Last summer, an unsettling quiet cloaked the isolated Southwest Alaska community of King Cove as the town’s economic engine — a sprawling seafood processing plant — sat shuttered.

Bunkhouses, once filled with hundreds of workers during the peak salmon harvest, were vacant. Four diesel generators that had rumbled day and night were stilled. The plant docks, once lined with boats and circled by fish-scavenging gulls, were empty.

The closure resulted from the financial implosion of the plant’s owner, Peter Pan Seafood. Some local fishing boat captains directed their ire at company leaders who accepted their seafood, then failed to pay them.

They dwelled far less on a surprising, largely silent, powerhouse investor in the plant: the state of Alaska.

The trustees of Alaska’s Permanent Fund, an $80 billion savings account whose earnings provide residents with annual dividends and help pay for government services, decided to invest more money in companies with ties to Alaska. More than $29 million went to Peter Pan, according to figures provided by the Permanent Fund’s current board chair.

The deal ended disastrously last year with the company’s liquidation, hundreds of unpaid creditors and a likely total loss for Alaskans on their investment.

A ProPublica investigation, in collaboration with the Anchorage Daily News and Northern Journal, revealed that the Permanent Fund’s leadership and its hired management firm ignored or overlooked warning signs leading up to the deal.

The management firm, McKinley Capital Management, had scant experience in restructuring private companies to boost profits — a skill set that would be essential in its Peter Pan deal.

McKinley chose an entrepreneur with troubling chapters in his career to be a business partner in Peter Pan and to help run the company. He had pleaded guilty to a federal misdemeanor criminal count in 2006 stemming from the marketing of tainted fish and was involved in another Alaska seafood processor that went belly-up months before the Peter Pan deal closed, a business failure that drew FBI scrutiny.

Amid a long-term decline in state revenue from oil, the Permanent Fund faces increasing pressure to deliver earnings. The Peter Pan venture illustrates the risk involved in seeking some of these returns within Alaska. When failure occurs, the impact is local, not in another state or a foreign country where a Wall Street firm has invested Alaskans’ money.

In King Cove this winter, the processing plant, the community’s largest generator of jobs and tax income, remains closed. City leaders are contemplating slashing a third of next year’s budget and are likely to ask the state to bail them out. Some families have already moved away, and school enrollment is down 20%.

“Events have conspired to threaten our very existence,” said King Cove Mayor Warren Wilson, in a commentary published in the Anchorage Daily News.

About $56 million from the Permanent Fund remains invested by McKinley, the firm that put together the Peter Pan deal. Its investments have ranged from a kelp processing venture to a satellite launch company that, last year, narrowly averted filing for bankruptcy. These investments — dragged down by Peter Pan — have dropped 21% in value since 2021. That is the worst three-year return of any individual investment fund shown in the Permanent Fund’s December performance report.

The seafood industry is notoriously volatile, and Peter Pan’s failure came during a difficult period. Collectively, the industry in Alaska lost an estimated $1.8 billion between 2022 and 2023, according to a federal study.

Craig Richards, a Permanent Fund trustee and former Alaska attorney general who led the effort to create the state-focused investment program, said he’s not ready to declare it a failure. A second investment firm managing a portion of the fund’s Alaska-focused investments has produced far better results than the one that bet on Peter Pan.

“This is a business risk, and sometimes when you take risks and you hold private portfolios, you’re going to have failures,” Richards said. “That doesn’t tell me there’s inherent danger in the Permanent Fund making in-state investments. It tells me that fishing is risky.”

Other trustees see it differently. In the spring of 2023, all but Richards voted to keep the $200 million in-state program from expanding. Jason Brune, the current chair of the six-person board, was one of the critics.

“We are not a training ground for Alaska investment opportunities to see if they can work or not work,” Brune said in an interview. “Our statutory responsibility is to maximize returns for the state.”

A New Kind of Investment

Alaskans voted to create the Permanent Fund nearly a half-century ago, when the state was awash in royalties and taxes generated by recently discovered oil. The fund grew into a portfolio of stocks, bonds, private companies and real estate that now churns out multibillion-dollar returns. The earnings finance much of state government and provide annual dividend checks that typically exceed $1,000 per resident.

