Legislature(1995 - 1996)
03/27/1995 03:10 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR & COMMERCE STANDING COMMITTEE March 27, 1995 3:10 p.m. MEMBERS PRESENT Representative Pete Kott, Chairman Representative Norman Rokeberg, Vice Chairman Representative Kim Elton Representative Gene Kubina Representative Brian Porter MEMBERS ABSENT Representative Beverly Masek Representative Jerry Sanders COMMITTEE CALENDAR HB 224: "An Act relating to the state plumbing code." HEARD AND HELD *HB 251: "An Act relating to Native corporations." HEARD AND HELD (* First public hearing) WITNESS REGISTER REPRESENTATIVE CARL E. MOSES Alaska State Legislature State Capitol, Room 204 Juneau, AK 99801 Telephone: (907) 465-2214 POSITION STATEMENT: Sponsor of HB 251 ROY HUHNDORF Chairman and Chief Executive Officer Cook Inlet Region, Incorporated P.O. Box 93330 Anchorage, AK 99509 Telephone: POSITION STATEMENT: Testified in support of HB 251 MARK KROLOFF, General Counsel Cook Inlet Region, Incorporated P.O. Box 93330 Anchorage, AK 99509 Telephone: POSITION STATEMENT: Answered questions on HB 251. TIM BENINTENDI, Legislative Assistant to Representative Carl E. Moses Alaska State Legislature State Capitol, Room 204 Juneau, AK 99801 Telephone: (907) 465-2214 POSITION STATEMENT: Explained CSHB 251(L&C), Version G. CHARLES WHEATON, Shareholder Sealaska Native Corporation; and Goldbelt Native Corporation P.O. Box 21662 Juneau, AK 99801 Telephone: 586-2794 POSITION STATEMENT: Testified against HB 251 DOROTHY ZURA, Representative Shareholders for Shareholders 2140 Lawson Creek Douglas, AK 99824 Telephone: 364-3898 POSITION STATEMENT: Testified against HB 251 DELICE ALEXANDER-CALCOTE, Shareholder Cook Inlet Region, Incorporated 205 East Dimond, Number 326 Anchorage, AK 99515 Telephone: (907) 349-1546 POSITION STATEMENT: Testified on HB 251. JUDITH KALKINS, Shareholder Cook Inlet Region, Incorporated 3723 East 66th Avenue Anchorage, AK 99503 Telephone: (907) 349-7648 POSITION STATEMENT: Testified against HB 251 BOBBIE OSKOLOFF P.O. Box 266 Kenai, AK 99611 Telephone: (907) 283-7748 POSITION STATEMENT: Testified against HB 251 IKE CROPLEY, Shareholder Sealaska Native Corporation; and Goldbelt Native Corporation 4104 Birch Lane Juneau, AK 99801 Telephone: (907) 789-0858 POSITION STATEMENT: Testified against HB 251 KATHY POLK P.O. Box 32677 Juneau, AK 99803 Telephone: (907) 789-0438 POSITION STATEMENT: Testified against HB 251 SONYA SMITH General Delivery Juneau, AK Telephone: (907) 586-3914 POSITION STATEMENT: Testified against HB 251 JANE IGTANLOC, Chairperson Shareholders for Goldbelt 3258 Montpeleir Court Anchorage, AK 99503 Telephone: (907) 563-7917 POSITION STATEMENT: Testified against HB 251 HAROLD RUDOLPH, Shareholder Cook Inlet Region, Incorporated 635 "B" Bliss Street Anchorage, AK 99508 Telephone: (907) 338-2507 POSITION STATEMENT: Testified against HB 251 SHARON KAY, Shareholder Cook Inlet Region, Incorporated 17400 Spain Drive Anchorage, AK 99516 Telephone: (907) 345-7848 POSITION STATEMENT: Testified against HB 251 JOAN MANTEI, Shareholder Sealaska Corporation Box 34711 Juneau, AK 99803-4711 Telephone: (907) 463-7351 POSITION STATEMENT: Testified against HB 251 BERNICE TREGO, Shareholder Sealaska Corporation Yak-Tat Kwaan Tlingit Corporation 9464 Brady Place Juneau, AK 99801 POSITION STATEMENT: Testified against HB 251 EDWARD DALE CASEY 4003 Minnesota Drive, Number 36 Anchorage, AK 99503 Telephone: (907) 561-6542 POSITION STATEMENT: Testified against HB 251 JIMMIE D. HARTLEY, Shareholder Cook Inlet Region, Incorporated 4501 Parson, A Anchorage, AK 99508 Telephone: (907) 272-3095 POSITION STATEMENT: Testified against HB 251 HELEN HARTLEY, Elder Cook Inlet Region, Incorporated 3710 B, Raudolph Street Anchorage, AK 99508 Telephone: (907) 596-0001 POSITION STATEMENT: Testified against HB 251 BERTHA HORTON, Shareholder Sealaska Native Corporation; and Goldbelt Native Corporation Box 20505 Juneau, AK 99802 Telephone: Not available POSITION STATEMENT: Testified against HB 251 PAT SIERRA, Shareholder Sealaska Native Corporation; and Goldbelt Native Corporation P.O. Box 34711 Juneau, AK 99803 Telephone: (907) 789-0815 POSITION STATEMENT: Testified against HB 251 ADA PATTERSON, Shareholder Sealaska Native Corporation P.O. Box 020508 Juneau, AK 99802 790-2890 POSITION STATEMENT: Testified against HB 251 GAIL ANAGICK SCHUBERT Shareholder, Unalakeet Native Corporation; and Shareholder, Member, Board of Directors Bering Straits Native Corporation Address and telephone number not available POSITION STATEMENT: Testified in support of HB 251 GLORIA SARABIA, Shareholder Sealaska Native Corporation; and Goldbelt Native Corporation P.O. Box 32751 Juneau, AK 99801 Telephone: (907) 789-5597 POSITION STATEMENT: Testified against HB 251 CATHERINE PRICE, Shareholder Sealaska Native Corporation P.O. Box 33796 Juneau, AK 99801 Telephone: (907) 790-2163 POSITION STATEMENT: Commented on HB 251 PREVIOUS ACTION BILL: HB 251 SHORT TITLE: NATIVE CORPORATIONS SPONSOR(S): REPRESENTATIVE(S) MOSES, MacLean, Williams JRN-DATE JRN-PG ACTION 03/15/95 741 (H) READ THE FIRST TIME - REFERRAL(S) 03/15/95 741 (H) LABOR & COMMERCE 03/27/95 (H) L&C AT 03:00 PM CAPITOL 17 ACTION NARRATIVE TAPE 95-24, SIDE A Number 000 The House Labor and Commerce Standing Committee meeting was called to order by Representative Pete Kott at 3:10 p.m. Members present at the call to order were Representatives Kott, Elton and Rokeberg. Members absent were Representatives Porter, Kubina, Masek, and Sanders. CHAIRMAN PETE KOTT asked that the record reflect that Representatives Masek and Sanders were excused absences. He also asked that the record reflect that a quorum wasn't present so action couldn't be taken on legislation. He said testimony would be taken because many people in attendance had come to Juneau from other locations of the state. HB 224 - STATE PLUMBING CODE CHAIRMAN KOTT asked that the subcommittee chairman, Representative Rokeberg, give an overview of the single wall exchanger and the rewrite of the plumbing code relating to HB 224. REPRESENTATIVE NORMAN ROKEBERG explained the subcommittee is in the process of redrafting a committee substitute (CS) or an amendment to HB 224 to accommodate the adoption of the 1991 plumbing code. He noted it has not been amended since the early 70s. The bill turned over responsibility of code adoption and regulation to the Department of Labor (DOL). As part of the CS, the subcommittee will be asking that an exception be made for the single wall heat exchangers. He noted they are also going to adopt a two year sunset provision on Wednesday, if that is the will of the committee. The documentation and testimony should be ready for the committee meeting on Wednesday. REPRESENTATIVE KOTT said the measure will be discharged from the subcommittee back to the committee for consideration of the CS. He requested that a teleconference be set up as well. HB 251 - NATIVE CORPORATIONS Number 070 The next order of business was HB 251, "An Act relating to Native corporations." REPRESENTATIVE CARL E. MOSES, sponsor of HB 251, explained he introduced the bill to address problems dealing with special shareholder meetings and petition actions within Native corporations in Alaska. The objective of HB 251 is to try to bring more balance between needs of the shareholders to responsibly petition for change, and management's need to pursue the objectives of the corporation without undue attention to the continual repetitive and unsuccessful actions of shareholder groups. Recognizing the rights of petition for shareholders, we must also realize the considerable drain on the financial resources of the corporations that many of these efforts generate. REPRESENTATIVE MOSES explained there is information in the committee packets which shows that this bill provides for filing procedures for shareholder petitions, penalties for the willful distribution of false or misleading information, 90 days for securing signatures an increase from 10 percent to 25 percent of the eligible shares needed to insure a successful petition, and promoting for a two year wait for the revival of an unsuccessful petition attempt. Many conditions exist for Native corporations in Alaska. Concern for minority shareholder rights and actions must be tempered with a regard for the financial health, stability and survival of the corporation. He said he believes HB 251 achieves such a balance. REPRESENTATIVE MOSES said he would answer questions the committee may have. There were no questions. CHAIRMAN KOTT said the bill is scheduled for a teleconference which will begin at 3:30 p.m. He asked Mr. Roy Huhndorf to come to the table. He noted Representative Kubina joined the meeting at 3:15 p.m. ROY HUHNDORF, Chairman and Chief Executive Officer, Cook Inlet Region, Incorporated (CIRI), read his statement into the record: "As you know, CIRI is one of the 12 Alaska regional corporations formed pursuant to the Alaska Native Claims Settlement Act (ANCSA). The legislation you are considering today, House Bill 251, is the result of careful consideration over a long period of time by the regional corporations and a number of ANCSA village corporations, of problems posed for them by the Alaska Corporations Code. This bill has broad support among the Native corporations, and I am privileged to speak to you not only on behalf of CIRI, but on behalf of