Legislature(1993 - 1994)
03/18/1994 01:35 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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. 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.
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