Scarcely any of the money, though, is invested within Alaska. After falling oil prices slammed the state’s petroleum-dependent economy in 2015, some of the fund’s governor-appointed trustees posed a question: What if a chunk of the portfolio went to investment firms and businesses with Alaska ties?

Alaska has a patchy record of government-sponsored investment and economic development. Those efforts include hundreds of millions of dollars spent studying a hydroelectric dam that was never built and tens of millions building an Anchorage seafood plant that failed.

Two former Permanent Fund employees told ProPublica that staff members considered the proposed in-state investment plan a distraction from their mission to maximize returns regardless of geography — and that they made that position clear to board members in private.

Staffers also considered the $200 million investment that trustees proposed to be too hefty for the scale of business opportunities connected to Alaska’s small economy. (The former employees requested anonymity to express views contrary to those of some board members.)

Still, the trustees approved the program unanimously in 2018. The Permanent Fund chose to hire outside management firms to make the investments, a standard operating procedure that, in this case, would insulate trustees and staff members from lobbying by Alaska businesses seeking money. Richards, the program’s champion, said he didn’t recall pushback from the staff on in-state investments but thought the outsourcing plan would address concerns that might arise from such an initiative.

In the end, only two firms bid on the contract: Barings, a $420 billion subsidiary of the finance giant MassMutual, and McKinley Capital, based in Anchorage.

At McKinley’s head was Rob Gillam, a third-generation Alaskan bullish on the economic potential of his home state. Gillam had recently taken over as chief executive of the firm founded by his father, Bob, a colorful player in Alaska business listed as one of the state’s wealthiest residents before dying of complications from a stroke in 2018.

Rob Gillam, now 52, spent parts of his youth in Southwest Alaska’s Bristol Bay region — including at his father’s fishing lodge, where guests could savor aged whiskey and king crab. The younger Gillam roamed drainages that sustain the world’s largest sockeye salmon runs. He once told an interviewer he would “rather be in Dillingham,” a Bristol Bay salmon hub, than Davos, the Swiss resort area that hosts annual conclaves of billionaires.

Gillam’s father oversaw billions of dollars in investments for the Permanent Fund and other clients, but the money largely stayed in the plain-vanilla world of publicly traded stocks and bonds.

Rob Gillam’s bid for a piece of the new $200 million investment program would take the firm into a different realm: private equity, which entails buying private companies, finding ways to boost their profits and selling them for a big return.

Private equity requires specialized skills, and a critical one is hard-nosed due diligence before an investment is made. That may include running background checks on key partners and sifting through litigation to uncover red flags, according to Eli Gralnik, a due diligence specialist at a consultancy called Alias Intelligence.

Gillam, who declined to be interviewed, said in a statement that McKinley was up-front with the Permanent Fund about its lack of private equity experience. He said he has always believed in “Alaskans investing in Alaskans” and noted that the Permanent Fund, in its announcement about the in-state program’s launch, said it was trying to generate attractive returns by backing “emerging” managers locally. “Emerging generally means new” to a line of investments, Gillam wrote.

Gillam said he’s done numerous personal business deals in his career and that his firm hired an experienced Alaska investment adviser to help manage McKinley’s private equity work. (The adviser did not play a leading role in the Peter Pan deal, according to two sources familiar with McKinley but unauthorized to disclose sensitive information. The adviser declined to comment.)

One of the former Permanent Fund employees said the staff was uncomfortable with giving McKinley part of the in-state portfolio but felt pressure from trustees to hire an Alaska-based firm.

“We couldn’t, politically, not choose McKinley,” said the former employee.

Richards, the Permanent Fund chair at the time and the main advocate for the in-state investment plan, called this assertion “poppycock.” He said the idea that the board had an “implied or expressed” expectation of whom the staff should choose is “not accurate in the least.”

Staff members ultimately agreed to split the $200 million between Barings and Gillam’s McKinley Capital.

With $100 million in hand, Gillam was ready to plunge into private equity. McKinley Capital secured another $17 million from investors beyond the Alaska Permanent Fund. McKinley called the joint project the Na’-Nuk Investment Fund, after the Iñupiaq word for polar bear.

Then, the bear started hunting for deals.

The Seafood Entrepreneur

An opportunity soon emerged for Gillam that was centered in Southwest Alaska, the region Gillam knew and loved. The idea was to turn around the flagging seafood company Peter Pan — aided by a charismatic entrepreneur with a mane of blond hair, a passion for pickleball and an eclectic resume.

