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Anchorage Daily News (AK)
September 13, 1992
Section: Business
Edition: Final
Page: C1



Daily News business reporter


After the four or so days without sleep, the lawyer lost it. In the middle of the night, his mind raging and racing, Jim Gottstein said he jumped out of a second-story window of his father's house and wandered around the schoolyard across the street in his underwear. Paramedics hauled him away to Alaska Psychiatric Institute in a straitjacket. "I was really wild when they dragged me in," he said.

The pressure of opening a new law practice and a run for the legislature combined with jet lag and a lack of sleep were more than he could stand, Gottstein said.

Released from the institution a month later, he spent the next nine months battling the depression that set in after his breakdown. Depression so deep that some days he couldn't even get out of bed.

Nearly a decade after recovering from that breakdown, Gottstein is still involved in the mental health field, but this time as a litigator rather than a consumer. He was pulled into one of Alaska's biggest lawsuits over land by a longstanding family commitment to advocacy for the mentally ill and pushed along by his own experience as a patient. That battle has made him one the most powerful people in Alaska right now.

Gottstein is the main land expert in the troika of lawyers for the mentally ill who are settling the decade-old lawsuit with the state over mental health trust land.

Courts have ordered the state to remake a million-acre land trust after Alaska took land once set aside by the federal government before statehood to pay for mental health programs.

Under a proposed settlement with the state drafted last year, those lawyers can lay claim to almost any chunk of state land outside parks, preserves and refuges. And in the process, they control many of state's own decisions on what will happen to millions of acres of state-owned land.

If you want to dig for coal on land once owned by the trust, go see Jim. If you want to build on land once owned by the trust, go see Jim. That's what the state does.

State officials downplay the power of the mental health lawyers. "They have a little more juice than the Joe Citizen, but they don't have a lot of control," said Ron Swanson, the state's top land manager.

Tell that to people who mine the land, cut the forests and drill for oil.

Uncertainty over how a new mental health trust would administer the land it acquires was enough to prompt a Japanese company to halt plans to mine the Wishbone Hill coal deposit near Palmer, said David Germer. He's a consultant to developer Idemitsu Alaska Inc. Part of the proposed mine site is on original mental health trust land.

The risk that the mental health lawyers will claim resource-rich land adds enough uncertainty to the development process that miners are running to the sidelines until the controversy is settled, said Debbie Reinwand of the Resource Development Council for Alaska Inc. And everyone involved says that could take years.

Already trust lawyers have claimed all of the Cook Inlet oil and gas leases and land at Girdwood's Glacier-Winner creeks now being eyed for a ski resort.


So powerful is the group that Natural Resources Commissioner Glenn Olds said Gottstein and the mental health lawyers can overturn his decision this summer to give Usibelli Coal Co.'s mine a break on the fee paid to the state to extract coal. Alaska's only coal mine, Usibelli is located on original trust land near Healy and the trust advocates want it back.

But as happens with anyone who has power and wields it, Gottstein is coming under attack. Critics are trying to torpedo their settlement proposal by saying, in part, that Gottstein, David Walker and Jeff Jessee the lawyers who settled with the state have a conflict of interest for accepting $880,000 so far in fees, paid by the state, that grew out of the preliminary settlement.

Gottstein, who had been at the case longer than any other of the mental health lawyers, counters that his side won in court and the state has been ordered to pay the costs. That is common in lawsuits. But beyond that, the mental health case is not just a lawsuit. For him, it's a legacy passed on from his mother.FIRE DOWN BELOW

Natalie Gottstein had a fire for righting wrongs, a fire for helping the mentally ill, said Robert Gottstein, one of her five children.

She kindled the mental health land trust lawsuit. That blaze ignited Jim Gottstein, he said. And after his mother died of cancer in 1986, Jim "continued to light the torch of his mother," brother Robert said.

In 1978, Natalie Gottstein became executive director of the Alaska Mental Health Association. That same year the legislature abolished the mental health land trust.

With that mandate, the state set about draining the million-acre land bank by giving away, selling or making parks out of land once designated to fund mental health programs.

