Legislature(1993 - 1994)
03/18/1994 01:35 PM Senate JUD
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE
March 18, 1994
1:35 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chairman
Senator Rick Halford, Vice-Chairman
Senator George Jacko
Senator Dave Donley
MEMBERS ABSENT
Senator Suzanne Little
COMMITTEE CALENDAR
HOUSE CONCURRENT RESOLUTION NO. 24
Supporting the governor's decision to authorize a suit against the
United States government for violating the Alaska Statehood Act.
SENATE BILL NO. 337
"An Act relating to the voting of shares in Native corporations."
HOUSE CONCURRENT RESOLUTION NO. 11
Designating the month of March as "Women's History Month."
SENATE JOINT RESOLUTION NO. 47
Proposing amendments to the constitution of the State of Alaska
changing the membership of the Judicial Council.
SENATE BILL NO. 161
"An Act relating to interest rates and calculation of interest
under certain judgments and decrees and on refunds of certain
taxes, royalties, or net profit shares; and providing for an
effective date."
PREVIOUS SENATE COMMITTEE ACTION
HCR 24 - See Judiciary minutes dated 3/14/94.
SB 337 - NO PREVIOUS ACTION.
HCR 11 - See State Affairs minutes dated 4/16/93.
SJR 47 - NO PREVIOUS ACTION.
SB 161 - See State Affairs minutes dated 4/2/93 and 4/7/93.
See Judiciary minutes dated 4/14/93 and 4/20/93.
WITNESS REGISTER
John Katz, Special Counsel
State/Federal Relations
444 N. Capitol NW, Suite 336
Washington, DC 20001-1512
POSITION STATEMENT: Supports HCR 24.
Cheri Jacobus, Asst. Atty. General
Civil Division
Department of Law
1031 W. 4th, Suite 200
Anchorage, Alaska 99501-1994
POSITION STATEMENT: Supports HCR 24.
Daniel Bruce, Attorney
Baxter, Bruce & Brand
P.O. Box 32819
Juneau, Alaska 99803
POSITION STATEMENT: Represents Huna Totem Corporation.
Larry Carroll, Securities Examiner
Division of Banking, Securities and Corporations
Dept. of Commerce & Economic Development
P.O. Box 110807
Juneau, Alaska 99811-0807
POSITION STATEMENT: Opposed SB 337.
Alice Petriuelli, President
Aleut Corporation
4000 Old Seward Highway
Anchorage, Alaska 99503
POSITION STATEMENT: Supports SB 337.
Renee Chatman, Aide
Representative Bettye Davis
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced HCR 11.
William Cotton, Executive Director
Alaska Judicial Council
1029 W. 3rd Ave., Suite 201
Anchorage, Alaska 99501
POSITION STATEMENT: Opposed SJR 47.
Chris Christensen, Staff Counsel
Judicial Branch
310 K Street
Anchorage, Alaska 99501-2084
POSITION STATEMENT: Opposed SJR 47.
Deborah Vogt, Asst. Atty. General
Civil Section
Department of Law
P.O. Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Supports SB 161.
Larry Meyers, Director
Income & Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, Alaska 99811-0420
POSITION STATEMENT: Supports SB 161.
Grant Hunter
733 W. 4th Street
Anchorage, Alaska 99501
POSITION STATEMENT: Opposes SB 161.
ACTION NARRATIVE
TAPE 94-18, SIDE A
Number 001
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to
order at 1:35 p.m.
SENATOR TAYLOR returned HCR 24 (SUPPORT SUIT AGAINST FEDERAL
GOVERNMENT) by prime sponsor REPRESENTATIVE RAMONA BARNES, to
committee.
SENATOR TAYLOR announced JOHN KATZ, Special Counsel for State-
Federal Relations, was on teleconference from Washington, DC, to
answer questions from SENATOR DONLEY.
SENATOR DONLEY, in reference to a conversation with MR. KATZ the
previous day and from reading about the suit, expressed his concern
about the timing of the lawsuit that dealt with the oil export ban.
