Opinion ID: 2829639
Heading Depth: 2
Heading Rank: 3

Heading: Post-Auction

Text: Shortly after the auction the Department determined that Benchoff, Meisterheim, and Kerr had not submitted statement of qualifications forms. They were notified that they had been disqualified. Krause contacted Meisterheim and Benchoff and reported that “both told me they had fil[l]ed one out but neglected to turn it in.” The Department also held a public meeting in Nome on October 19, at which participants stated that “the auction process changed over three times, creating confusion,” and that “[i]t seemed that the bidding process was casual with nobody responsible for checking documents and qualifications and that there was lots of confusion in the process.” D. The Director’s Determination On Incomplete Bids Director Brent Goodrum of the Department’s Division of Mining, Land & Water issued the first adjudication in this case, the Director’s Determination on Incomplete Bids, in October 2011. The Director’s Determination applied to the twelve tracts on which either Benchoff or Meisterheim was the high bidder, the three tracts on which Benchoff was the second-highest bidder, and one tract on which the Director mistakenly listed Benchoff as the high bidder. Kerr was the second-highest bidder on that last tract, Tract 3. The Director’s Determination did not purport to apply to the other tract on which Kerr was the second-highest bidder, the four tracts on which Kerr was the third-highest bidder, or the tract on which Meisterheim was the second-highest bidder. The Director referenced 11 AAC 82.445, which provides: No bid may be considered unless supported by the deposit and information required by 11 AAC 82.425, 11 AAC 82.428, and 11 AAC 82.430 unless the commissioner determines that any omission was immaterial -5- 7035 or due to excusable inadvertence and if the omission is corrected in the manner provided by notice of sale. The Director wrote that “it appears that there may have been some misunderstandings during the sign-in process the day of the sale that contributed to the incomplete bids. Consequently, the omissions are determined to be due to excusable inadvertence.” He gave Benchoff and Meisterheim ten days to file their completed statement of qualifications forms, and both did. The Director’s Determination also stated that “[t]he department is aware that there are several second and third-highest bids with omissions. Determinations regarding completeness of these bids will be made in the event that such determinations become necessary.” E. Norm Stiles’s Appeal Norm Stiles was the second-highest bidder on Tract 4, one of the tracts on which Meisterheim was the highest bidder. In November 2011 he appealed the Director’s Determination to Daniel Sullivan, the Commissioner of the Department. F. An Interlude – The Murphy Tracts Dan Murphy, a properly qualified bidder, was the high bidder on Tracts 1 and 3. He did not make timely payments on these leases, which made them available to the second place bidders — Benchoff and Kerr, respectively. In early January 2012 the Department offered Kerr the opportunity to lease Tract 3. Krause, the Department employee who oversaw the lease auction, stated in a later affidavit that although he knew Kerr had not submitted the required statement of qualifications at the auction, he believed that Kerr had submitted the form shortly after being offered the opportunity to lease the tract. Kerr signed the lease in February, and the Department signed and executed it first in late March 2012 (by a non-authorized Department employee), and then again in August 2012 (by an authorized Department employee). -6- 7035 The Department did not offer Benchoff the opportunity to lease Tract 1 after Murphy failed to make his payment. The Commissioner later explained that “[s]ince Mike Benchoff was the #2 bidder for Tract 1, the division did not proceed with offering that tract for lease because of the pending appeal” of the Director’s Determination. G. Norm Stiles’s Appeal The Commissioner acknowledged Norm Stiles’s appeal in a January 26, 2012 letter. The letter explained that the appeal would stay any action on not just Tract 4 but also the eleven other tracts on which Benchoff or Meisterheim was the highest bidder “because a decision on this appeal will affect the other tracts and the bidders for those tracts.” It also explained that the decision on appeal would not apply to four tracts the Director had included because as to Tracts 1, 17, and 23 “there is no uncertainty about the completeness of the highest bid,” and the other, Tract 3, “was mistakenly included.” The Commissioner’s letter noted that Department regulations allowed cross-participation in appeals and stated: By this letter, I am notifying the three highest bidders for [the twelve affected tracts] of their right to participate in this appeal. Participation in the appeal is voluntary. The applicant/bidder may respond to the issues presented in [Norm Stiles’s] appeal (copy attached). Additionally, since the director’s October 27, 2011 decision referred to “omissions of the two bidders” and “some misunderstandings during the sign-in process the day of the sale and incomplete bids,” the applicant/bidder’s response should also include any information that may be relevant to the sign-in and/or bidding process in Nome on September 28, 2011. . . . If nothing is received by [the response deadline], I will assume the applicant/bidder has chosen not to participate in the appeal. -7- 7035 Solomon Gold, Inc., the second-highest bidder on four tracts for which Benchoff was the highest bidder and an appellee here, participated in the appeal by a February letter to the Commissioner. Meisterheim and Benchoff did not submit any response. Subsequently Stiles and Meisterheim reached an agreement whereby Meisterheim agreed to withdraw his successful bid on Tract 4 in exchange for Stiles’s withdrawing his