the many regional village corporations supporting this bill. "Our general counsel, Mark Kroloff who is with us today, has already submitted detailed written testimony regarding the specific provisions of HB 251. My purpose today will not be to repeat that more detailed, technical testimony, but instead to touch briefly on some of the policy considerations that support passage of this bill. "As you may know, ANCSA called for all regional and village corporations to be chartered as corporations under Alaska law. Regional corporations were required to be chartered as for-profit corporations. Village corporations could opt to be chartered as for-profit or non-profit corporations; most chose for-profit status. Therefore, all regional corporations and most village corporations are governed by the general corporations law of Alaska found in part 10.06 of the Alaska Corporations Code. "What many people do not realize is that Native corporations are preeminent among the businesses most affected by the Alaska Corporations Code. Most of the state's largest businesses, such as the oil companies, communications companies, timber companies, oil field service companies, and others, are not incorporated under the laws of the state of Alaska, but are incorporated under the laws of Delaware or other states that attract incorporation. Thus, Alaska Native corporations are among the most economically significant corporations governed by the Alaska Corporations Code. "Yet, in 1989 when the Corporations Code was broadly rewritten by a California law professor hired at that time to advise the state, the re-write largely ignored important issues of state corporate law that affect Native corporations. As a result, the legislature has amended the Corporations Code on more than one occasion since 1989, to enact specific provisions dealing with Native corporations. Most of these amendments are contained in section 10.06.960 of the code, which is a separate section dealing with Native corporations and which is the section that would be further amended by HB 251. "Most of the Native corporation amendments have been designed for two purposes: First, to address problems unique to the way Native corporations operate; and second, to more closely reconcile provisions of the Corporations Code with provisions of ANCSA. The legislation before you today seeks to do both. "We are all familiar with the series of petition drives and special meeting requests that are sweeping across the state, from Goldbelt and Sealaska in Southeast to Arctic Slope Regional Corporation on the North Slope. In these petition drives, small groups of shareholders, in some cases encouraged by a group of non-shareholder advisors who have moved from region to region, are demanding that Native corporations hold special meetings of shareholders to consider a variety of resolutions. Most of these resolutions, while addressing matters that shareholders may be interested in, are of an advisory nature only. "On its face there is nothing wrong with the petition process. If a significant number of shareholders would like their corporation to call a meeting, and if they have honestly and with full disclosure presented to their fellow shareholders all of the facts surrounding the matters to be addressed at the meeting, we would have no objection to the process. "But that is not what is happening under current law for two important reasons. First, these petition groups have been using false and misleading information on their petition drives in every region of the state. The securities administrator has done nothing to stop this false and misleading information, because it is uncertain, in his view, whether a petition for the purpose of calling a special meeting is the same as a proxy and, therefore, subject to the truthfulness requirements of Alaska's proxy rules. This legislation makes clear that it is, and requires the administrator to act to stop the spread of false and misleading information in these petition drives. "Second, this legislation would change the threshold for calling a special meeting from 10 percent to 25 percent of the shareholders, to make it more consistent with the petition provisions of ANCSA. This is an important protection mechanism for the vast majority of shareholders who support conducting the corporation's business at its regular annual meeting, and who see the corporation's money wasted when it has to conduct repeated special meetings at the behest of a small minority. "ANCSA has not dictated petition requirements for every corporate issue affecting Native corporations. But on perhaps the single most important issue--the alienability restrictions governing ANCSA stock--Congress provided that 25 percent of the shareholders sign a petition before the corporation can be required to call a special meeting. "What is the purpose of a higher, 25 percent threshold: To ensure that a proposition has some significant level of support, even if it is a minority, before the corporation can be required to undergo the expense and disruption of a meeting. "If you pass this legislation, will shareholders be deprived of their rights to bring resolutions before their corporations? No. First of all, shareholders can always bring resolutions before the corporation at the company's annual meeting, which by statute is required to be held every year. HB 251 addresses special meetings only and does not affect that right. "Secondly, any time there is significant support for a special meeting, even if it is only supported by a minority, 25 percent of the shareholders will be able to call for such a meeting. "What this legislation will do is protect the vast majority of shareholders from the manipulation that can come when people use false and misleading information in a petition drive. It will also ensure that a petition that has only a very limited amount of support cannot be used to repeatedly subject the corporation to the expense and disruption of a special meeting. In addition, the legislation contains a provision conforming Alaska law to the majority of state corporations law, including Delaware, by providing that where a corporation has a classified or `staggered' board of directors, the recall provisions of the Corporations Code do not apply. "In conclusion, I would like to point out that CIRI has taken a leading role in improving the lives of our shareholders and helping empower our shareholders to control their own destiny. Our efforts include one of the state's most aggressive native hire programs; numerous social and cultural programs such as the Alaska Native Heritage Park, the Alaska Native Justice Center, Koahnic Broadcasting Corporation, and other programs; and special stock buy-back legislation for CIRI shareholders to vote on to provide a middle-ground between restriction and un-restriction of CIRI stock. The many other Native corporations supporting this bill also support some of these, and other important programs, in their areas. We see this bill as a means to further protect to empower our shareholders, by requiring a petition process that is truthful, accurate, and supported by at least a relatively significant minority of shareholders. "In closing, I would like to thank you once again for the opportunity to speak to you today and I'd be happy to answer any questions that you may have." Representative Porter joined the meeting at 3:20 p.m. Number 272 CHAIRMAN KOTT referred to there being 12 regional corporations in the state and asked Mr. Huhndorf if he would give an idea how large they are and how much variation there are between membership and shareholders. MR. HUHNDORF explained CIRI ranks fifth among the 12 and has about 6,700 shareholders. Sealaska is number 1 in terms of population and has approximately 20,000 shareholders. Calista is next in rank and has approximately 16,000 shareholders. The smallest has about 3,500 shareholders. Number 285 REPRESENTATIVE ROKEBERG referred to the village corporations that are chartered under the state code and asked if they would also be affected by the legislation. MR. HUHNDORF said as he recalls, from his reading of the statute, those with more than 500 shareholders would be affected. Number 310 MARK KROLOFF, GENERAL COUNSEL, CIRI, indicated that is correct. MR. HUHNDORF stated a vast majority of the villages are under 500 and wouldn't be affected by these changes REPRESENTATIVE ROKEBERG asked if that is 500 shareholders. MR. HUHNDORF said that is 500 shareholders. CHAIRMAN KOTT said as he understands the measure, the Alaska Corporation Code would be amended with respect to calling special meetings by shareholders. He said it is also being done in a way that we're dealing specifically with Natives. He asked if anyone has looked into the possibility that Natives may be treated differently. He asked if that could be in violation of the equal protection clause in the U.S. Constitution. REPRESENTATIVE ROKEBERG said he believes the Code, as it would apply to all corporations that are incorporated in Alaska, is being amended. He asked MR. KROLOFF if that is not true. MR. KROLOFF explained there would be no particular reason that the legislation couldn't apply to all corporations. As it currently stands, the CS addresses only Native corporations and is intended to be (indisc.) in the way Native corporations are regulated by the Corporations Code. The most