He described his support for the substance of both the lawsuits, as
well as the resolution, but he was concerned about the timing of
the oil export ban provision in relation to the potential for an
administrative lifting of the ban. He understood there was a gap
between the expiration of the export act and when it was once again
extended by executive order by the Bush Administration.
SENATOR DONLEY explained his staff had faxed to MR. KATZ a couple
of oil industry periodicals that identify the concern about whether
it was the Justice Department stance that caused the withdrawal by
the Bush Administration. He quoted MR. KATZ as not having a direct
conversation about the Justice Department position, and he asked
MR. KATZ if he had any details on any communication.
Number 050
MR. KATZ responded by reiterating what he had said to SENATOR
DONLEY yesterday, in that he didn't believe the timing of the
lawsuit had any effect on the discussions that occurred with
respect to rescinding the oil export ban by administrative action.
He explained there was a brief window of opportunity in 1992 when
it was hoped that the ban Executive Order would expire by its own
terms, but it did not.
MR. KATZ further explained that after the November elections his
office entered into discussions with both the Department of Energy
and the White House, which culminated in a direct meeting between
the Governor and the President in December. At no time, in any
discussion at any level did anyone raise the issue of the pending
lawsuit in district court and court of claims as a problem with the
negotiations.
MR. KATZ believed the involvement with the Justice Department
concerned the legal issue as to whether the President had the
authority to rescind the Executive Order once he had executed it
originally. He argued that because the President had the authority
to execute it, he had the authority to rescind it. MR. KATZ said
there were people at the Justice Department who were raising
questions about that legal issue, but in all his discussions he
concluded the pendency of Alaska's litigation didn't have an
effect. He believes the Bush Administration decided not to rescind
the Executive Order for other reasons.
Number 99
SENATOR DONLEY respectfully disagreed with MR. KATZ'S analysis, and
stated that he did think the lawsuits were a factor. He read
excerpts from some of the petroleum periodicals which made it seem
to be common knowledge around Washington, DC, that there was a
problem with the Justice Department on the lifting of the ban
because of the defense the department had to prepare for the case.
He told MR. KATZ he had faxed him a copy of the periodicals to him
and had distributed copies to the committee members to show his
concern on the timing.
SENATOR DONLEY reiterated his support for the lawsuit and the
dilemma faced by MR. KATZ, but he thought that the lawsuit should
not have been filed until after the elections and that that would
have prevented the defense presented by the Justice Department. He
read a quote from INSIDE ENERGY, dated December 11, 1192: "DOE had
to back off its support of Alaska Governor Walter Hickel's request
to have President Bush administratively lift a ban on the export of
Alaska North Slope crude oil, after learning that the Justice
Department had taken the opposite legal stand in its defense
against Hickel's lawsuit on the same subject, according to sources
familiar with the issue." He read several other quotes along the
same theme to indicate there was knowledge in the oil industry that
this conflict had occurred.
SENATOR DONLEY thought there was a strong case that there was
direct input from the Justice Department to halt lifting the ban,
but he accepted MR. KATZ'S explanation that he didn't get such a
message from the White House.
Number 169
MR. KATZ opined we will never know exactly what transpired between
the Justice Department and the White House at any given time in the
process, and he described juggling the State Administration with
the judicial option against the possibility of executive action
against the future possibility of legislative action. He claimed
with certainty in all the meetings he attended, at no time dealing
with the clients was the lawsuit mentioned. He explained if there
had been a chance the ban would be lifted if the lawsuit was
dropped, the lawsuit would have been dropped.
MR. KATZ, in reference to one of the quotes read by SENATOR DONLEY,
thought the principal legal issue was when the Justice Department
advised the president there would be significant legal problems,
not caused by the lawsuit, but by the questions raised about the
president's authority to rescind the ban once he had executed the
ban. MR. KATZ thought there were political concerns about the
merits, but not about the legal issues, and the existence of the
lawsuit was only a tertiary factor in the analysis.
Number 207
SENATOR DONLEY suggested it would be interesting if MR. KATZ
followed up the discussion with someone from the Department of
Energy to determine their opinion on the problem.