appeal. They communicated this to the Commissioner, who accepted their agreement and notified all parties that the appeal had been closed. Solomon Gold appealed the Commissioner’s decision to close the appeal to the superior court. Ultimately Solomon Gold and the Commissioner stipulated to an August 2012 order remanding the matter to the Commissioner for a decision on the merits. This order “reinstated” the stay as to twelve tracts: the ten on which Benchoff was the original high bidder, the one remaining on which Meisterheim was still the high bidder, and Tract 1, the tract for which Murphy was originally the high bidder but, due to his failure to pay, Benchoff was now in position to lease. H. The Commissioner’s Decision On Remand In early June 2013 the Commissioner issued his Decision on Remand. He “decided the October 27, 2011 Director’s Determination was in error,” and therefore rejected Meisterheim’s and Benchoff’s bids for the twelve tracts in the remand order. The Commissioner’s Decision on Remand first laid out the factual and procedural history of the lease auction and subsequent litigation. He quoted from three responses he had received to his January 26, 2012 letter that described the Nome auction. Two felt that the instructions were “abundantly” or “very” clear, while the third noted the potential for “confusion” amid “the extreme excitement of the day of the auction.” Turning to the merits the Commissioner “decide[d] that the October 27, 2011 Director’s Determination was in error because it was contrary to the applicable law. The applicable regulations require that a bidder submit qualification statements before -8- 7035 or at the public auction.” He distilled the statutory and regulatory requirements as follows: 11 AAC 82.428 and 11 AAC 82.435 require a bidder to submit the qualifications information described in 11 AAC 82.200 and 11 AAC 82.205 before or at a competitive mineral lease sale or auction. Under AS 38.05.250(b), the lease can only be offered to the qualified person who offers the highest bid. (Emphasis in original.) The Commissioner determined that “the information in the DNR record does not support the director’s finding of excusable inadvertence” under 11 AAC 82.445. The Commissioner noted that the public notice for the auction had documented the need for every bidder to submit a statement of qualifications at the sale. He noted that the agenda demonstrated that Krause verbally announced that requirement. He noted that the sign-in sheet included a column that asked whether the bidder had submitted the qualifications form, and that Meisterheim had written “yes” and Benchoff had left the space blank. And he noted that Krause wrote an email after the auction that reported that both Meisterheim and Benchoff had told him that they filled out the missing form but neglected to turn it in. The Commissioner thus announced his findings: Reviewed in its entirety, I find that the DNR record does not support the director’s conclusion that Scott Meisterheim’s and Mike Benchoff’s failure to each submit the required Statement of Qualifications form prior to bidding at the Nome auction on September 28, 2011 was due to “excusable inadvertence.” The record shows that all bidders had ample notice that the form was required prior to bidding at the Nome auction. While a minor technical omission on a Statement of Qualifications form, such as an incomplete address or phone number, might be viewed as immaterial or due to excusable inadvertence under 11 AAC 82.445, there is no analysis in the Director’s decision or apparent basis in the record to conclude that failing entirely to submit a Statement of Qualifications form is immaterial or due to -9- 7035 excusable inadvertence. Contemporaneous information in the form of Kerwin Krause’s October 13, 2011 email documented that both Scott Meisterheim and Michael Benchoff admitted they did not submit their Statement of Qualifications forms at the Nome auction. Finally, when given the opportunity to explain what happened at the Nome auction by responding to my January 26, 2012 letter, Scott Meisterheim and Michael Benchoff did not reply. Even if it could be construed that Scott Meisterheim’s and Michael Benchoff’s failure to submit their Statement of Qualifications forms prior to bidding at the Nome auction was somehow due to “inadvertence,”16 the Director erred by finding that inadvertence was excusable since (as discussed in Point #2) department regulations require that the qualifications statement information must be submitted prior to or at a competitive mineral lease sale and is a prerequisite that demonstrates a bidder is qualified to both apply for (bid) and acquire mining rights in Alaska. There was “inadvertence” by department staff at the Nome auction since Scott Meisterheim and Michael Benchoff were given bid # cards that enabled them to make several outcry bids, without verification by department staff that Scott Meisterheim and Michael Benchoff had in fact submitted their Statement of Qualifications forms prior to bidding – a mistake that was not discovered until after the auction when department staff returned to Anchorage. But the staff error does not alleviate the bidder’s responsibility to comply with the law and submit the required qualifications information, a requirement for which all bidders had notice prior to the Nome auction, nor is it grounds to disadvantage the other competing bidders who complied with the law and properly submitted their Statement of Qualifications forms prior to the bidding. ____________________ 16 “Inadvertence” is defined as “the fact or action of being inadvertent; inattention.” “Inadvertent” is defined as -10- 7035 “not turning the mind to a matter; inattentive; unintentional.” Webster’s Ninth New Collegiate Dictionary, 1983. The Commissioner therefore vacated the Director’s Determination and rejected Meisterheim’s and Benchoff’s bids for the twelve tracts.