Friday, March 27, 2009

J-Week Liveblogging
Alaskan Issues:
Covering Native Corporations: It’s the People’s Business

UAA professor, former Seward mayor, Columbia graduate and former state commissioner Edgar Blatchford discusses covering Native corporations. Here are his remarks, condensed and paraphrased:

I was very interested in Native issues. I testified to federal legislative committees on the importance of building the Trans-Alaska Pipeline and settling Native land claims. Make sure it’s “fair, just and equitable.” Native corporations have to be watched. I served as Gov. Hickel’s commissioner of regional and community affairs. I worked with regional and community organizations, so I had a great deal of influence over administration of regional grants. I went back to Seward when Knowles was elected and got involved in city politics. I then served as commissioner of commerce under Gov. Murkowski, and I was also on the board of a Native corporation, Chugach Alaska. There is this special benefits program that allows Native corporations to get government contracts and generate revenue to move to Native areas. I began to be caught between two different interest groups. When I voted the wrong way on the board of directors, the minority on the board took their complaints to the governor and I was asked to resign from the board. Then there was some bad press during the last days of my tenure with the state during which information was disclosed to the ADN.

The Basics
Why should you watch Native corporations? They are not tribal entities, per se. In the Lower 48, what you have are Indian reservations. The land is not owned by the tribe; it’s held in trust by the Department of the Interior. They have to ask permission to do anything. Native corporations are very, very different, and so you shouldn’t make comparisons between an Alaska Native corporation and Native entitites in the Lower 48. I’m not talking about the non-profits; I’m talking about for-profit corporations. What I’m really talking about are the over 200 village corporations and the 12 regional corporations: Ahtna, CIRI, Doyon, etc. Who owns these corporations? Shareholders. And you must always keep that in mind. There’s a big difference between a normal corporation and a Native corporation, and that is that, in order to own stock in a Native corporation, you had to be alive in December 1971. The first “after-born,” or “new Native,” was born at 12:01 a.m. on December 19, and she was not eligible to be enrolled. Native corporations are allowed to create a new class of stock in order to open up the rolls for those born after 1971. Doyon, ASRC and NANA have opened their rolls. You get a life estate; when you die, your shares go back to the corporation or they evaporate.

Stock Transfer
I was born before December 1971, so my shares of stock are not going to evaporate. What am I going to do with them? If I don’t like my kids or my corporation, what am I going to do? I’m going to leave my shares to Prince Harry, Prince William, and Bill Gates. Can I do that? Yes, I can. Original shares of stock in a Native corporation can be gifted. I can leave them to anybody. Native shares of stock are transferable upon death to anybody in the world.

Who Watches the Corporations?
Who watched Madoff? The SEC. There were some complaints, and examiners did not follow through on those complaints. Later you find out that the SEC didn’t do their due diligence duty in looking into the complaints that were filed against Madoff. Who watches Native corporations? Under the Settlement Act, it explicitly exempts SEC oversight and leaves it to the State of Alaska. Who watches the Native corporations? When I was commissioner of commerce, community and economic development, this is how I got into trouble. I was a member of the board of directors of a for-profit corporation, and I was a commissioner. When it was offered to me, they said, “We want you to stay involved in Native issues, but we don’t want you to have anything to do with the board. Delegate those responsibilities.” I did that, but I didn’t do it in writing soon enough. Why should you watch a Native corporation? Well, it’s the people’s business. Should you be sensitive to allegations that it’s discriminatory reporting? Should you back off? No. I think what you have to do is have pretty thick skin and barrel right through it. Somebody has the responsibility to watch them. The government has that responsibility. You should treat a Native corporation just like you treat any corporation. Someone has to watch them.

Corporate Democracy
What responsibility does a corporation have to its shareholders? An annual financial report and one meeting a year with shareholders. One report and one meeting a year. When you have an election to a board of a Native corporation, is there such a thing as corporate democracy? Corporate democracy was created for the first time when the Settlement Act was signed. All shareholders were equal. One hundred shares each. Now let’s look at the elections. You have a shareholder who doesn’t like what the corporation is doing. That shareholder is entitled to speak — for the amount of time determined by the people who run the corporation. If I want to run for the board and I have the signatures, does the corporation have to put my name on the ballot? No, they do not. They can put the names of only the people they want on the ballot. When people congratulate other people on election to a board, I say, “Get off it.” If it were a real election, we’d call it a rigged election. A corporation has a rigged election system. That’s how it is. It’s not just Native corporations; it’s across the board. What can a corporation do if they don’t like me? They can keep me off the ballot. You can go to them and ask why your name isn’t on the ballot. “You know why; you don’t behave. You don’t vote right.” Do I have any legal recourse? No. They can use attorneys, accountants, PR people, all their liquid assets, to elect the people they want on the board. Democracy doesn’t exist. This is the system. This is the free enterprise system.

Native Corporations are Big Business
It’s big business. How big is it in Alaska? If I were giving this presentation on public relations for Native corporations, this room would be packed. You guys are going up against a Goliath. Why should you watch a Native corporation? Because it’s the people’s business. There’s one thing on an annual report that has no recorded value because they don’t know what the value is: It’s about 70,000 square miles of land. It’s held at zero value on the balance sheets. There is value to it; we just don’t know how much. I think the only way you can determine the value is to go to the Exxon Valdez Trustees Council and see how much they spent for land purchases. 277,000 acres were sold for conservation, but I don’t remember any big stories about it. “They’re Native corporations, so let’s just back off.” How much of this is private land? All of it. It’s not Native land. It’s private land. It’s owned by a Native corporation. Not all of the shareholders are Native.