SENATOR DONLEY thought it was a significant enough question to
propose an amendment to disclaim the timing of the specific case of
State v. Brown, but not taking a position one way or the other
about the case.
SENATOR TAYLOR objected to the motion for purposes of discussion,
and he asked MR. KATZ to stay on line during testimony from CHERIE
JACOBUS, Asst. Atty. General from the Department of Law who wanted
to comment. She was on teleconference from Anchorage.
MS. JACOBUS thought the resolution, HCR 24, was very appropriate
because it was this governor's legacy to Alaska's future, and she
reviewed the past 35 years with the erosion of promises made to
Alaska at statehood. She said Alaska had not been treated equally
with other states, particularly under the compact lawsuit and the
90/10 split which is the subject of the lawsuit. She also reviewed
the manner in which Alaska was to fund state government and the
effect of dwindling resource development.
MS. JACOBUS thought future legislatures would see continued erosion
of the unreserved lands available for development. She also
thought it was important the legislature take a stand on the issues
as outlined and the litigation should continue. She urged support
for the resolution, saying it was also supported by the governor.
In reference to the proposed amendment, MS. JACOBUS said she
understood what SENATOR DONLEY was suggesting, but she did not
agree it would serve any purpose, and she believed MR. KATZ'S
explanation was correct.
Number 255
SENATOR TAYLOR questioned whether would it not have been logical to
assume that when the President, the Governor, and MR. KATZ sat down
with litigation pending on the issue, the Governor would have said,
"We're suing you, but we will drop the suit if you lift the ban."
MS. JACOBUS said she couldn't speculate as to what occurred between
the Governor and the President, but she thought dropping the
lawsuit would be a factor in whether the oil export ban was lifted.
SENATOR DONLEY didn't see how the proposed amendment undercuts,
because the whole resolution is the legislative support of the
concept behind the lawsuit. He claimed the amendment only
specifically disclaims the timing of the one lawsuit, and he
reiterated his support for the substance of the suit. He asked MS.
JACOBUS why she thought the amendment would undercut the substance
of the suit.
Number 290
MS. JACOBUS didn't think there was anything to be gained by the
action of the amendment, and she thought it might suggest the suit
should have been brought earlier.
SENATOR DONLEY continued to explain the amendment was neutral on
support for the timing, and he admitted the suit should have been
brought earlier. MS. JACOBUS concluded her testimony.
SENATOR TAYLOR called for a vote on SENATOR DONLEY'S motion to
disclaim the timing of the specific case of State v. Brown, but not ot
taking a position one way or the other about the case. SENATOR
JACKO objected to the amendment. The roll was taken with the
following results: SENATOR DONLEY voted "yes," and SENATORS JACKO
and TAYLOR voted "no." SENATOR TAYLOR said the motion failed.
SENATOR TAYLOR announced SB 337 (SHAREHOLDER VOTING: NATIVE
CORPORATIONS) to be up for consideration.
DANIEL BRUCE, Baxter, Bruce & Brand, representing Huna Totem
Corporation, supported SB 337, the purpose of which is to eliminate
the sunset provision contained in AS 10.06.420. (d) pertaining to
non-cumulative voting. The 1989 amendments to the corporations
code provides that a corporation that had prohibited cumulative
voting only in the by-laws had until July 1, 1994 to amend their
Articles of Incorporation to replace the restriction on cumulative
voting in the Articles. This would have required a two thirds
majority vote of the corporation shareholders to approve the
amendment of the Articles. It is his position that not amending AS
10.06.420 (d) enforcing compliance with the sunset provision is
unnecessary, unduly burdensome, and costly to the affected
corporations.
The concern with cumulative voting is that it is necessary to
protect the rights of minority shareholders and they believe the
current system of non-cumulative voting adequately protects the
shareholders in the context of the Alaska Native Corporations.
He said there are no benefits to the sunset provision currently in
the statute for the Alaska Native Corporations.