prominent of what is currently in there for Native corporations that differs from other corporations is a more lenient ability, under the code, for Native corporations to pay dividends in circumstances where other corporations might not have the retained earnings that would otherwise be required. Mr. Kroloff said the question is an interesting question. He suspects that there would be sufficient grounds for justifying unique treatment of Native corporations to address the unique problems of those corporations should that be the legislature's desire. He noted that has been done on a number of occasions. Dividends are the most prominent because he believes the legislature recognized the importance of Native corporation dividends even in circumstances where other corporations might not be permitted by law to pay them. This would be analyzed the same way. Mr. Kroloff said he doesn't believe the legislature would be doing any injustice to any other corporations should it be decided that the provision be broadly applicable. To his knowledge most of the other major corporations that would be incorporated in Alaska, such as Carrs or the National Bank of Alaska (NBA), are regulated in a considerably different manner and really face these issues. Legislation that affected them technically wouldn't affect them practically in one way or another. Number 344 REPRESENTATIVE ROKEBERG asked if the 10 percent or the 25 percent provision would apply to all corporations. MR. KROLOFF said currently it would not. It wouldn't affect NBA or First National Bank one way or another. If you wanted to take that approach and make it broadly applicable, he doubts it would have any practical affect on them because there are controlling blocks of stock in those companies that allow those controlling parties to call or not call meetings as they see fit. CHAIRMAN KOTT indicated there is a proposed committee substitute in the committee member's packets and asked staff for Representative Moses wanted to address the proposed CS. Number 367 TIM BENINTENDI, Legislative Assistant to Representative Moses, Alaska State Legislature, explained Representative Moses had a CS drafted based on some people who came into his office late the previous week. The CS makes the bill more responsive to their objectives. Mr. Benintendi said the CS clarifies the title by including the words "shareholder proposals and removal of directors" to indicate which subjects, within the area of Native corporation matters, that are being addressed with the bill. He said on page 3, lines 4 and 5, of the proposed CS a clause was added starting with "or if the corporation is allowed." He said that basically provided for Native corporations whose bylaws account for their classification of directors as opposed to the Articles of Incorporation. Since 1989, most corporations either formed or who have done (indisc.) revised the bylaws have provided for their directorships to classified within the Articles of Incorporation. Mr. Benintendi explained there are Native corporations in Alaska that still have those provisions in the bylaws. The CS cleans up the original subsection (n) that didn't make that distinction. He noted those are the only two changes in the CS. Number 390 REPRESENTATIVE BRIAN PORTER moved to adopt CS for HB 251, Version G, dated 3/24/95, as the committee's working document. CHAIRMAN KOTT said there is a motion to adopt CS for HB 251, dated 3/24/95, Bannister, Version G. He asked if there was an objection. Hearing none, CSHB 251(L&C) was adopted. Chairman Kott welcomed people listening via teleconference. Chairman Kott asked Charles Wheaten to give testimony. Number 419 CHARLES WHEATON, Shareholder, Sealaska Native Corporation; and Goldbelt Native Corporation, said he received a copy of HB 251 the previous Friday. He said he really doesn't understand a lot of it and really doesn't agree with it. Mr. Wheaton explained he has been through a few recalls and the most recent was with Goldbelt. He said he feels there are a lot of things in the bill that just aren't true. He said a lot of the corporations might be having trouble from shareholders, but if the bill does pass, it is going to affect all corporations from what he understands. Mr. Wheaton said Goldbelt did a complete 120 percent turnaround after it was faced with recalls. He said he is now proud to be a Goldbelt shareholder. Mr. Wheaton noted he doesn't know how many corporations want the bill to pass. He said he doesn't feel it should be passed and he is very much against it. He noted most recently people have been fighting over net operating losses (NOLs). Mr. Wheaten referred to 1971 when the Alaska Native Land Claims Settlement Act was passed, and said he was 17 years old. He is now 39 and is raising a family. He explained he really didn't understand what the 1971 act meant when he was 17, and he still doesn't. Mr. Wheaten said at one time he was looking forward to having and building on his own land, but the corporations are holding a lot of people back. Many of the shareholders don't like fighting the corporations. He said he feels sad that the corporations have to come to the legislature and ask for bills like HB 251 to make it more difficult for poor people like him to come in and speak. Mr. Wheaten said he feels the corporations don't have any business getting into politics, especially Sealaska. MR. WHEATEN said he didn't vote for Tony Knowles. When a fund raiser was held for Governor Knowels, he called Sealaska to hold a fund raiser for Jim Campbell and they hung up the phone on him. Mr. Wheaten said in an issue of the Juneau Empire, it was said that Southeast Alaska Natives are voting for Tony Knowles. That wasn't true. He said he is a Native of Southeast Alaska and he belongs to Sealaska. When the corporations tell him who he is voting for, he feels that is wrong and its really unjust. Mr. Wheaten said he doesn't feel that corporations should be running to the legislature and asking for help in introducing bill such as HB 251. Recalls are a last attempt at trying to get changes within corporations. He urged that the bill not be allowed to pass. Number 465 DOROTHY ZURA, Representative, Shareholders for Shareholders, said he is very opposed to HB 251. She said Representative Elton knows of how the shareholders are being treated. Ms. Zura said she is full Tlingit and her grandmother is still alive and sat in front of people like the committee members to win the settlement. HB 251 was introduced as she sees as 501, but 501 was tabled. She said it isn't the people who want HB 251, it is lawyers and consultants that wrote the bill. She referred to Mr. Wheaten and said he read the bill and couldn't understand it. She noted she semi understood the bill as she has been into this type of political outfit before. She referred to Roy Huhndorf and said when they ask for balance and needs, there is no balance and needs in her corporation. The people are poor. The old balance and needs is the board of directors, lawyers and consultants. When they talk about more fairness with 10 to 25 percent, it is dictatorship. They are making it so hard to fight. She discussed going to the board of directors and asking them what they are going to do in 1991, as they would be lifted from Congress. She said they are now at the mercy of the state of Alaska. How dare them. Now they are at no mercy, because if HB 251 is passed, there is going to be an uprising. Ms. Zura discussed how she has lived through two Goldbelt recalls and how they threatened elderly people. Ms. Zura continued to give testimony against HB 251 by saying this has become ownership. ANCSA was won on the Alaska Native Brotherhood and Sisterhood and it is now in the hands of lawyers and consultants. She discussed the difficulty in doing petitions. Ms. Zura continued to express her opposition and urged the committee to vote against HB 251. Number 572 CHAIRMAN KOTT pointed out that the meeting was noticed the previous Wednesday, in accordance with statutory and legal requirements. The bill was noticed appropriately. Chairman Kott said he would take testimony via teleconference from Anchorage. Number 590 DELICE ALEXANDER-CALCOTE, Shareholder, Cook Inlet Region, Incorporated, was next to testify on HB 251, via teleconference. Ms. Alexander-Calcote said she is currently serving as the ad hoc chairperson for Shareholders for CIRI's Future. She referred to two petitions relating to NOLs and the most recent on recalling CIRI's entire board. She said she has been told the petitions are valid for a year and HB 251 has some ramifications. She referred to petitions that are currently out there relating to recalls or NOL money and asked if they would still be able operate under what they have been approved to operate under. They are still continuing to gather signatures and are very concerned about the bill. Ms. Alexander-Calcote said corporations are pushing state and federal legislation that the shareholders don't even hear about until after it has already been submitted. The corporations are the shareholder's corporations and shareholders should be informed. The board members and officers are the shareholders' employees. The shareholders, as the owners, should be told of legislation that exists to alienate the shareholders or (indisc.) stock. She discussed the process of filing petitions and said everything