Rodger May has produced Hollywood movies featuring John Travolta, Julia Roberts and Danny Devito. He bankrolled a hunt for sunken treasure near Juneau and owns a Washington-based wagyu beef company. He works out of his home on Maui and sometimes from a second large, lakeside home south of Seattle.

May, now 59, launched his seafood industry career as a college student in the 1980s when he founded a Canadian salmon import business. Since then, he has sold billions of dollars of seafood, he said in a 2024 court filing. Big box stores and food service companies are major clients.

His business career has also, on occasion, drawn scrutiny from federal authorities.

May entered into a consent decree in Seattle in 2000 to settle charges of violating a federal safety law intended to keep unsafe foods out of interstate markets — in this case, smoked salmon that allegedly was not properly prepared and risked forming toxins during the product’s shelf life. May did not admit to wrongdoing but agreed to take steps to ensure product safety, including implementing a processing plan developed by a food safety expert.

Six years later, after a Food and Drug Administration investigation, May pleaded guilty to a criminal misdemeanor count stemming from vacuum-packed fish that federal officials said was contaminated by an ammonia leak. May’s company was fined $400,000.

In court filings, May said the fish was sold at a deeply discounted price and labeled for use only as bait, as required by the federal government. But other companies resold a portion to federal prisons, and inmates in Minnesota reported suffering stomach disorders, prosecutors said in a sentencing memorandum. While prosecutors wrote that May admitted some sales were made “with a wink and a nod,” May’s attorney wrote that his client did not “advise or have knowledge of the mislabeling of the fish.”

The court cases were long past when May and McKinley Capital began talking about a partnership in 2020, the year after McKinley was entrusted with the Permanent Fund’s money.

May had known Rob Gillam and his father for years and had visited the family fishing lodge, according to two sources who said Gillam talked about the visits. May also previously served on a corporate board with Jared Carney, vice chair of McKinley’s board, federal securities records show.

Three investors — May, McKinley Capital and a third partner, Los Angeles-based RRG Capital Management — would pool their money. May’s Washington-based fish company would merge with Peter Pan, which had four Alaska processing plants that had been losing money for its Japanese owners, and May would take a leadership role. Everyone’s investment would nearly double in value by 2026, one financial projection showed.

What did May’s would-be partners know about his business background at the time?

ProPublica obtained one data point: a “quality of earnings” report, produced for RRG before the deal closed. It examined May’s company, Northwest Fish. The report found it profitable with annual revenue that for two years exceeded $100 million, but its authors cautioned that the company-supplied figures were unaudited.

The report also noted May’s partial ownership of an Alaska seafood business called Golden Harvest Alaska Seafood. It omitted that the company had collapsed months before, making headlines when it shuttered its processing plant on the remote Aleutian island of Adak. May was one of four Golden Harvest board members, according to interviews with investors.

Fishing boat captains alleged in court they were owed more than $2 million, although they later withdrew their lawsuit, citing dim prospects of getting paid.

Separately, a forensic audit commissioned by some of the company’s investors found evidence of financial fraud, including “improprieties” in financial submissions to a bank, according to a copy of the document obtained by ProPublica. The audit said that company officials submitted documents to the bank showing “the company was profitable when, in fact, it was not.”

The audit findings were handed over to the Alaska State Troopers, spurring an FBI investigation that included interviews with commercial fishermen and several investors but ultimately no charges, according to investors familiar with the inquiry. May said he was aware of the FBI investigation but was never interviewed by an agent. He said it had nothing to do with him, adding that “we were one of the largest losers in this debacle.”

An FBI spokesperson, Chloe Martin, said the agency does not confirm or deny the existence of investigations unless or until charges are filed.

Gillam declined to comment on the scope of McKinley’s vetting of May and his businesses or what it found.

A source familiar with the vetting process indicated that Gillam and the other partners in the Peter Pan deal were aware of the federal scrutiny May received early in his career over food safety. But they also reviewed his strong record of seafood sales through the decades, according to the source, who asked not to be named due to the confidentiality requirements of private equity deals.

The source said the formal vetting process did not turn up the allegations of financial fraud at Golden Harvest.

