morrison, executive director of Dakota Resource Council, which recently released a 30-minute documentary titled โThis Is Our Country: Living with the Wild West Oil Boom,โ told DeSmogBlog what unfolded during the Petraeus visit is aย case study emblematic of the daily reality in Northย Dakota.
Don Morrison; Photo Credit: Dakota Resourceย Council
โThe actions of State Treasurer Kelly Schmidt unfortunately have become the norm for our current state officials,โ he said.ย โThey jump at the chance to roll out the red carpet for oil industry leaders and systematically ignore the growing impacts of fracking the Bakken on people and livelihoods.โ
Photo Credit: Office of North Dakota State Treasurer, obtained via ND Open Recordsย Statute
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