has to be filed in a timely manner. They must work with the state of Alaska. They have an attorney and consultants. Ms. Alexander- Calcote explained they have been communicating with other corporations that have (indisc.) been successful and they are very appreciative of what the Goldbelt Board has done as they have completely turned around and are working with their shareholders. She said they want positive changes in their lives and if they have positive changes, the rest of the people in the country are also going to be impacted in a positive manner. She said shareholders don't want to be on unemployment or AFDC. They want jobs and changes. Ms. Alexander-Calcote explained they would rather vote by ballot rather than proxies. She noted a lot of shareholders have degrees and are very talented people. They want to have open elections for whoever wants to run for the board. She thanked the committee for listening to her. Number 634 JUDY KALKINS, Shareholder, Cook Inlet Region, Incorporated, referred to CIRI's 1994 annual meeting and said CIRI's president was asked if CIRI was going to distribute any NOL money to the shareholders. The president answered "no," and said shareholders already received their share of NOLs through their dividends. CIRI's president told the shareholders the NOL funds were going to be used for investments and to buy back stock for CIRI shareholders. Ms. Kalkins stated she didn't like the president's answer then and still doesn't because (indisc.) CIRI proxy statements that he would pay nearly $2.8 million from 1987 through 1993 and (indisc.) was paid based on requiring CIRI NOL money as revenue. TAPE 95-24, SIDE B MS. KALKINS continued... which he himself said 70 percent was (indisc.) quality level couldn't get a fair share. Refusal to give NOLs to the shareholders lead to the formation of Shareholders for CIRI's Future. Ms. Kalkins explained the group (indisc.) handed out flyers then it passed out petitions that called for CIRI to distribute 50 percent of its NOLs. When there were enough signatures to call a special meeting, they contacted both CIRI and the state's attorney's office. The shareholders didn't want a special meeting nor did they want to do a proxy campaign. All they wanted was to have the voice of the people heard. CIRI management spent a large amount of money to oppose the shareholder's resolutions. She noted shareholders donated supplies such as envelopes, paper, money, etc. After the signatures were turned in, CIRI's management called a meeting with 20 days notice. They set up the deadline for (indisc.) on Veteran's Day. There was only nine days to mail proxies and get them back from rural Alaska, the U.S.A. and foreign countries. Over 525 shareholders were disenfranchised by CIRI's move. Neither CIRI's management nor the group received an (indisc.) vote on the resolutions that were presented at CIRI's meeting. CIRI's management also changed the shareholder's resolution and presented (indisc.). Ms. Kalkins said she believes HB 251 is legislation that discriminates against Native stockholders and asked the committee to kill the bill. Number 065 CHAIRMAN KOTT referred to Ms. Alexander-Calcote indicating that there are some ongoing recall petitions and said the effective date of the bill would be 90 days after the Governor signs it. He asked if it would be retroactive. REPRESENTATIVE MOSES stated there is no intent to make the bill retroactive. CHAIRMAN KOTT asked if the bill wouldn't intervene with existing petitions. REPRESENTATIVE MOSES said he isn't an attorney but he doesn't think it does intervene. REPRESENTATIVE PORTER said it has been his experience that without a retroactive clause in the bill, the bill would not affect anything in process. It would only affect filings and actions that began after the effective date of the bill. The next person to testify was Bobbie Oskolkoff. Number 102 BOBBIE OSKOLKOFF, representing herself, testified via teleconference from Kenai. She explained her village, Ninilchik, other villagers and shareholders were not informed of HB 251, which affects about 70,000 Alaska Natives. Ms. Oskolkoff stated she has a problem with a bill being introduced before everyone is completely and totally notified, and what the contents of the bill are. She explained she is currently working on a petition asking for NOL money. She referred to petitions being done in a timely manner and passed at annual meetings and said the bill is assurance that if there is a technical error, a legal technicality, or anything that may happen, they could still reintroduce their bill, under HB 251, and would have to wait two years. The bill is discriminatory against Alaska Natives to have 25 percent of signatures, when state law for other corporations is 10 percent. Ms. Oskolkoff said they are asking for another resolution that they be included in participation and litigation (indisc.). She said the shareholders don't feel they are being allowed participation because they have a discretionary vote. If they fail, they shouldn't have to wait two years to reintroduce anything. Ms. Oskoloff said she feels that she doesn't want to personally do anything called (indisc.) for her corporation, but she does feel that any time the board of directors is completely and totally out of line, then a recall might be necessary. It keeps the board in line. To take this right away is really wrong. She thanked the committee for listening to her. Number 168 CHAIRMAN KOTT referred to legislation and said any idea can be drafted at any point in time without consulting members of the public. There is no requirement to bring in the public during the drafting process and anyone can introduce it. Once it is introduced, and there is the first hearing, the public then becomes involved. He announced the next person to testify was Ike Cropley from Juneau. Number 180 IKE CROPLEY, Shareholder, Sealaska Native Corporation and Goldbelt Native Corporation, explained that he was born and raised in Juneau. He said he has been helping with a recall effort against Sealaska. As a shareholder, he would like to say Shareholders for Shareholders stand united against HB 251. Their rights as shareholders are being taken away by the bill. He asked why shareholders in Juneau weren't notified about HB 251 and about the current hearing. He referred to the Sealaska recall and said he would like to explain some of the reasons they are having a recall. First, the reason shareholders are protesting and calling for a recall of Sealaska directors, by petition signed by shareholders, is to end corrupt leadership who has not accounted for $310 million of Native funds and $900 million lost in timber revenue. The source of those figures is from the Forrest Service and the Sealaska Annual Reports. Shareholders protest leadership who vote themselves elaborate salaries, $3,000 per month, and who allow the minority to rule over Native corporations with unfair election practices. With the help of the state of Alaska and the U.S. government, they spend millions of dollars of Native corporation monies to fight off honest attempts by a majority who want to reclaim their Native company. Shareholders for Shareholders stand united against HB 251. He thanked the committee. Number 223 CHAIRMAN KOTT announced that the next person to testify was Kathy Polk. KATHY POLK was next to testify from Juneau. She informed the committee that last year she was chairperson for Shareholders for Goldbelt's Future. She said they had a lot of concerns that affected shareholders and the reason that they had joined forces together was because the directors weren't listening to them. Ms. Polk said they tried to get in touch with people in the U.S. government to help them. Native corporations are protected within themselves. After 1991, the board of directors wouldn't listen to the shareholders. When there was the first recall, they were turning off the microphone and wouldn't listen to the shareholders. Theoretically, the shareholders won by majority on the recall, but because of the way the law is written, you had to have 50 percent, plus 1, in order to win. Ms. Polk said it has been a known fact that you don't have that many shareholders vote within the elections for the board of directors. One of the problems with the recall is they, the board, hired proxy workers to work for them and paid them $75 a proxy. There are 2,700 shareholders and they were picking up their proxies. She said they didn't know if they won. From the records she had, she knew that they won, but the board said they didn't. She indicated the shareholders didn't want to have the recall. You cannot recall just one person, you have to recall the whole board in order to be effective the way the law is written. MS. POLK said they had a problem with the chairman of the board of the corporation and a few people that were behind him. They wouldn't listen to the shareholder's concerns. She said the president was fired and he was paid a large amount of money and then hired another president. What happened is they ended up paying double the amount for a president for one year. The board gave the shareholders 20 days for a special meeting from the time the petition was submitted. She said the proxy material couldn't be printed up until the board had given the date. The board had their material printed and then they immediately