Jason Scharfman, a due diligence expert, said that McKinley or its partner should have uncovered the Golden Harvest lawsuit had they taken steps common in the private equity world — like hiring a private investigator or other professionals to conduct “boots on the ground” research on May’s businesses. Those efforts, in turn, could have led to information about a government investigation.

“It’s not clear that McKinley and its business partners were asking questions that would surface such concerns,” said Scharfman, after a reporter read him an excerpt of the “quality of earnings” report on May’s business.

As for the Permanent Fund, Allen Waldrop, the fund official who oversees private equity investments, said the staff doesn’t interfere with the individual investment decisions of their private money managers.

But the staff had at least one opportunity to raise objections: The Permanent Fund’s agreement with McKinley contained what’s known as a “concentration limit,” restricting how much money could go into a particular deal. Waldrop said Gillam’s team asked the Permanent Fund to waive the cap for Peter Pan, to which staffers said yes.

So, on Dec. 31, 2020, two weeks after the report on May’s businesses was delivered, his new business partners closed the deal. Alaska residents were about to wager a small piece of the Permanent Fund, the source of their annual dividend checks, on a seafood company.

The Turnaround Begins

King Cove, 625 miles southwest of Anchorage, spreads across a swath of the Alaska Peninsula often shrouded in fog. Summer sun breaks reveal vistas of precipitous slopes mantled in deep green grasses — with distant volcanic peaks shrouded in snow.

Since 1911, boat captains — many of them descendants of Indigenous Unangax̂ who resettled from nearby islands — have been delivering bountiful catches to the town’s seafood processing plant. It sits along a narrow spit frequented by brown bears.

In the decade leading up to the acquisition, residents complained that Peter Pan’s Japanese corporate parent was letting the plant fall into neglect.

May and his partners promised to shake things up. They would develop new products that commanded a premium. When buying fish, they would be fiercely competitive with processors in other communities. More fish flowing through Peter Pan’s production lines would boost earnings so that the company could later be sold at a profit.

Many industry observers were skeptical, noting increasing foreign competition as well as the age and remoteness of Peter Pan’s plants.

“Everyone is losing money in the Alaska salmon industry,” read a headline in Intrafish, an industry trade publication. “Why do Peter Pan’s new owners think they’re different?

Gillam was confident. In a 2021 interview with another industry publication, National Fisherman, he emphasized the enduring demand for sustainably harvested seafood in the pandemic and the experience of the team that would execute on the Peter Pan deal. “What’s most unusual about our transaction,” Gillam said, was the addition of May’s sales organization to form “a vertically integrated, global seafood powerhouse.”

Two summers of huge salmon runs ensued, fueling a surge in production at the King Cove plant and record tax hauls for the city government.

But economic headwinds and years of underinvestment in Peter Pan’s assets made it hard to convert the enormous catch into corporate profits.

One big problem was the skyrocketing cost of labor in Alaska. Hourly wages for the plant’s foreign workers, set by the federal government, rose 30% from 2020 to 2022 even as a pandemic forced costly quarantines.

Another challenge: Peter Pan’s aging King Cove plant required costly maintenance. Salmon canning equipment repeatedly broke down. Many spare parts were secondhand.

“We were slowly making progress,” said Jon Hickman, Peter Pan’s vice president of operations between 2021 and 2023. “But stuff was pretty tired.”

The company funded upgrades. Bunkhouses got new siding. Junk equipment and old nets were hauled away. The workforce expanded.

“Everybody got extra helpers,” said Alejandro Cornil Jr., who’d worked at the King Cove plant for more than three decades. “I got two employees that I didn’t need.”

May, Peter Pan’s president and chief growth officer, focused on marketing the company’s products. He would later say in court filings that he tripled Peter Pan’s sales and also personally lent the company nearly $40 million to keep it afloat.

In 2023, two years into the new ownership, a global downturn in seafood markets put the company under severe pressure. Warehouses filled with unsold product, running up storage bills, and the company struggled to make payments to fishermen.

In January 2024 came a bombshell announcement: The King Cove plant would not open for the winter fishing season.

“You can’t keep on going to work producing a product, and selling it at a loss,” May told Northern Journal at the time. He would later tell ProPublica that Peter Pan was hit with an array of economic blows that created a “perfect storm.”

In April, bank creditors found Peter Pan in “imminent danger of insolvency.” They filed a motion in a Washington state court to take control from the owners, then moved to liquidate the company.