SENATOR JACKO asked him to explain cumulative. MR. BRUCE explained
if a corporation has cumulative voting, and four directors are
being elected, for instance, each shareholder would be able to
cast, four hundred shares to vote for one director. Under non-
cumulative, it's basically 1 person, 1 vote.
SENATOR JACKO asked if this would have any affect on the
corporations using cumulative voting now. MR. BRUCE said it would
not. He said it would basically only affect the corporations which
had restricted cumulative voting in their by-laws prior to amending
the Corporations Act in 1989.
SENATOR TAYLOR commented that if they take no action, that would be
an affirmative act on the part of the native village corporations
that have decided not to use cumulative voting to continue not
using cumulative voting.
LARRY CARROLL, Securities Examiner, said that was correct. He said
the one thing you can do as a shareholder is vote. Eliminating
cumulative voting poses a serious consideration for dissenting
minority shareholders within any corporation. If the enactment was
done by the Board, it's makes it harder to change that Board.
They, therefore, suggest an amendment that says if the by-law was
in place by a majority of shareholders.
SENATOR JACKO said often the corporations have a difficult time
having two thirds of the members present, so it is really difficult
to amend the Articles to get non-cumulative voting. MR. CARROLL
commented that usually quorums arise when there issues of
importance to shareholders. However, they realize it is a problem
which is why they suggested the amendment.
SENATOR TAYLOR said he is personally concerned with the village
corporations in his area of the state whom he watches harvesting
their resources go broke in the process of doing it, and yet the
Board members get taken care of real well. The shareholders
couldn't do anything about it, because the Board was so well
entrenched and they didn't have cumulative voting where they could
take advantage of their minority status to get some of their people
on the Board to turn things around.
SENATOR JACKO said it has been his experience that the Boards that
had more continuity were more successful than the ones with new
members every two years. He said non-cumulative voting doesn't
prevent a minority from getting elected. SENATOR TAYLOR said it is
tougher and takes longer.
SENATOR DONLEY asked for a position paper. MR. CARROLL said they
didn't have one at the time, but they did have a $0 fiscal note.
They do oppose SB 337. He said their bottom line is to let the
shareholders make the decision themselves.
Number 526
ALICE PETRIUELLI, President, Aleut Corporation, supported SB 337.
She said anyone can run for their Board and win. They don't have
a management slate. Non-cumulative voting does not encourage a
management slate. They want to be allowed to keep doing what they
have been doing since 1972 which is 1 man gets 1 vote.
SENATOR TAYLOR asked if the decision to go from cumulative to non-
cumulative was made by a vote of the shareholders or if it was made
by a by-law change by the Board of the Directors. She said they
have had non-cumulative voting from the beginning. They went to
every village and asked them how they wanted it and it was put into
the original by-laws which was voted on by the shareholders.
MR. BRUCE said that type of voting is not the only protection
shareholders have under corporate law. If they believe abuses are
being made of corporate resources by the Board of Directors or they
are being oppressed by a majority on the Board there can be
derivative suits.
SENATOR TAYLOR said that derivative suits are at the shareholder's
expense and the Board has the wealth of the corporation behind
them. He did not think that was a level playing field.
SENATOR TAYLOR moved to amend page 1, line 7 inserting "or approved
by a majority of the shareholders and provided for non-cumulative
voting by its shareholders" after "June 30, 1989." SENATOR JACKO
objected. He said the amendment would cost the corporations a
substantial amount to do what they have already been doing and also
he thought it would be difficult to get the number of people
required to vote. SENATOR TAYLOR pointed out on page 2 it said "an
affirmative vote of the shares represented at a regular or special
meeting at which a quorum is present by person or proxy." SENATOR
JACKO said the expense would be for the campaign before the
shareholders meeting. SENATOR TAYLOR pointed out that they would
be having an annual meeting anyhow. He also thought that it would
probably be more difficult for a Board who did it without consent
of the shareholders.
SENATOR TAYLOR called for the question on the amendment. SENATOR
TAYLOR and SENATOR DONELY voted yes; SENATOR JACKO voted no;
SENATOR HALFORD passed. There was more discussion and action was
deferred on the vote.