mailed it as soon as they announced the date of the meeting. She noted she spent $5 thousand out of her own pocket on this effort. Ms. Polk informed the committee the shareholders put together a platform. She stated that the system with elections is such that the board can take discretionary votes and use them to manipulate the votes. She indicated that shareholders have been threatened. Ms. Polk suggested the committee should be looking at changing the election rules in the Division of Banking, Securities and Corporations statutes for corporations. MS. POLK said when NOL monies become available, they want a board that will give the shareholders the right to decide how their money will be handled and to vote for or against 100 percent distribution, and when it becomes available, to vote for or against a permanent fund. Ms. Polk said they wanted a board of directors that was in favor of election reform. She asked that the little which is left that the shareholders have to fight with not be taken away. The state or the government doesn't give the Native shareholders much rope to fight. Recall is just about the only way to do it. She asked the committee to give consideration to the shareholders. Number 329 CHAIRMAN KOTT referred to Ms. Polk mentioning that the only way to effectively cause change is to recall the entire board of directors. He said it would seem that if they got rid of every director, there would be a lot of disruption and disharmony within the corporation. MS. POLK said that came up during the recall. She said she was not in favor of recalling the whole board. There were some people that shouldn't be there. She said, in speaking with the Division of Banking, Securities and Corporations, the way the situation is such that it makes more sense to recall the whole board. She said she doesn't really know what the answer is except that she knows shareholders have very little rights within the Native corporations. The corporations are run by legal counsel and whoever the majority is on the board of directors. It is run by the majority. She noted that Goldbelt has had two recalls because they try to trick the shareholders the first time, and they didn't give enough time. Ms. Polk urged that there be unity with the shareholders and within the corporation. Number 390 SONYA SMITH was next to testify. She noted that she is originally from Kake, Alaska. She stated that she was informed about HB 251 at the last minute and was surprised and angered. Ms. Smith said she doesn't approve of the bill. She stated she comes from a very cultural family and the whole purpose for the corporations is to have cultural representation. Ms. Smith said she supports previous testimony against the bill. She is very upset, and she doesn't think that it is fair, right or proper. Ms. Smith said that when you are dealing with people with a past, you can only poke those people long enough before you get a reaction. Ms. Smith said she hasn't participated much in the voting process because of the result and outcome of what they are dealing with here. She said that this isn't the way her people were taught to deal with problems. She referred to not participating in the voting process and said it is mainly because she doesn't agree with the process. Sealaska has done a lot of hard work but there is a gap there between the leadership and the shareholders. She questioned why the bill was written and said she has many concerns and doesn't believe any of it can be dealt with in the committee because of the last minute approach that was taken. The process of the petitions should actually be a warning to the Sealaska Board of Directors. She said she doesn't agree with HB 251 at all. She indicated she will do her best to see that a lot of the shareholders are informed about this whole thing. Number 458 JANE IGTANLOC, Chairperson, Shareholders for Goldbelt, was next to testify from Anchorage. (A lot of Ms. Igtanloc's testimony was indiscernible due to taping difficulties) She discussed language on page 1, line 8, starting with, "A director who votes for or assents to a distribution to the corporation's shareholders contrary to the provisions..." She discussed how she is against having an increase in signatures on a petition from 10 percent to 25 percent. Ms. Igtanloc said it seems to her that HB 251 is written for management and not for the shareholders. She referred to wording in the bill where it says, "A corporation that is organized under this act is not required to consider or to submit to a vote of the shareholders a shareholder proposal that deals substantially with the same subject matter as a proposal that was submitted to a vote of the shareholders within the preceding two years." Ms. Igtanloc indicated that the language takes away the shareholders constitutional right of freedom of speech. She said they have every right to petition and HB 251 takes away the right to petition. Ms. Igtanloc continued to give testimony against HB 251. Number 512 HAROLD RUDOLPH, Shareholder, Cook Inlet Region, Incorporated, testified via teleconference from Anchorage. He said as a CIRI shareholder, he is totally opposed to HB 251. If the bill passes there would be great deprivation to all children of all corporations. He said no white man's corporation would allow such a bill. Mr. Rudolph said he wonders why the bill is before the legislature and 70,000 Natives haven't heard about the bill. The bill shouldn't even go to the floor. He referred to a November 17th, CIRI meeting and said it was uncalled for. The shareholders don't know how much money the corporation spent against simple advisory resolutions. The corporation promised to tell them how much they spent but haven't done so yet. It seems to him the directors are supposed to be running the corporations, not the officers. He said he would be happy to answer questions. CHAIRMAN KOTT noted that HB 251 was read across on the House floor nearly two weeks ago and had been noticed for a hearing in the House Labor and Commerce Committee five days ago. Number 558 SHARON KAY, Shareholder, Cook Inlet Region, Incorporated, testified via teleconference from Anchorage. She said she faxed a letter to Representative Masek's office earlier in the day with approximately 80 signatures. She noted that it was one evening of gathering signatures. Ms. Kay said she was really sad that some of her fellow Alaskan Native shareholders were hesitant to sign the petition against HB 251, even after she explained the consequences to shareholders. If HB 251 passes, it will negatively affect thousands of Alaska Native shareholders who don't know anything about the bill. Ms. Kay said she spoke to a CIRI board member about HB 251. That board member was really concerned and didn't have any knowledge of the bill. HB 251 deals with Chapter AS 45.55, Chapter 55 of the Alaska Securities (indisc.) Ms. Kay asked why Native corporations are exempted from the Securities Exchange Act, and therefore, she inquired how are they to abide by laws from which they are exempted. She said the bill is another political ploy to further shut the shareholders out of their own corporations. It is discriminatory. Ms. Kay urged the committee to vote against HB 251. REPRESENTATIVE GENE KUBINA said the current debate is an interesting debate, as he has never listened in on how Native Corporations are run. He said he has a lot of questions and he would like to know more about how the corporations are run. Representative Kubina said he would like someone from the department to give an overview of what things are currently like and what the bill would do. CHAIRMAN KOTT said he also has some questions. He noted that Mr. Kirkpatrick from the Division of Banking, Securities and Corporations, Department of Commerce and Economic Development, was in attendance. He also said the committee might want to get an opinion from Legislative Legal. Number 610 JOAN MANTEI, Shareholder, Sealaska Corporation, was next to testify in Juneau. She said her grandmother was a full blooded Athabascan-Tsimshian Indian Sealaska shareholder. She referred to the bill being introduced without people knowing about it and said they had three days to inform people. Ms. Mantei referred to people in outlying villages and said she wonders how much notice was really given to them. She referred to Section 6(a) and said it mentions stockholders having to take on the burden of proof that they didn't know a regulation existed on misleading information. She said she is concerned because a lot of the shareholders are very old. They don't understand the issue and are not technical people. She said they do wonder, including her grandmother, where their Indian land is, as they never received any through the Claims Act; yet, they believed they were going to receive land. Ms. Mantei said she has a feeling they're not going to be allowed to challenge why they didn't get any Indian land from Sealaska Corporation or the corporations that haven't given any yet. She referred to a bill introduced last year, HB 510, and said it was 9 pages long. She said there were some errors in it. She spoke to Klukwan's attorney and the Division of Banking, Securities and Corporations, and saw what was mistaken and what was not. Ms. Mantei explained that Sealaska didn't give them an opportunity to understand the bill. There weren't educational classes; nor were