Peter Pan and its processing plants would be sold at auction.

Aftermath

For King Cove residents, Peter Pan’s plunge was a wrenching development that put boat captains in line with hundreds of other creditors seeking to get their money back.

City Council member Dean Gould was one of the hardest hit. Peter Pan owed him more than $185,000 for his catch of Dungeness crab and salmon the company processed in 2023, Gould said in a receivership filing.

Gould started fishing at age 10, inheriting his boat, the 53-foot Northern Star, from his father. For decades, he was loyal to Peter Pan, selling the company his catch even when competitors paid higher prices.

With the plant closed, Gould and other King Cove fishermen scrambled to find plants in other communities that would buy their catch. Gould dipped into retirement savings to pay his crew and other expenses.

But the season was a bust.

During one July opening, Gould pulled in fewer than 400 salmon in a day, not even enough to cover his fuel costs.

“Wishing, wishing, wishing there would be more, but there ain’t,” Gould said. “If I had that money in the bank, I wouldn’t have to push so hard.”

The closure roiled the King Cove plant’s workers, many of them on work visas from countries including Mexico, Ukraine and the Philippines. They were at other seasonal worksites when Peter Pan closed and had left behind laptops, televisions and other personal gear. The belongings remained locked up as people far away decided the company’s fate.

Members of the Permanent Fund staff offered sympathy but did not accept responsibility for Peter Pan’s demise.

“We don’t have the ability to change the course of the company,” said Waldrop, a deputy chief investment officer at the Permanent Fund. “We can’t intervene. We can’t do anything. We’re not managing it.”

Behind the scenes, the Permanent Fund staff had continued to voice concerns about the in-state investment program even before Peter Pan shut down. McKinley faced particular scrutiny.

In a heavily redacted version of a 2022 memo released after a public records request, top Permanent Fund officials observed that many of McKinley’s investments had “very weak ties” to Alaska. They recommended that for “future iterations” of in-state investments, the board consider restrictions like demanding McKinley and the other investment manager, Barings, divulge which businesses received state money — a request both managers had initially resisted.

The Permanent Fund staffers had one more suggestion for the board: Consider consolidating the program under one of the two management firms. The next 10 lines of the memo are blacked out. But Brune, the current board chair, confirmed the staff suggested dropping McKinley if the in-state program were to expand. One reason was that McKinley had put so much money into a seafood company, he said.

In April 2023, the fund’s trustees voted to halt further expansion of the in-state investment program. Board members cited concerns including the risk that managers’ investments could go to businesses connected to trustees or their relatives, creating conflicts of interest.

Richards, the program’s backer, cast the lone vote to keep it going. But in a recent interview, while standing by his support for in-state investments, he acknowledged he may have underestimated one risk.

“What we’re seeing is headline risk,” Richards said, “and that was something that I think I probably did not internalize to the degree that it turned out to be.”

A New Owner

The fight for what remains of Peter Pan took one last twist at the end: May, the man originally brought in to help steer the company to profitability, joined the bidding for its assets.

More than 90 commercial boat owners and operators wrote a letter of protest, saying they would refuse to sell future harvests to May. Another letter, signed by 200 King Cove residents, told the court overseeing the auction, “We are a proud hardworking people, and what happened under Mr. May’s leadership broke something inside of us that may never fully heal.”

Gillam also had soured on his business partner, May. Their attorneys traded strongly worded court filings about the events that preceded Peter Pan’s failure. May defended his record, saying that far more boat captains would have gone unpaid without the money he loaned the company.

Despite all the objections, a Washington Superior Court official overseeing the liquidation approved the sale to May. The decision called for May to pay off more than $27 million in bank loans, legal fees and state taxes. The future of King Cove’s plant would be in his hands.

Most creditors, including Gould and other boat owners owed more than $5 million, would get nothing. The workers with items left behind could pay to have someone ship them home. The money invested by the state of Alaska and other partners in the Peter Pan venture was gone.

May is selling most of Peter Pan’s assets while litigation continues, but he’s held on to the King Cove plant. In a November teleconference with King Cove’s City Council, May called for a collaborative effort to try to get the aging facility, damaged by a 2024 fire, back up and running. He bristled when a skeptical Gould confronted him about unpaid debts.

“I’m the guy that’s been fighting for you,” May said. “I’m really getting tired of people taking shots at me.”