Shareholder Interests
When I die, you’ll have Prince William going to an annual shareholders meeting with Bill Gates. Prince William will argue for jobs and economic development for Englishmen. Bill Gates will want a laptop in every office, or something like that. Their interests will not be based in the tradition and interests of Native people. Is this happening? Yes. I think what’s going to happen as Alaska Natives become more distanced from tradition, these corporations will become more bottom-line oriented. Do they have an obligation to watch out for tradition and culture? No, they do not. The only obligation a corporation has is to make money, to declare a dividend for their investors. I suppose you all know this. I want people to be aware of these Native corporations. The State of Alaska, in my opinion, has abdicated its responsibility in watching these Native corporations. If you’re a shareholder and you file a complaint, you’re lucky if it gets addressed. It’s like what happened with Madoff and the SEC. If a shareholder doesn’t like what a Native corporation is doing, they file a complaint. There’s this form you fill out. I’m not blaming the commissioner; they don’t have the people to follow up. Meanwhile, who has the money and the power? The corporation. And they can silence you. If the board is committed to a financial return, do you think they’ll put a shareholder’s name on the ballot if that shareholder is opposed to logging? They might. But they’re not going to put any resources into getting that person elected. What’s it take to control a board of directors? I never learned to count to five. “Edgar, there’s nine directors. You need to learn to count to five. That’s a majority of the board. Once you can count to five, you have the majority and you control the corporation.” There’s no open-meeting laws that apply to corporation. They don’t have to do anything out in the open.

So how do you get information on a Native corporation? You could talk to shareholders. But then, management doesn’t have to give all that much information to the shareholders. They’re only obligated to give an annual report. It is private land. It’s owned by the corporation. It is not owned by Natives. This is what Congress intended when they passed the Settlement Act. President Nixon didn’t want to create pockets of poverty in Alaska, so the best thing was to create an entrepreneurial system.

Future Shareholders
How many Alaska Natives were there in 1971? Maybe 60,000. What’s the Native population today? About 120,000. What’s it going to be 10 years from now, 20 years from now? Maybe 240,000? How many of them are going to be shareholders? When Prince William inherits my shares of stock – or Bill Gates – or they’ll share – will they receive more than an after-born or a New Native? Will their shares of stock give them potentially more dividend than an after-born? Will Prince William receive more money owning 56.5 shares? I would say yes. He probably will be receiving more money than an Alaska Native born after 1971 who has only life estate shares. What’s the difference? Go back to land ownership. 70,000 square miles. Why will Bill Gates and Prince William be receiving more? Under the Settlement Act — and this is where you’ll really get into conflict between 60,000 haves and 60,000 have-nots — 70% of revenues from development of the subsurface estate have to be shared with shareholders of other Native corporations. That means that when Red Dog turned 10 years ago and they finally started to return dividends, I got a check. Section 7(i) of ANCSA states that 70% of net subsurface has to be distributed to all original shareholders or shareholders who have inherited original shares. In 2030 there will be about 200,000 Natives, most of whom will be life estate shareholders. If Pebble was on Native corporation land, you’d have every Native corporation pushing for it. Subsurface includes gold, gas, timber… 7(i) was meant to develop equality among Alaska Natives. It’s a legally-mandated revenue-sharing clause.

Look at Pebble. Let’s say Pebble was on Native land. There’s a Pebble in every region of this state. How much of that has been explored? Very little. Just look at the original estimates of Pebble. It’s a mining district of maybe 500 square miles. Pebble is 15 square miles. Native corporations own 60,000 square miles. We’re talking lots and lots of land. The value of the subsurface estate at Pebble was estimated at $10 billion. Then it went to $50 billion. Then it went to $100 billion. Last year when the economy was good, they stopped guessing. If it were Native land, there would be enormous pressure on the corporations to develop the subsurface estate. The press might not want to cover it because it’s a Native corporation and it’s too sensitive. Where’s the pressure coming from for these transnational corporations to explore? Population. Alaska’s mineral-rich. Look around. Why do we have so many national parks and national forests? That’s a clue, isn’t it? The only people who look off into the future seem to be environmental organizations. They’re transparent. Mining organizations are looking into the future. There are findings of some of these minerals all over Alaska.

Pressure on the Bottom Line
If you’re a shareholder in Houston or Portland, do you want the corporation to dedicate part of the bottom line to culture and tradition? No. You have a car payment, a house payment, kids going to college, and you’d like to take a vacation. When I first ran for the board, I pushed for jobs and economic development in the villages. Now I’m political. Now I talk about the dividend. We’re older. We’re not looking for jobs. We’re looking for retirement. The pressure on the boards is this: $

If nobody’s watching them, if the State has abdicated its responsibility to watch these corporations, who’s going to watch out for that shareholder who wants their voice in the corporation? You see very few people in regional corporations who talk to the press. I’ve been chairman of the board before. I wouldn’t talk to you guys. But somebody has to watch what’s happening. We’re running out of natural resources, and people are going to look north. They are looking north.

How Do You Get Information?
That depends on the instincts of the reporter. How did Woodward and Bernstein do it? They found a source. If you want to know, if you think there’s dissention in the corporation, call up the Division of Commerce, banking and securities, and ask if there are any complaints. And maybe they’ll say, “Oh, it’s an open investigation, we can’t tell you anything,” but then you’ll know something’s going on.

— Maia Nolan

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