Legislature(1997 - 1998)
05/06/1997 04:50 PM Senate STA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SJR 28 FED AUDIT OF NATIVE REGIONAL CORPORATIONS
CHAIRMAN GREEN called the Senate State Affairs Committee to order
at 4:50 p.m. and brought up SJR 28 as the first order of business
before the committee. She stated SB 194 (ANCSA CORPORATIONS),
which is also sponsored by Senator Halford, would be rescheduled to
the May 8 meeting, and that copies of a letter from Sealaska
Corporation relating to that piece of legislation would be
distributed to committee members.
BOB LOESCHER, Executive Vice President, Sealaska Corporation,
stated that since incorporation Sealaska and the other regional
corporation have been audited annually by independent certified
public accountants, which is required by federal law. Sealaska's
accounting firm, Price Waterhouse, holds the corporation to the
standards of generally accepted accounting principles. Reports of
these audits are sent to every shareholder of the corporation, and
these reports are published in an understandable, user-friendly
format. The coporation's audited financial statements and reports
to shareholders are filed with the State of Alaska.
Mr. Loescher said because there is already plenty of auditing and
accountability to shareholders and government agencies, it is
apparent to Sealaska that the purpose of SJR 28 is to create
discord among Native groups whose views differ on issues of
corporate direction and management, to retaliate against Alaska
Natives over the Indian Country issue, and to discredit Alaska
Natives and rural residents in advance of public policy
consideration of the subsistence issue pending before the
Legislature. Sealaska suggests that these are neither necessary
nor proper purposes for legislative involvement. Sealaska also
suggests that the regional corporations are the wrong target since
they too may be affected by the Venetie decision.
Mr. Loescher said the sponsors of this legislation are not willing
to fund an audit at the state level and the U.S. Congress is even
less likely to fund an audit. He added that none of Alaska's
Republican congressional delegates support SJR 28, and that Deborah
Williams, who is the special assistant to the U.S. Secretary of the
Interior, recently stated that the federal government lacks the
authority to audit Native corporations.
Mr. Loescher noted that much of the testimony on SJR 28 has been by
shareholders who say that the corporations do not do enough for
them. He then outlined the following benefits that have been
provided to Sealaska shareholders throughout the years:
- An at-large or urban Sealaska shareholder with 100 shares
has received $17,663 in dividends and other distributions since
1972. Shareholders with village corporation shares receive a
portion of this through their village. Sealaska has approximately
15,700 shareholders, which totals over $277 million being injected
into the economy.
- The Alaska Native Claims Settlement Act requires Native
corporations to share revenues from natural resources from their
land, and from the start of ANCSA to March 31, 1997, Sealaska has
paid out approximately $162 million to other corporations. These
funds were in turn distributed directly to shareholders and village
corporations throughout the state.
- In 1991 a vote by shareholders approved a special one-time
benefit payments when he or she reaches age 65. Since then over
1,900 elders have received payments totaling $4.4 million.
- Educational support has been a vital part of Sealaska's
programs for about 1,500 shareholders and their descendants since
1981. Last year 403 young people received awards totaling
$422,000.
- Additionally, Sealaska has a jobs program which provides
jobs to over 400 people, an internship program that has provided
over 120 internships, cultural programs, historic sites and
cemetery programs, etc.
In closing, Mr. Loescher said Sealaska is proud of its role in
providing jobs, dividends and other benefits to its shareholders,
as well as its contribution to the economy of Alaska.
Number 145
AMY GAMBELL, Audit Manager, Seattle Office of Price Waterhouse,
said Price Waterhouse is the independent accountants of Sealaska
Corporation and since 1982 have been performing annual audits of
the corporation's financial statements. The firm's reports are
addressed to the corporation's shareholders and published by
Sealaska in their annual report, which is distributed to all
shareholders every year. This audit process is closely monitored
by the audit committee of the Board of Directors.