Natalie Gottstein recruited Jim to the association board of directors. That group decided in 1982 to sue the state to get the land trust back.

Ironically, Gottstein was drafting that suit when he had his 1982 breakdown. The experience brought him up close with the weaknesses of the mental health system, he said.

He was drugged against his will, he said. Doctors took away his hope, telling him he would be mentally ill for the rest of his life and should just accept that, Gottstein said. But he rejected that notion. And with the help of Dr. Robert Alberts, an Anchorage psychiatrist, he came to understand he could recover and that others could, too.HASN'T BEEN EASY

Recovery hasn't been easy. In 1985, Gottstein got overloaded again and wound up in Providence Hospital for a week, he said.

Two years later he helped start Mental Health Consumers of Alaska, a group for survivors of mental illness.

Back in 1982, however, Gottstein was in no shape to do legal work. So the Mental Health Association hired Fairbanks lawyer Steve Cowper who later became governor to file a class-action lawsuit, said Jim Parsons, former association president.

With the association paying the bills, Cowper located mentally ill people who might have been wronged by the state's decision to abolish the trust, Parsons said. Those clients then came to embody a whole group of people in a similar situation.

In class-action suits, lawyers hold much more power than in typical civil suits. Lawyers make decisions on behalf of a number of people, many of whom may not know that someone is fighting for them.

In 1984, a dispute between Cowper and the association brought Gottstein into the fray, he said. The mental health association, with Gottstein as its lawyer, fought for and won a voice, under its own name, in the lawsuit.WORKED FOR FREE

Aside from the fact that he was a Harvard-trained lawyer committed to mental health issues, Gottstein brought another strong point to the case. He was willing to work for free, at least for a while. In 1986, the court ordered the state to pay the legal bills for him and the rest of the mental health lawyers.

In the early years it was low-profile work, a case ignored by almost everyone except those involved.

Even after the Alaska Supreme Court ruled the state must remake the trust, few took notice.

But when the Hickel administration latched on to the mental health land as a way to get land into developers' hands, Gottstein, who understood the power of land, found an ally.

In a marathon set of negotiations, state and mental health lawyers hammered out a deal to enable the state to remake the trust. The state put up 6.7 million acres as collateral until the trust is returned.

Jessee, who took part in the negotiations, said Gottstein, as lead negotiator, was a master.

"He's a very tough negotiator. But just at the point where you think, 'We'll never get agreement if we keep this up,' then somehow, there's a little glimmer of light that enters the picture, and he'll do what it takes to get an agreement. He's probably the best negotiator I've ever seen," Jessee said.

But the backlash against the deal has been growing. Environmentalists challenged the plan in court. Nine days ago a pair of oil companies sued to stop the state and mental health lawyers from entangling Cook Inlet oil and gas wells in the settlement.

Through it all Gottstein maintained the settlement is a good one. It will give the trust land to make money for people who need counseling, hospitals and other mental health services.PASSION FOR LAND

In his office overlooking Fourth Avenue, Jim Gottstein sits in front of the computer, cranking out legal documents, a yellow bowl of popcorn at his left hand.

Surrounding him is the comfortable clutter of someone who works for himself. Photos of his wife, son and airplane sit on the window sill and hang on the wall. Eskimo masks and carvings hang there, too, and the tables are piled high with legal files.

Down the hall, the mental health lawyers have their land office. This miniature state Department of Natural Resources has a computerized data bank filled with information on state land, file drawers brimming with maps, and a small staff to help select and value state land for the trust.

Tom Hawkins, a former deputy commissioner of the Department of Natural Resources, ran the mental health lawyer's land office until he joined Bristol Bay Native Corp. this spring.

Gottstein passionately believes in the power of land as a vehicle to earn money, Hawkins said.

"Perhaps it's part of the family lineage. Jim is the one (of the three lawyers) who keeps his eye on the real estate ball the closest."

Jim's father, Barney Gottstein, built a business empire as much on real estate as he did on pallets of groceries. The owner of food wholesaler J.B. Gottstein & Co. Inc., teamed with grocer Larry Carr to build Alaska's largest retail food chain, more than a dozen shopping centers and malls as well as residential and commercial developments all over Anchorage.