any Indians contacted. TAPE 95-25, SIDE A MS. MANTEI said HB 251 affects every Native in Alaska, there is a moral responsibility to allow each and every one of them insight as to how the legislation will affect them. It is their right as stock owners and Native people. She said she feels that when the board feels that the shareholders are stating something that imposes on them, they can throw scary circumstances out such as $25,000 fines, indictments, felonies, etc. Ms. Mantei explained many Indians got only Sealaska as a corporation. They have no land or economic base to continue the Indian way of life. She said bills such as HB 251 further prove to her that they cannot get through the corporate Berlin wall that Sealaska has been steadfastly encroaching to incapacitate the shareholders. MS. MANTEI explained that there is a 90 day regulations period being proposed in Section 2(m), page 2, for petitions to be turned in. The cost for stockholders to turn in these petitions would be about $25,000 to $30,000 under the increase in petition signatures that the legislation calls for. What the legislation is stating is that you must have about 3,000 signatures and $30,000, and you have 90 days from the date you began the petition to accomplish it all. She said Indian people are poor and you'll never see it. An Indian will never be heard again. Ms. Mantei asked the committee to kill the bill. She asked that the committee remain sensitive to the needs of the old Indian people. Number 091 BERNICE TREGO, Shareholder, Sealaska Corporation; and Yak-Tat Kwaan Tlingit Corporation, said she is opposed the HB 251. She explained that she sat back believing her corporation was there to help all these years. There wouldn't be the petitions for the distribution of the NOLs or the recall for the board of directors if they were doing what they were elected into office for. She said she wouldn't have elected the directors into office if she knew they were going to introduce HB 251. She asked what corporations fine their shareholders serious fines. She asked if she should be fined for something that she doesn't fully understand. She asked about their freedom of speech. Ms. Trego asked the committee members not to pass HB 251. EDWARD DALE CASEY was next to testify via teleconference from Anchorage. He said he opposes HB 251 as he believes the bill will further (indisc.) between our corporation and our shareholders. Mr. Casey again said he is against the passage of HB 251. Number 134 JIMMIE D. HARTLEY, Shareholder, Cook Inlet Region, Incorporated, testified via teleconference from Anchorage. He said he would like to remind everybody that we still live under a democracy. HB 251 is one in a series of special interest legislation sponsored by CIRI. This signals the desperation and intention of CIRI's leadership which doesn't have the support of the majority (indisc.) It attacks the shareholder and director's basic freedoms of speech. Already (indisc.) by legislation, politician have been lobbied at considerable expense and is causing severe public ridicule for their efforts and will probably lose their political tenure and voting support. He asked that the legislators not allow themselves as to be used as innocent pawns to (indisc.) any dictatorship. Mr. Hartley said currently 10 percent of the CIRI shareholders have petitioned for change and have followed all of the legal guidelines for this change. He said if committee members support and vote for HB 251, it is another form of the KGB and the (indisc.) and the constitution of the U.S. might as well be thrown out. He said HB 251 is the grossest form of special interest legislation CIRI has sponsored to date. The issues will not go away but will only intensify. Mr. Hartley thanked the committee for listening to his testimony. Number 164 HELEN HARTLEY, Elder, Cook Inlet Region, Incorporated, testified via teleconference from Anchorage. She said she is 75 years old, is an elder of CIRI, and is against HB 251. Number 187 BERTHA HORTON, Shareholder, Sealaska Native Corporation; and Goldbelt Native Corporation, testified in Juneau. She said when the ANCSA came about in 1971, she was ten years old. She said her mother believed that they would be rich some day and the corporations were for the Natives. Ms. Horton said HB 251 tells her that the shareholders don't have a voice if they have concerns about the management of corporations. She stated she doesn't agree with HB 251. Number 208 PAT SIERRA, Shareholder, Sealaska Native Corporation Goldbelt Native Corporation, testified in Juneau. She said if HB 251 is passed without the knowledge of its existence to the entire population of nearly 75,000 Native stockholders enrolled in the ANCSA corporations that it affects, it can be compared to the blankets filled with smallpox germs that were handed out to wipe out unknowing and unsuspecting groups of Indians. HB 251 will wipe out rights of a minority group of stockholders that are slowly becoming a majority. She suggested that instead of passing laws against the stockholders who are supposed to be the owners of the corporation, stiffer laws should be passed against the directors who do not conform to corporate laws already in existence. She explained that at no one time in Sealaska's corporate history have the shareholders been asked about assets affecting the corporation like buying and selling major assets, and as she understands under corporate law, this is a major issue that must come before the stockholders before it can be dealt with. Ms. Sierra said they are breaking the law and asked why they are getting away with it. She said not one recall attempt has ever succeeded due to the voting laws under state statutes. HB 251 will not benefit everyone but will benefit present management and directors. It would secure what they currently have to ensure their future as they are the only ones benefiting from the corporation. ANCSA was the shareholder's grandparents dream and has now become a nightmare. MS. SIERRA said instead of passing HB 251, the legislature should take a look at what is going on in corporations today. She said, "Find out why there are so many recall attempts with almost all the corporations." She said, "Compare it to what was supposed to happen when ANCSA was passed." Not only is HB 251 unnecessary, it discriminates against the Native people. She asked where are the equal rights as guaranteed in the U.S. Constitution. Black people were freed from slavery a long time ago, but the Indians are still wards of the government. Ms. Sierra said it is time that they are granted some freedoms like the freedom to have a say in their corporations. If HB 251 is passed without full knowledge disclosed to everyone it affects, it will be time to ask for a congressional hearing. She stated that the legislature was elected to serve the people and to listen to them. Therefore, as a Native and taxpayer, Ms. Sierra said she is asking the committee to table the bill until hearings in every city, town and village can be held to make every Native stockholder aware of the bill and listen to what they have to say. Then the committee members will be able to say, "I've done my job well, I've listened to the people." She thanked the committee. Number 282 ADA PATTERSON, Shareholder, Sealaska Native Corporation, testified in Juneau. She explained that during one recall, she passed out fliers against Sealaska. Ms. Patterson explained the main question in the flier was where was the interest earned on the permanent fund. This really disrupted the management, and within a month, they had $12 million put into the permanent fund because of that one question. That shows there is a lot of "crap" going on. She said there is previous management such as Byron Mallott who retired at $160,000 per year for life. Shareholders get a few bucks here and there. If the legislature takes away their rights, it will be extremely hard to process petitions and come up with a slate. It is hard to raise money to get new independent candidates into the corporation. Shareholders should have a right in the corporations and should have the right to have the freedom to do what needs to be done in order to keep the corporation up to par to their needs. She continued to give testimony urging the committee not to pass HB 251. Number 334 GAIL ANAGICK SCHUBERT, Shareholder, Unalakeet Native Corporation; and Shareholder, Member, Board of Directors, Bering Straits Native Corporation, testified in Juneau. She said she would like to speak out in support of HB 251. There have been a number of recall and other petitions that have occurred over the past several years by minority or dissident shareholders. One of the complaints that she has heard is that shareholders who have an opinion that differs from the directors, don't have a chance to be heard. Her argument has always been that when you have an election, even if you have a board slate, shareholders are entitled to vote whoever they want to on or off the board slate. She said she ran as an independent and noted there was a board slate. Ms. Schubert said she was elected because there were enough shareholders who voted for her. Shareholders can have a voice in how the corporations are managed and what happens. The amount of time and money that goes into recalls or other activities could be better spent elsewhere. When the regional