Ms. Gambell said Sealaska Corporation prepares their financial
statements following generally accepted accounting principles,
including full disclosure for all sources and uses of money and
disclosure to explain the financial statements and to describe any
important matters such as litigations or claims against the
company. In addition, Sealaska has recently submitted their proxy
statements and financial statements for voluntary review by the
Securities and Exchange Commission who has commended Sealaska on
the readability of these statements and are using them as an
example for other public companies.
Price Waterhouse's report on the financial statements contains no
exceptions or qualifications. If they noted any material
noncompliance that was not corrected, they would explain it in
their audit report as an exception or a qualification. Also, if
Price Waterhouse was to become aware of any material impropriety by
management not resolved by the directors to their satisfaction,
they would no longer be able to continue their association with
Sealaska.
Ms. Gambell said SJR 28 asks the federal government to audit
Sealaska and implies that they lack accountability to their
shareholders; however, Sealaska is audited by an independent
company and they are financially accountable.
Number 195
SENATOR MACKIE stated for the record that he is a Sealaska
shareholder and a Shan S'eet Shareholder. He then asked Mr.
Loescher what Sealaska is doing to improve communications with
shareholders, to share information with them so that they don't
feel like they are being shut out of the process and to reduce the
animosity felt by many of them.
In response to Senator Mackie's questions, MR. LOESCHER said from
time to time Sealaska receives petitions for recall on board
members and they are responsive to them. He also related Sealaska
has a shareholder newspaper that is published approximately every
six weeks that goes out to all shareholders in which they discuss
the corporate affairs and corporate actions that go on within the
corporation. Also, the corporation's annual report and proxy
statement is sent out to every shareholder every year. In
addition, shareholders may go the Sealaska offices and review the
books and records of the company at any time. Sealaska also
provides a toll free line and a Website.
Number 245
SENATOR MACKIE asked Mr. Loescher if the federal government were to
decide to do an audit, was their anything in his view that would be
contained in such an audit that Sealaska would be criticized for
not providing to its shareholders. MR. LOESCHER responded that
there was not.
Number 245
SENATOR WARD asked Mr. Loescher if he would explain the
discretionary voting process used by the corporation. MR. LOESCHER
explained that every year Sealaska puts out a proxy and there is a
slate of candidates. A shareholder can vote on the proxy form
only, or a directed vote, or a discretionary vote. If a
shareholder signs the box for a discretionary vote, that empowers
the committee of the board to cast the ballot on behalf of the
shareholder in a manner that they see fit. This process is allowed
under state law, and sometimes over 50 percent of the shareholders
elect to use the discretionary voting box. SENATOR WARD commented
that the committee has received testimony from hundreds of people
that think this is an inherently unfair and quite anti-Indian
process. MR. LOESCHER responded that it is a matter for policy
makers to determine whether or not that law should be continued,
but the law is there and their shareholders have elected to use
that provision of law.
Number 295
SENATOR WARD inquired if every board member gets full retirement
after serving on the board for five years. MR. LOESCHER
acknowledged there is a retirement program for directors, but he
was not familiar with its provisions. He also acknowledged that he
didn't think that program was approved by the shareholders.
SENATOR WARD asked Mr. Loescher if had a running tally of how much
money he and other officials of the corporation have been paid
since December 18, 1971. MR. LOESCHER replied that he didn't have
that information with him, but the data could be provided to the
committee if necessary.
Number 323
CHAIRMAN GREEN stated testimony would be taken over the
teleconference network from witnesses waiting to testify on SJR 28.
BARBARA DONATELLI, Vice President of Administration for Cook Inlet
Region Incorporated (CIRI), testifying from Anchorage, voiced
CIRI's opposition to SJR 28, not because CIRI is in any way
concerned about the end results of the audit process called for in
the measure, but because of the disturbing implications presented
and the messages sent by it. CIRI has nothing to hide from its
shareholders or from state or federal auditors. CIRI, like all the
Native regional corporations, is audited annually by an independent
accounting firm.