Carr and Gottstein sold the food and transportation sides of the business in 1990 for an undisclosed sum and retained much of their real estate holdings.

The Gottstein family is chocked with twins. Jim, 39, has a twin sister Ruth Anne. His younger brothers, Robert and David are also twins.

As a teen-ager, Jim Gottstein said, he "humped groceries," loading trucks in his father's warehouse. Later he worked in the computer operation at J.B. Gottstein, where computers are essential tools for tracking all their inventory and orders.FLYING HIGH

Jim Gottstein inherited his father's passion for flying. At their father's insistence, all three Gottstein boys got their pilot's licenses in high school, said Robert Gottstein.

When most kids were pleading for the car keys for the night, Jim was borrowing his father's Cessna 172 for flights to Kenai or Homer.

Although his brothers no longer fly, Jim still does. And he proudly recalls how he flew a trio of musicians from the band Grateful Dead to Homer for dinner during their 1980 show here. Without much searching, he reached behind a stack of legal files and unfurled a wrinkled poster from the band's West High concert.

When he started college at the University of Oregon in 1971, Gottstein figured he would study business and return to Alaska to work with the family company.

But after his first course in business law, Gottstein said he found a calling, and after ripping through the university in three years, he went to Harvard Law School.

Gottstein returned to Alaska and since then worked for two private law firms, as in-house council for Carr-Gottstein Inc. and for himself. Working with lawyer Robert Goldberg, Gottstein helped Ahtna Inc. with its land disputes.

Lidia Selkregg, a longtime family friend who worked as a land-planning consultant to Ahtna, said Gottstein set up a computerized land program for that project, a technique Gottstein adapted for the mental health land issue.

"He's a real computer jock," said Walker, the lead attorney in the mental health case. "Frankly it's saved our bacon numerous times in terms our ability to turn things around quickly."

When legal briefs are due, Gottstein writes the first drafts, said Jeff Jessee. "He's a word machine."

Billings submitted to the state show he's a money machine, too.

Gottstein's billings have been the highest of the three mental health attorneys settling with the state.

A July 23 letter from Walker to one of his clients, the Alaska Alliance for the Mentally Ill, shows Gottstein billed $262,548 since spring 1991 to implement the preliminary settlement with the state. That amount also included work done by two other independent attorneys working for Gottstein, the letter shows.

Walker, also a sole practitioner, billed $230,781 for himself and the work of two law firms assisting him.

Jessee, a staff attorney for Advocacy Services of Alaska, an agency for the developmentally disabled, billed $26,648 for fees and expenses.

The land office, consultants and some of the out of pocket expenses paid by three lawyers cost an additional $360,234, the letter shows.

For Gottstein and the other lawyers to collect that kind of money from the state to implement a settlement that hasn't even been approved by the court is a conflict of interest, charges lawyer Philip Volland.

He's a lawyer representing chronic alcoholics who need mental health programs. At one time Volland was allied with the other three lawyers. But he has split with them saying the settlement with the state is a bad deal that could give less money to mental health programs and keep the lawsuit alive.BIG FEES

The big fees Gottstein, Walker and Jessee get from the state may be clouding their abilities to tell their clients of the deal's drawbacks, Volland wrote.

What's more, Gottstein, Walker and Jessee were more preoccupied with negotiating a fee agreement with the state and writing a report to sell their proposed settlement to their clients than they were with moving forward onnegotiations of unresolved legal questions on the deal, Volland charged in court papers.

Gottstein and Walker both said Volland's claims are groundless. They negotiated the best deal they could for their clients, they said. Volland gets his fees from the state, too, they said. He just submits his bills to the court first.

Volland will argue the issue in a court hearing in Fairbanks next week and plans to put his colleagues on the witness stand, he said.

Gottstein figures he will prevail in court, but not necessarily in the public eye.

"There's kind of no way for us to win on this fee issue," Gottstein said. "People just think lawyers are getting rich off of this. But I think that's really a red herring. You have look at who created this problem. It wasn't us."

Copyright (c) 1992, Anchorage Daily News

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