Native corporations were set up, they went forward very quickly into the twentieth century. Ms. Schubert said some of the original leaders that are currently being attacked have done a lot of good for Natives. She said HB 251 makes sense and should be passed. Number 372 REPRESENTATIVE MOSES asked Ms. Schubert if it is her observation that the more successful Native corporations are the ones that are having the most problems. MS. SCHUBERT said that is correct. If you look at Sealaska and CIRI, those are the two corporations that she has heard have the most problems. If you look at the annual reports, you'll see they have been the most successful. She said that is why she doesn't really understand why this is going on. It is the people who have done very well and have been successful who are being attacked. Ms. Schubert said she doesn't understand it. Number 385 REPRESENTATIVE KUBINA said what he is feeling from this, there is a lot of "some who have and some who have not." He said he sees it in the room and when we see people representing the corporations, they really seem to be the Natives that can dress better, can have more material things. He asked if the Native corporations are not working to help spread the wealth to all Native groups. MS. SCHUBERT said she disagrees with Representative Kubina's observation. REPRESENTATIVE KUBINA said to take it as a whole, the dissidents really do seem to be the poorer group. MS. SCHUBERT said she doesn't know the answer to that. She said she doesn't know enough about the population base of the regional corporations that are experiencing these problems. Ms. Schubert informed Representative Kubina that she was born and raised in Unalakeet and was one of nine children. She said she comes from a fairly well educated family. She indicated they were very poor as they had no running water or electricity. When her father was hospitalized for six months with tuberculosis, her mother didn't want to go and ask for support to feed her children. On Thanksgiving, her mother sent her children to the church with a bowl to get some reindeer stew. Ms. Schubert said she and several of her sisters got an education. Because of that education, she has options available to her. She noted those options are available to everyone. Anyone else in the committee room could have the same options available to them. REPRESENTATIVE KUBINA said he is looking for a reason why there are so many problems, and why those who aren't involved with Native corporation see so much and feel so much emotion. He said it seemed very split. He said he is trying to figure out if something has gone wrong and if there is a way the legislature can help make it better so that the corporations can succeed in their goals to somehow bring everybody together. MS. SCHUBERT said if you look at who is being attacked, it is the corporations that have been really successful. It is her understanding that HB 251 comports state law to federal law. She noted she isn't a securities expert, so she isn't absolutely sure. Ms. Schubert said she doesn't think it is up to any legislative body to dictate to any management team how they should or should not run their corporations. These people in charge know what it is that they have to do to make the corporation grow. She said it would be great for her personally to receive a huge $5,000 or $10,000 dividend out of a corporation, but her concern is in ensuring that the corporation is healthy, stays healthy, continues to grow, and is there to protect her interest, her children's interest and her grandchildren's interest into the future. Ms. Schubert explained she doesn't favor seeing huge pay outs that might damage the corporate structures. There is a desire to share the wealth, but by the same token it is necessary to ensure that the corporation remains viable. Number 450 GLORIA SARABIA, Shareholder, Sealaska Native Corporation; and Goldbelt Native Corporation, testified in Juneau. Referring to Ms. Schubert she said if she is really for the shareholders, she shouldn't wear her $500 suit. She said her clothes were on special at K Mart. She said everything comes from clearance racks from K Mart, Costco, etc. She said she can't afford nice clothing. Ms. Sarabia said she has 30 years of service with the state of Alaska. She said Ms. Schubert almost insulted her intelligence when she asked if the board were to be recalled, wouldn't it be disruptive. We have an awful lot of intelligent people. The board of directors hold the shareholders in bondage. She urged the committee to table the bill or at least vote against it. Ms. Sarabia said she has worked as hard as anybody with a degree. She may not have gone to college. She is the oldest of eight kids and not one has been to college except her brother and he is the only state Indian coordinator in the U.S, in the state of Connecticut. Ms. Sarabia said her entire family is against HB 251. Number 478 CHAIRMAN KOTT said if he has insulted anyone's intelligence, that wasn't his intent. He said he is trying to seek answers and understand the issues. Chairman Kott noted he is not a member of a Native corporation and never has been. He said he is trying to understand the whole concept. MS. SARABIA said Sealaska started 25 years ago with people who knew nothing. People know a lot today. Number 491 CATHERINE PRICE, Shareholder, Sealaska Native Corporation, said she learned about HB 251 earlier in the day. She referred to the legality of the legislation, and asked that the committee thoroughly do the research and find out if it truly is legal to make these kinds of changes. Ms. Price asked the committee to please do the research before any decisions are made. Number 504 MS. SCHUBERT said she meant no insult to anyone sitting in the committee room. She referred to her clothing and said she doesn't owe any of it to her Native corporations. She said she owes her coat to the fact that she went to school for 21 years. She is an attorney, is proud of it, and worked very hard. She said she isn't going to make excuses for how she dresses and she certainly owe it to the Native corporations. CHAIRMAN KOTT stated is isn't his intent to move HB 251 out of the committee today. There are a lot of questions that need to be answered. He said he believes the committee has a number of questions that relate to the legal aspects of the bill. Chairman Kott asked Mr. Huhndorf to come back before the committee Number 513 REPRESENTATIVE ROKEBERG asked Mr. Huhndorf if he has any questions or statements he would like to make. MR. HUHNDORF said there has been a lot of testimony that has been sharply conflicting in terms of people being very pro or very con of what is being proposed in HB 251. He said he would submit that this is about dividend and distribution policy. Some of the corporations have become quite successful and have increased their net worth, cash flows and their net income substantially. He said CIRI has a policy of distributing about 50 percent of their net profits in dividends to the shareholders. He said they have been coming under a lot of pressure from a minority of shareholders to distribute more. The board is caught on one side of the question with their duty to the corporation to be prudent in terms of the distributions they make and the liquidity that they maintain in the company. On the other hand, they know that the people asking for more money need money. In many cases they are desperately poor and they want more money. Mr. Huhndorf said it is really hard to explain why you have to keep the corporation alive and put some net profits back into the growth of the company in order for the company to be around and alive for generations to come. He said there are no good or bad guys. The irony is that as the corporations grow and become more liquid, there is an increase demand by people who are not very well off to want more of that money, and all of a sudden, there are accusations flying back and forth. Mr. Huhndorf said it is really a question of money, and that is why there is the disruption in the Native community in recent months. He said CIRI has grown, for example, from $34 million in 1971, to a corporation with a net worth of about $435 million. There was nearly a 20 percent a year growth. MR. HUHNDORF explained dividends have increased each year. In one year CIRI distributed 62 percent of their net income. He said the corporations obviously can not conduct business if they're perpetually holding special meetings. He said to hold a special meeting, you can get 10 percent of the signatures on a petition in just a few days. He said the tragedy is that the special meetings are advisory in nature mostly because state law prohibit shareholders from voting themselves dividends or for making major policy changes in the fiscal management of the company. State law simply does not allow it and it only becomes advisory to a board who then becomes or feels threatened. They then go into a siege mentality about what they should or shouldn't do. They are threatened by being told they are going to lose their board seats, and of course, nobody likes to be fired. MR. HUHNDORF said the board thought they were doing a lot of right things, but it ended up, he believes, that the shareholders weren't asked to participate in the planning and recommend some of the policies that resulted in some of the things that