Ms. Donatelli said regional corporations, in general, and CIRI, in
particular, have not failed the Native people of Alaska. She noted
that in 1972 CIRI received $34 million and the right to select
certain lands. Today CIRI's total shareholder equity is excess of
$492 million in addition to the value of CIRI's ANCSA land. CIRI's
net income last year was $39.8 million, and for the last five years
alone cumulative net income for the company exceeded $150 million.
Additionally, during its 25 years of existence, CIRI has paid out
a cumulative amount of approximately $240 million to its
shareholders.
CIRI has also been one of the leading contributors in sharing of
resource revenues with all other regional corporations. CIRI's
sharing of $161 million in resource revenues over the past 25 years
has made CIRI a driving force for economic return and growth, not
only for its own shareholders, but for Native shareholders
statewide.
CIRI has contributed millions of dollars to nonprofit corporations
that are dedicated to furthering economic, educational and health
care and other benefits to CIRI shareholders and Alaska Natives.
In the last three years alone, CIRI has donated $7.9 million to
these important nonprofit organizations.
Ms. Donatelli said the regional corporations do not lack
responsiveness or accountability to their shareholders. CIRI is
the first regional corporation to put directly before the
shareholders the chance to choose by ballot amongst four different
options for the future direction of the corporation. CIRI's
philosophy and goal in this process is to enhance and extend
shareholder participation in the fundamental direction of the
corporation.
Additionally, ANCSA provides itself with the ultimate mechanism for
Native shareholders to express dissatisfaction or assert control
over the corporation with the democratic election of corporate
boards. Ms. Donatelli said contrary to the resolution's suggestion
of widespread dissatisfaction and disenfranchisement among
shareholders, CIRI shareholders have repeatedly returned CIRI's
board members to the board thereby expressing their continued
confidence in the board. Notwithstanding this, CIRI allows
minority voice representation on the board. CIRI's bylaws provide
for cumulative voting for directors, whereby shareholders with less
than a majority of votes can still beat directors. Ironically,
this system allows dissident candidates to win seats with only
about 15 percent of the vote.
In her closing remarks, Ms. Donatelli said the dissatisfaction with
the regional corporations did not bring about an outcry by Native
people of Alaska for sovereignty. She said the sovereignty
movement in Alaska is not a recent development, and that it has
been fueled by governmental failures in areas such as subsistence,
social welfare programs and drug and alcohol enforcement rather
than by objections to the management of regional corporations.
Number 395
SENATOR WARD asked Ms. Donatelli how much land CIRI received in its
original entitlement, how much of that land is left and the book
value of that land. MS. DONATELLI answered that she did not have
that information with her, but she advised that it was available
and she would forward it to the committee.
Number 400
CHAIRMAN GREEN noted that Mark Kroluff, who was also representing
CIRI, was present in Anchorage to respond to questions.
Number 410
DAVID MCCAMBRIDGE, an audit partner with KPMG Peat Marwick in
Anchorage, stated KPMG currently audits six of the twelve regional
corporations, provides other professional services to two other
regional corporations, as well as auditing a number of Alaska
Native village corporations.
Mr. McCambridge related the audits performed by his company are
financial statement audits and are performed annually. These
audits result in their giving an opinion as to whether the Native
corporations' financial practices follow generally accepted
accounting principles. The audit standards require, among other
things, that the accountant be independent of the corporation that
the audit is being performed on, that an opinion be rendered as to
the financial statements and whether or not they are presented in
accordance with generally accepted accounting principles and that
those financial provide adequate and full disclosure as required by
generally accepted accounting principles. He said his company
believes that the proposed governmental audits may be a duplication
of the existing efforts and expense.
Number 435
SENATOR WARD asked Mr. McCambridge is he had information on how
much land was given to CIRI under ANCSA, how much acreage is left
and what the book value of that acreage is today. MR. MCCAMBRIDGE
responded that he did not have that information with him, and he
added that most of it is included in CIRI's annual report.