Number 495
SENATOR TAYLOR announced HCR 11 (WOMEN'S HISTORY MONTH) to be up
for consideration.
RENEE CHATMAN, Aide to Representative Bettye Davis, said HCR 11 was
intended to bring to the forefront contributions that women have
made to our nation and in Alaska.
SENATOR TAYLOR thanked her for her testimony and announced SJR 47
(MEMBERSHIP OF THE JUDICIAL COUNCIL) to be up for consideration.
SENATOR HALFORD, sponsor of SJR 47, said he had a proposed CS which
added two public members.
SENATOR HALFORD moved to adopt the CS to SJR 47. There were no
objections and it was so ordered.
BILL COTTON, Executive Director, Alaska Judicial Council, said
their agency is separate from the court system. It is assigned 3
duties by law: to screen and nominate judicial applicants providing
the Governor with at least two nominees for each vacancy; second,
to review the performance of judges and to provide the voters with
information and a recommendation as to whether the judges should be
retained; and, third, to do research into the administration of
justice as the constitution refers to it. The Council is currently
made up of 3 non-attorney members appointed by the Governor; 3
attorney members appointed by the Bar Association; and the Chief
Justice sits as the seventh member who only votes to break a tie.
MR. COTTON said the Judicial Council voted unanimously to oppose
SJR 47 which would change the makeup of the Council giving the
Governor more appointees. The Council believes the current system
works well. He gave a brief background on two of the public
members who had made significant contributions to the Council:
Janice Linheart and Jim Arnesson who both oppose changing the
current system. The reasons are in every trade and profession the
ones who know the careers the best are the ones engaged in the same
type of occupation. Attorneys have a self interest in selecting
good judges. They endeavor to base the selection of judges on the
basis of merit rather than political correctness.
SENATOR HALFORD commented that his discussion with the members of
the Council was based on the version prior to the Judiciary CS. He
asked if they had taken a position on adding two public members.
MR. COTTEN said his understanding of their feelings was that they
were satisfied with the current system and did not wish to change.
That is not true of the sixth member who was not there to vote,
however. He would propose something like the Judiciary version.
CHRIS CHRISTENSEN, Staff Counsel to the Alaska Court System, said
he didn't have anything to add to Mr. Cotten's comments. The
Supreme Court had instructed him to state their opposition to
changing the composition of the Judicial Council. They believe
Alaska has the best judicial selection procedure in the country.
SENATOR DONLEY said that sections 6 and 10 have concerned him more
over the years, because the terms of the judges are really long.
Section 10 is where they vote on the conduct of the Judiciary.
Because there are only three members of the public on the Council,
it is possible to get a quorum with no public members present.
SENATOR HALFORD agreed with Senator Donley and pointed out that the
public members have to go through legislative confirmation and the
attorney members don't even have to go through legislative
confirmation. He thought it was set up to protect the
establishment.
Number 241
SENATOR HALFORD noted that this is where the separation of powers
occurs and it is defined by the document they are working on. The
separation in this state is far greater than in other states.
SENATOR TAYLOR said things are structured now so that if a person
takes "an elevated position" in this state, we believe that they
have just forfeited all of their civil rights - for a trial by
their peers and to know what the charges are posted against them.
MR. CHRISTENSEN said the system works very well for the criminals
and for their civil process.
SENATOR HALFORD said that was probably true, but he didn't think it
worked very well for the victims.
SENATOR DONLEY asked what they thought about requiring that a
certain number of public members have to be present for a quorum to
occur instead of changing the membership. SENATOR TAYLOR said he
had no problem with that; and said again he thought their terms
were too long.
SENATOR TAYLOR said they would hold CSSJR 47 for further discussion
and announced HCR 24 (SUPPORT SUIT AGAINST FEDERAL GOVERNMENT) to
be up for consideration.
SENATOR HALFORD moved to pass HCR 24 from Committee. SENATOR
DONLEY commented he thought there was a substantial question as to
the specific timing. There were no objections and it was so
ordered.