were done. Number 583 REPRESENTATIVE ROKEBERG said from his personal knowledge, it seems to him that Mr. Huhndorf was probably the most underpaid executive in North America during the 70s and 80s. He also asked if it isn't true that the solid decision making by the board of directors of CIRI in the land selections and the ability to acquire assets, which are probably one of the most important sources of income for appropriations under the 7I provisions. MR. HUHNDORF said that is true statement in that to an extent they were able to select lands that had oil and gas bearing potential. CIRI was able to do that and generate revenues under Section 7 of ANCSA, which requires a sharing with other regions in that a producing region must share 70 percent with other regions. Mr. Huhndorf said as he recalls, since CIRI came into existence, they have shared in excess of $200 million with other regions. MR. HUHNDORF explained that one of the things corporations try to do that has a sense and continuity of management is to try to pay market levels of salaries. So when a person looks at his/her salary, it is either above or below the middle of the market. That is what they strive to do in CIRI. It is important that managers don't have reasons to quit or look for new jobs. If they are paid under the market consistently, even though they like their job, they will eventually feel used and put upon and will look for a new job which pays more. He said they try to pay at the middle of the market. That may be high because the corporation is large and it is compared to other corporations in America that do similar things. He explained they try to follow paying the middle of the market and that causes some problems. REPRESENTATIVE ROKEBERG asked if it wasn't true that CIRI didn't have a retirement program for the first 12 years of their existence. MR. HUHNDORF explained they currently don't have a retirement program. They have a full "1K" and a small profit sharing program that builds some annuity. He noted some companies have retirement plans and stock options. TAPE 95-25, SIDE B CHAIRMAN KOTT asked Mr. Kroloff to come back before the committee. He referred to the sponsor statement saying the 10 percent requirement would be adjusted to the 25 percent, which would bring Alaska's law into conformity with federal statute. He asked Mr. Kroloff if he could specifically sight what federal statute is addressed. MR. KROLOFF explained as ANCSA was originally passed in 1971, it provided that the stock that the Native shareholders would receive would be subject to very strict alienability limitations where the stock could not be sold, pledged or seized in foreclosure. Those restrictions were to end 20 years from the passage of ANCSA or in 1991. In 1988, ANCSA was amended by congress in a way that dealt with alienability restrictions. The rule was essentially changed so rather than the restrictions expiring automatically in 1991, they stayed in place automatically unless 50 percent plus 1 of the shares voted to lift them. So rather than having the restrictions expire, congress, in essence, gave authority to the shareholders to make that decision for themselves. It also provided a mechanism for shareholders to bring that decision before the corporation. There are two ways that can come about. The board of directors can bring before the shareholders its own motion, in essence, or resolution to lift the restrictions or shareholders may petition the company for a vote to lift the restrictions. It is that provision of ANCSA that set the petition level at 25 percent. The argument that has been made to the committee by people testifying earlier in the meeting can be summarized. Mr. Kroloff said congress did not mandate that every petition be 25 percent. The state would not be required to make everything a 25 percent threshold. The argument being made is that when congress considered what is probably the most important subject that shareholders could bring before their corporation for a vote, which is to retain or to remove the restrictions on alienability of Native corporation stock. Congress set 25 percent as the threshold and the reason it did that is so there would have to be a relatively significant level of support for the petition. Even if it was not majority support at the time it was brought, it had to at least be a significant minority. Mr. Kroloff explained the argument being made today is if that every important question requires such a threshold. The proponents of the bill feel that these kinds of questions that are not of the same significance, largely because they are of an advisory nature only, shall require a similar threshold. Corporations should not be subjected to repeated calls for meetings on matters that are of lessor significance and are advisory only, with a lessor minority of shareholder supporting. Number 094 CHAIRMAN KOTT said he assumes Mr. Kroloff worked on the legislation with the bill sponsor. He referred to the 90 day period to gain the required number of signatures on petitions, and noted shareholders are mobil and scattered. He asked if it was reasonable to place the 90 day restriction in order to gain the required number of signatures. MR. KROLOFF said he thinks it is reasonable. He stated that state law currently provides for a proxy campaign for an annual meeting to elect directors. The requirement is as low as 20 and no longer than 60 days and that those who support or disagree with management have to contact all the shareholders to submit their proxies and to cast them at the meeting. These meetings have happened for 20 years. Mr. Kroloff referred to previous testimony where there were complaints that shareholders thought 20 days was too short. The whole point of the bill is to treat the petitions like proxies, which in essence is what they're like. It provides a longer period than you would have to solicit votes for a director which is considerably more significant act. MR. KROLOFF said there were some calls for modeling Native corporations governance on SCC Rules. He said he believes the SCC has the same or a more stringent requirement. Number 138 CHAIRMAN KOTT said HB 251 would make it a criminal offense to solicit support for a request for a special meeting without first notifying the corporation. He asked Mr. Kroloff if he could comment on the reasonable "miss that" aspect of it. He asked if it perhaps infringes on the shareholders rights of free expression. MR. KROLOFF asked if there should be criminal penalties. He said he doesn't think CIRI has a particular view in favor of criminal penalties. He said he believes that is in the bill because he thinks the bill just incorporates the proxy votes, already in law, for willful violations of the proxy rules. Mr. Kroloff said if the committee didn't feel comfortable with that, he doesn't think CIRI would care. He referred to the question relating to violating people's free speech rights and said he doesn't think so as a legal matter. This is because free speech rights are between a citizen and a government and not between a shareholder and a corporation. He noted even between a citizen and the government, the government can impose reasonable time, place and manner restrictions on them. Number 160 REPRESENTATIVE ROKEBERG referred to earlier testimony that indicated there currently is a year or an unlimited period for petitioning. He asked if there currently was a time frame. MR. KROLOFF said he isn't familiar enough with that to know. An unidentified speaker indicated there isn't a limit. Number 174 CHAIRMAN KOTT said the penalty would be a felony of not less than one year and not more than five. Number 181 REPRESENTATIVE KIM ELTON said he wasn't sure what the chairman's plan is for the bill. He said as a dissident Democrat in the legislative body dominated by a majority of Republicans, there are questions that have come up that need answers. He said he would doubt that the questions can be answered in the next 20 minutes. He noted Mr. Kirkpatrick is in attendance, but indicated he thinks it would be good for the committee to have Mr. Kirkpatrick come back at a point in time where there is enough time for questions for him from other members of the body. He said a lot of people have shown up to testify and he believes it would be fair to have those people leave their names and telephone numbers to they can be contacted when HB 251 does come up again. Representative Elton said he will need his energy for later in the evening when the House goes back into session. He said he would move for recess or adjournment. CHAIRMAN KOTT objected for the purpose of inviting Mr. Kirkpatrick to the table for a very brief dialogue. He asked Mr. Kirkpatrick to provide a very brief synopsis of the bill as he sees it. He explained the bill would be held over until the following Wednesday and he would invite Mr. Kirkpatrick back to cover some of the more intricate matters. REPRESENTATIVE PORTER said if the bill is going to be back before the committee, he would prefer that Mr. Kirkpatrick give his testimony at one time. It is unfortunate that the timing is off. He said he would like to also have someone from the Department of Law that deals with securities and corporation matters as well. CHAIRMAN KOTT agreed with Representative Porter. ADJOURNMENT CHAIRMAN KOTT adjourned the House Labor and Commerce meeting.