Number 444
WALTER JOHNS, a Tlingit Indian testifying in Juneau against SJR 28,
stated he is a shareholder of both Sealaska Corporation and
Goldbelt Corporation. He noted there are currently several other
pieces of legislation before the Legislature that are all anti-
Indian. He contended that if this type of legislation, which he
considers racist, were introduced in other states with Indian
populations they could create war.
Mr. Johns said he said he believes the people of the corporations
can handle problems that have arisen, and he is strongly opposed to
state involvement in these corporations.
In closing, Mr. Johns stated he is strongly opposed to SB 195 as
well.
Number 490
BUNNY MERCER a Sealaska and Goldbelt shareholder residing in
Juneau, read her written testimony in support of SJR 28 into the
record. She noted that since Sealaska's inception they have had
the same board of directors, and she spoke to the need to get rid
of the discretionary vote. She believes a federal audit will
settle questions about what all previous shareholders are saying
and what the opposition is saying.
Number 525
SANDRA STUERMER, the treasurer of the Arctic Slope Regional
Corporation (ASRC) testifying from Barrow, voiced the corporation's
strong opposition to SJR 28. They believe that the process would
not be positive for the state or to their shareholders. ASRC has
been audited each year since its inception, and any inconsistencies
or shortcomings in the financial records of the company are noted
in an audit opinion. The annual audit is also monitored by a
committee of ASRC's board of directors who are not employees of the
corporation. The audited financial presentation is given each year
and approved overwhelmingly by the shareholders at their annual
shareholder meeting.
Mr. Stuermer said ASRC believes the audit called for in SJR 28
would be a total waste of time and resources. She said none of the
land and money received by ASRC as part of ANCSA has been lost, a
fact demonstrated by their annual audit every year for 25 years.
It is that land and other resources that can serve as foundations
for further economic growth and development. Like many other
regional corporations, ASRC is more than just a for profit-making
entity. ANCSA corporations are not social service agencies,
however ASRC does more in that respect for it shareholders than
other corporations in the state. It was also noted that over the
years ASRC has paid more than $92 million in dividends to its
shareholders.
Ms. Stuermer reiterated ASRC's strong opposition to SJR 28, which
they believe is designed to create divisiveness within the Native
community.
Number 555
SENATOR MACKIE asked if ASRC shareholders have access to financial
information on salaries paid to the corporation's directors and
executives. MS. STUERMER responded that they do not deny specific
requests on such information, that they have an open door policy,
and that their financial statements are available every month at
the time of closing.
SENATOR MACKIE asked if 10 percent of ASRC shareholders were
dissatisfied with the decisions that are being made by its board,
could they petition for a recall election to remove their entire
board. MS. STUERMER acknowledged that they could, but ASRC has not
had any such action taken against the corporation.
Number 575
BUTCH FONDAHN, a member of the Tatitlek Village Corporation
testifying from the Mat-Su LIO, voiced his support for federal
audits of Native corporations because it will make them more
accountable to shareholders. He suggested the resolution should
include the auditing of village corporations as well. The Tatitlek
Village Corporation is going to receive approximately $37 million
in oil spill oil money, and he fears that the money will disappear
because their board of directors has a poor track record on its
prior investments.
TAPE 97-26, SIDE B
Number 015
JAMES KNUDSON, a Sealaska and Goldbelt shareholder testifying in
Juneau in support of SJR 28, stated it was his first time speaking
out on this issue. In the past he sat back and listened to
promises made by future board members that they would make Sealaska
and Goldbelt more open to its shareholders. However, once these
people are elected, the only thing that changes is their views, not
the policies of the corporations.
Number 030
CHAIRMAN GREEN closed the public hearing on SJR 28 because members
had to return to the Senate floor session. She then adjourned the
meeting at 5:40 p.m.
| Document Name | Date/Time | Subjects |
|---|