Number 60
SENATOR TAYLOR announced SB 161 (INTEREST RATES:
JUDGMENTS/TAXES/ROYALTIES) to be up for consideration.
DEBORAH VOGT, Department of Law, supported SB 161 which addresses
two distinct areas relating to interest in the state, judgements in
all civil litigation, not just litigation involving the state of
Alaska, and interest on back taxes and royalties.
The 10.5% statutory interest rate is totally out of wack with
current reality, she said. The legislation would simply adopt a
market rate that would float with the market for both prejudgement
and postjudgement interest.
TAPE 94-20, SIDE A
Number 001
SENATOR TAYLOR said that is not 10.5% more than you would have had
to have paid. If we take this legislation and apply a sliding
scale or a market test, the state would have to pay 7% or 8%
interest. So we are talking about a 3% penalty. MS. VOGT said
that interest under this legislation would be 3.49%, an amount that
would apply to postjudgement interest were the litigation concluded
this year. The prejudgement interest would flow under the
legislation from the rate in effect in the year in which the
litigation began. That might be significantly higher if it was
several years ago.
SENATOR DONLEY said he liked interest rates to be a little high as
incentive for people to settle. He thought her proposal took away
a lot of that incentive.
MS. VOGT explained that in the examples she brought for the
Committee the state makes an original deposit, an additional
deposit, and a master's award. The state deposits into an escrow
account the amount it believes the property is worth so interest is
just paid on the net.
There was some discussion regarding the examples of condemnation
cases she brought for the Committee because they involved such
large amounts of money owed by the state.
MS. VOGT explained that a very small percentage of condemnation
cases ever are contested. Most of them are agreed upon. A small
percentage goes into hearing and these are some of the ones they
have paid most of the interest in.
SENATOR DONLEY suggested having a fixed addition to the sliding
scale.
MS. VOGT emphasized that the state's position is that the interest
should be a floating market rate. It shouldn't be an incentive to
either party to either drag out the litigation or to settle.
Number 219
LARRY MEYERS, Department of Revenue, said under current law the
interest rates for over and under payment are determined by the
federal discount rate compounded quarterly at a percentage of the
greater of 5% or 11% above that rate. Currently, that discount
rate has been at 3% which means we have an 11% interest rate.
MR. MEYERS said what the state is seeing now is that we are
currently earning between 3 1/2% and 4% on our own money that is
being invested. We are seeing example of taxpayers who are
actually parking their money with the state to earn a higher rate
than they could under short term earnings elsewhere.
SENATOR HALFORD asked if there is any effort to accelerate in
getting the refunds out? MR. MEYERS answered by law if they issue
a refund within 90 days there is no interest due. The bulk of the
refunds we are paying have to do with taxpayers who are filing an
amended return. These are people who are voluntarily coming forward
saying they have made mistakes.
Number 284
SENATOR HALFORD asked if there was a way to separate by
classification those voluntary actions from the acts of conflicts.
MR. MEYERS said there is. If the state has, in an assessment mode,
collected and then had to make a refund.
SENATOR HALFORD said for the ones where the state was precipitating
the conflict, it would seem that the interest rate ought to be 25%
in both directions so everyone is betting a whole lot higher and
would come to an agreement a whole lot quicker.
MR. MEYERS said there are penalty provisions that they do apply
routinely for negligent preparation.
Number 334
MR. MEYERS suggested they change language that reads, "However, if
the overpayment is a result of the correction of an assessment, a
return made by the Department, the amount overpaid bears interest
rate in the manner provided in AS 43.05.225.
GRANT HUNTER, Anchorage, suggested that there be an alternative
interest rate which would be greater than 10.5%. He didn't think
interest should be paid on overpayments of taxes and royalty
payments to the state of Alaska. It's the obligation of every
citizen or royalty payer to determine on their returns what is the
current rate, he said.
SENATOR TAYLOR said he intended to have this bill again after an
informal work session.
SENATOR TAYLOR adjourned the meeting at 3:35 p.m.
| Document Name | Date/Time | Subjects |
|---|